ENTER THE DRAGON
Want to make waves in China? You’ll need a patient mind, open eyes and a strong drinking arm, says Mark Graham
Tips to help you seal the deal in China from those who have succeeded in the market
Everyone who does business regularly in China has a baijiu story to relate, usually one that involves a scenario of smoky cloistered banquet rooms and early-hours karaoke sessions. Despite the numerous changes in the country, and the increasing popularity of red wine, the instinct after a deal is sealed, or a friendship cemented, is to call for a celebratory bottle of baijiu. Ducking out is not really an option, unless you can cite a medical condition, or are teetotal.
Although it is essentially a male bonding ritual, women are also expected to slug back the clear spirit. Frenchwoman Helene Ponty, one of a new breed of foreign entrepreneurs who has spotted opportunities in China and capitalised on them in a major way, does not really
have a choice, given that she is peddling alcohol – albeit classy Bordeaux rather than rotgut ricebased baijiu.
During her four years in China, she has expanded her family’s business, Ponty Winery, so rapidly that sales now account for more than half of the Bordeaux vineyard’s annual output. The savvy US business school graduate rebranded the wines Le Ponty to give more of an instant French connotation for Chinese consumers, and learnt to speak the language.
“You have to toast many times to celebrate a business deal,” Ponty says. “But it is also important that people who are lower in the hierarchy stand up and toast to people who are higher on the hierarchy, or there as a guest. One time, I had lunch with a potential client, with around ten people at the table – me and my assistant and him and his seven employees – and we were drinking … baijiu. His employees, to be respectful to me, had to come one by one and toast with me. It meant I had to drink eight glasses of baijiu when they each only had one. As it was at noon, it did not make for a good afternoon! It was, of course, impossible to refuse, as it would have been seen as very impolite.”
She adds: “Etiquette in general is important, although some aspects are becoming less so with the younger generation. As a foreigner, some mistakes will be accepted.”
KNOW THE ROPES
The number one rule for newcomers, Ponty says, is to understand fully the administrative, legal and taxation landscape when setting up a company, or expanding an existing one. “China is a great market, but it takes a lot of time and financial investment to understand how things work here,” she says. “If you do not have that time or money, you might want to consider another market. Estimate the time and money you will need to get started, and multiply it by two.”
That advice certainly rings true with another, rather larger, wine importer. Miguel Torres, head of the Bodegas Torres Spanish wine company, made an initial foray into China in the 1990s. Myriad problems with partners and distribution channels meant the company lost an estimated US$1 million. Still, Torres persevered and the now-retired patriarch, who hired a tutor in Spain to teach him
basic Chinese, was proved right – revenues now amount to more than US$38.5 million annually with offices in most major cities and a staff count of about 300.
“My advice is simple,” he says. “Your own people are your most valuable asset, but choose the right partners. I remember saying we will treat our partners as friends, and it turned out to be successful – people became much more receptive.”
LAW OF THE LAND
When Jim Spear first came to China as an expat, there was not much in the way of fine wine. The former corporate warrior has travelled the length and breadth of the country, speaks fluent Chinese and knows all the potential pitfalls. Or thought he did...
During a post-retirement project to renovate the family holiday home out by the Great Wall, the American encountered a whole new range of challenges. In fact he learnt so much about construction, land leases and dealing with rural officials that it metamorphosed into a whole new later-life career. The self-taught interior designer now specialises in turning once-dere lict village homes into dream residences for city dwellers.
The affable Spear cheerfully admits he was probably ripped off in the early days, but has now acquired the realpolitik skills necessary to deal with local officials, peasant farmers and tradesmen. As well as home conversions, Spear also runs the Brickyard hotel at Mutianyu (brickyardatmutianyu.com), a boutique property with stellar views of the Great Wall from all of its rooms.
