Chinese Rules: Five Timeless Lessons for Succeeding in China

‘The second line?’ I asked.

‘Mina will know what I mean. Old Gao just says that the second line has to go into the contract.’

‘Well how about price, payment terms, all the other clauses?’

He just pursed his lips and the conversation drifted away. But at least we had the first clue.

I went out to look for Mina and found her sitting dejectedly in the lobby, sipping on a tall glass of chrysanthemum tea. When I told her what Chain-smoking Chen had said, she knew immediately what he meant. Inside the chemical plant at Quzhou, there were two separate production lines. At the start of the negotiations, Mina had tried to get both of the lines into the deal so that IHCF would get the maximum number of credits, but Wang had refused point-blank. The second line was huge; Mina told me that every year it spewed out gases with the equivalent warming effect of nearly five million tons of carbon dioxide. There had been weeks of discussions in the spring, but Wang wouldn’t be shifted and he refused to put the line into the deal. Eventually Mina figured that the carbon from the second line must have been sold to another buyer, so IHCF organized the syndicate to include only the credits from the first line. But now it appeared that Wang needed to reverse his position.

When Wang returned, we raised the issue directly and probed every way we could think of to avoid increasing the number of credits under the contract, but Wang was adamant. His position seemed to have become fixed and he was insistent that IHCF bought the credits from both lines. I switched into Mandarin and tried to persuade Wang to be more flexible. Whenever I asked him why he couldn’t just sell the second line to another buyer, he just said that it would be too troublesome to separate the two. But this made no sense; only a few months earlier, he’d been insisting on the opposite. Mina tried every idea we could think of – taking an option on the second line, cutting the carbon streams into two parts, taking some now with smaller amounts later – but Wang wouldn’t budge. It seemed as if we’d reached deadlock. I became more apprehensive about the phone call to London as the minutes ticked by and we failed to get to the bottom of the story.

At the allotted time, we trooped down the hallway to the little pantry next to the elevators. Mina swore under her breath as she tripped on one of the bumps in the carpet. Bizarrely, the pantry had a fixed line phone with a speaker where we could take a conference call in private. There was no line out, but the phone could accept incoming calls through the switchboard downstairs – but the call didn’t come in on time, so we sat there and waited in silence. The water boiler for tea was still steaming gently on a Formica-topped table in the corner, so it was stiflingly hot and as damp as a sauna. On the wall above the boiler, condensation was dripping down the glass frame of a famous photograph of Chairman Mao relaxing with a cigarette on top of Mount Lushan in a large wooden deck chair. As I leaned over the phone, I felt droplets of sweat gathering on the end of my nose. After a few more minutes, I called down to the operator only to discover that a foreigner had called several times earlier but she couldn’t understand what he wanted and hung up. I asked her to transfer the next foreign-language call up to our extension and after another few minutes we were connected. It wasn’t a good start; the receptionist had already put the phone down on Winchester several times, so he was spluttering with irritation before we even started.

Mina kicked off with a summary of the last few days while I sat on the edge of the table and listened. Once she had finished, I leaned down towards the phone and explained that the Chinese side seemed very fixed on putting in the second line. But Winchester was having none of it.

‘We went through all of that in March,’ he said. ‘We’ve closed the syndicate on the basis of this first deal. We can’t just go back and ask for more money; it would completely ruin our credibility.’

‘Well, perhaps we can do something less formal with the second line and get around it that way,’ I said.

‘What does that mean?’

‘Maybe we can stick to the existing deal for the first line and do something a bit vaguer for the second.’

‘Vaguer!?’

‘Well, often Chinese parties reach slightly vague agreements while they figure out what they really need to do. It’d buy us a bit of time. We can sign up the first line and do something less formal on the second.’

‘Less formal! Vague! Have you completely lost your mind?’ he raged. ‘We’re dealing with some of the biggest institutional investors in Europe. They’re not going to botch together some hare-brained scheme just to keep the Chinese happy. Less formal!’ he snorted. ‘The directors would all have hernias!’

After a few more minutes of haggling, we were instructed to go back to Wang and tell him that the deal had to stay the same. But when Mina explained it to Wang, he just replied calmly, ‘Bu xuyao tan le’ – no need to discuss then – and quietly gathered his papers. We protested, of course. Why couldn’t he just sell the second line to another buyer? We waved our arms in the air and threw papers onto the table; we pleaded and cajoled; we used flattery and promises, threats and excuses, but they were all useless. Wang just stood up and calmly left the room.

When we managed to get through to London to report this latest development, a jumble of voices burst furiously from the speakerphone in front of us, all demanding that the Chinese needed to go back to the original deal. When the clamour died down, one of them said, ‘You’ve just got to go back in there and tell them that they have to go back to the existing agreement.’

‘But we’ve already done that three times and Wang won’t agree.’

‘Do it again. Just insist on it. Don’t they understand that this sort of behaviour will ruin their reputation in the City?’

‘What!’

‘It’ll ruin their reputation in the City.’

‘Right,’ piped in a second voice. ‘Deutsche Bank is underwriting the whole deal!’

‘I shouldn’t think Wang has ever heard of Deutsche Bank before this deal!’ I said.

‘What?’

‘Yeah,’ Mina added. ‘Wang just told me he needs to show a copy of Deutsche Bank’s certificate of incorporation to the local Commercial Bureau here in Quzhou. They want to check out they’re real.’

After a brief moment of stunned silence, a sort of strangulated yell came out of the phone. ‘Anyone who hasn’t heard of Deutsche Bank is a cretin! Don’t they realise that Deutsche Bank was founded under the Treaty of Augsburg?!’

After a brief moment to gather his wits, another one said, ‘They must be out to stiff us. We spent months arguing about that second line in March and they wouldn’t put it in. This has to be about price or something.’

‘Yeah, or perhaps they’ve closed the factory? I read somewhere last week that everyone’s stopped buying fridges in China.’

‘What?!’ I said.

‘Or maybe there’s been a fire,’ said another.

‘Or perhaps it’s exploded!’ said a third. ‘I hear factories are always exploding in China.’

‘It could have been nationalized!’

‘Right,’ said another. ‘I saw a report about the government seizing a property business in Shanghai. They’d had riots there about some unfinished apartments.’

‘Hang on!’ I spluttered. ‘Can we try to get back to reality here? People are still buying fridges in China and the factory hasn’t exploded. There hasn’t been a fire and the factory can’t be nationalized because the government already controls it! No one has ever mentioned price, so why would they want to stiff you? We have to figure out what they really want. Try to look at it from their side. Wang’s sitting in a medium-sized town way out in the sticks in China working in some old broken-down chemical factory minding his own business and shuffling bits of paper, and then you all come along and offer him a hundred million bucks if he installs a few incinerators. Why would he want to stiff you?’

‘Bunch of yahoos, if you ask me,’ someone muttered in the background.

‘Look,’ continued another more sharply, ‘this deal has changed so many times, the syndicate’s already wobbling. If we just go back and ask them to double their money, it’ll blow the whole thing out of the water.’

‘Okay,’ I said, ‘but something must have happened to change the situation here. We need to take a bit of time to find out what that is. Wang’s in a different world; it makes no difference to him personally whether this deal gets done or not, but if you get it right, your investors will make a fortune. Whatever happens with this deal, Wang’s salary will just stay the same. But if something goes wrong later, he’ll get blamed by his boss. All his housing and his pension and his kid’s education are organized by the factory. Wang’s never going to risk all that for something where he’s got nothing to gain. If we try to put pressure on him, he’ll just clam up and do nothing.’

‘Absolute bollocks!’ I heard someone say in the background just before a click as the phone cut off. Then there was silence.

I looked at Mina.

‘So where does that leave us?’ I asked after a few moments.

‘Don’t worry,’ she said, rolling her eyes with a sigh. ‘We’ll get a nasty email in the morning.’

5 (#ulink_a4ea16da-7d4d-5eb4-b1da-a032c92e8dd8)

THE FIRST CHINESE RULE: (#ulink_a4ea16da-7d4d-5eb4-b1da-a032c92e8dd8)

How Can We Go So Far as to Change the Regulations of the Celestial Empire – Which are Over a Hundred Years Old – at the Request of One Man – of You, O King!?

—Edict of the Qianlong Emperor to King George III of England, August 1793

We were not the first band of foreigners to be kept waiting and given the runaround in China, nor the first to be sent with impossible instructions. For years visitors have felt confused, rebuffed and bamboozled by what they’ve found there; and none of them more so than the British.

In the autumn of 1792, while the world was preoccupied by the French Revolution, three ships set sail quietly from the south coast of England. King Louis XVI of France had been deposed and there’d been massacres in the prisons. Guillotine blades skidded down greased runners as carts piled high with severed heads rumbled through the shadows around the walls of the old Bastille; Europe braced for war. So the dispatch by George III of an embassy to China attracted little attention as it cast off with the morning tide on 26 September. The expedition was led by a former ambassador to the Russian tsarina, the Right Honourable Lord Macartney, and consisted of physicians, astronomers, painters, musicians, clockmakers, soldiers and servants, numbering more than seven hundred in all. The purpose of the mission was explained in a letter carried by the ambassador from His Britannic Majesty to the Celestial Emperor as follows:

We have taken opportunities of fitting out Ships and sending in them some of the most wise and learned of Our Own People, for the discovery of distant regions … Our ardent wish [is] to become acquainted with the celebrated institutions of Your Majesty’s populous and extensive Empire … [T]hese considerations have determined Us to depute an Ambassador to Your Court [for] communication with … your Sublime Person … [W]e rely on Your Imperial Majesty’s wisdom that You will allow Our Subjects frequenting the coasts of Your dominions fair access to Your markets.

Imperator Augustissime

Vester bonus frater et Amicus