An example he cites is a vivid – and amusing – example of the idiosyncrasies of China. When Spear converted his first house, a neighbour complained that pear tree roots were being compressed and damaged by the newcomer’s jeep; the problem was solved
with a small annual payment. A neighbour at another conversion property had a problem with building slabs being placed close to his chestnut tree.
“We had to have that case adjudicated in the village hall – it was urban meets rural, foreigner meets Chinese,” Spear recalls. “We eventually got a settlement that was fair. I originally thought it was just ripping people off, but these people are stewards of the trees. When you live out here, you can see the other side of the story. People here are suspicious of city folk, as they come out and steal fruit from the orchard – it’s a lack of respect. I have seen people come out and bang on doors and demand that the peasants cook them lunch.”
The fruit-tree episodes took place in a small village, but similar scenarios are repeated daily, on a larger scale, in the big cities. Every visitor will, at some stage, encounter the phrase, “This is the Chinese way” – a saying that invariably involves trying to bodyswerve, or ignore, international protocols. The “Chinese way” tends to be a route that loads the dice firmly against investors from outside; it most certainly does not
‘Time and time again I see newcomers being naive about how different China is. Cultural differences can be vast’
involve Western-style rule of law, as China, for all its superficial modernity, is indisputably a one-party state.
As China opens up, it finds itself increasingly having to adopt and accept outside influences and methods. Long-term resident Dominic Johnson-Hill, founder of T-shirt company Plastered 8, is an individual who manages to move fluidly between expat and Chinese societies, celebrating cultural similarities, rather than differences.
He has even managed to find a commercial market for irony – not a commodity much evident in China at large – with his business, which depicts Beijing icons, everyday consumables and memorabilia on colourful T-shirts. Johnson-Hill is a regular on Chinese TV talk shows and The Apprentice- style reality programmes and has a store in the popular Nanluoguxiang hutong (alleyway), which has seen a visit from Led Zeppelin’s Jimmy Page.
“I’m fortunate enough to be in the creative market, which is really untapped,” says Johnson-Hill, a father of four who originally came to China as a backpacker. “We generate artwork for graphic T-shirts, and the more creative and bonkers we get, the more we sell. In this very pragmatic society, they love creativity, so that’s what we try our best to deliver – it took a while to work it out.”
Australian entrepreneur Campbell Thompson runs the Wine Republic, which focuses on importing wine from familyowned vineyards. He boasts nearly two decades of experience in China, and is equally bullish about the opportunities presented by the creative industries, believing savvy players can exploit areas such as new media and entertainment as long as they are aware of the potential pitfalls.
“Anything involving culture is a double-edged sword,” Thompson says. “There are tremendous opportunities, but it can be a very sensitive area. I would advise people to take time, do some good research. The days are gone when China was seen as the El Dorado, where projects were rushed so you could get to market quickly.”
Former journalist Sarah Keenlyside developed her business along those lines, growing slowly and aiming for a niche market, in her case high-end travellers looking for personally escorted tours. The Bespoke Travel Company puts together itineraries that focus on art, history or food, featuring local personalities, little-known venues and Englishspeaking guides – along with some humour and quirkiness.
But, as Keenlyside can testify, it is rarely a breeze doing business in China. The regular moving of goalposts, and general opacity, are two of the prime inhibitors. “Almost no one escapes the woolly changes to legislation,” she says. “Sudden closures, shutdowns, changes in public opinion, or the knock-on effect of any number of factors. No matter the issue, it can happen with lightning speed, rendering much that you’ve been working on or planning towards irrelevant in a heartbeat.
“Aside from that, cultural differences can be vast,” she adds. “Time and time again I see newcomers being naive about how different China is – repeatedly willing their own norms and ways of doing things on to the local population because ‘surely that’s just the common sense/fair/most obvious way of operating, right?’ Everything you think you know is wrong – I can’t put it more simply than that. If you have the patience and fortitude to deal with the fact that China is not the West, you may just crack it and learn to be more open-minded in the process. I’m still working on that – it takes a conscious daily effort.”