DETAILS OF SOME TEST1 ANSWERS

From the first test, we found that some people had problem with the US Government’s definition of China, which is China is Mainland China, Hong Kong and Taiwan. And the PRC government is the only legitimate government of China. So, there are two parts of the US government’s definition of China

The class’s definition of Greater China is simply the three economies of Mainland China, Hong Kong and Taiwan. This definition is correct, since we are talking about doing business in the economies of Greater China. We do substantial amounts of business with all three economies of China and, because of the different systems in these three economies, doing business in these three economies is different. This is the reason that our definition of Greater China is correct.

The US government’s definition of China is incorrect for two reasons. The first reason is that the PRC government does not govern Taiwan. Taiwan is governed by the government of the Republic China. This is the so-called reality check. Thus, the reality check does not check out. The second reason is that the real reason for the US government’s definition of China is the Soviet Threat. The US government has been concerned about nuclear war with the former Soviet Union since 1945. However, this reason is no longer relevant, since the Soviet Union no longer exists. Hence, the US government’s definition of China is incorrect because of the two reasons.

Confucius said, “Name correct, words flow.” We turn this around a bit and say, “Name incorrect, words don’t flow.” Because the US government definition of China is incorrect, then actions by the US government, the PRC government and the ROC government are strange. For example, the US government calls its embassy in Taipei, the American Institute in Taiwan.

The ROC government, for examples, calls its embassy in the US, TECO or the Taipei Economic and Cultural Office and calls its ambassador to t he US the “Representative,” even in their own secret documents. The PRC government, which really insisted that the US government adopt this wrong definition of China, did not allow a US company to use its brochure in a trade show because the US company said in its brochure, “We have offices in Singapore, Kuala Lumpur, Bangkok, Hong Kong and Taipei.” The customs officer, a Mr. Chen said, if you put Hong Kong and Taipei in the same column as the other places, you are implying that Hong Kong and Taiwan are separate from Mainland china. This was in 1985, when Hong Kong was still a British colony (12 years before the PRC’s takeover of Hong Kong on July 1, 1997) and Taiwan, which was and still is separate from Mainland China. These actions are strange and often time wasting actions because, “Ming Bu Zheng, Yan Bu Shun” (name incorrect, words don’t flow).

One of the key problems with doing business in Mainland China is that doing business there is much too slow. So, to speed up doing business there,
1. Make lots of friends,
2. Learn the language,
3. Have a schedule and never lie (have a ticket to show that you are leaving on the date you say you are leaving,
4. Point out the opportunity cost of slow negotiations. To show that you understand what this means, you should cite an example, such as a $50 million 50/50 joint venture with a roi (return on investment of 20%). Then every year of negotiation would cost each partner $10 million.
5. Have a construction like contract. For example if negotiations are quick (e.g. less than 3 months), the give a 10% discount. If negotiations are slow (e.g. 6 months to a year) add a surcharge of 10%. If the project is priced at $10 million, the discount would be $1 million and the surcharge would be $1 million.

In using examples to illustrate differences in doing business in the 3 economies, in 1985, a service joint venture signing in the old section of the Beijing Hotel took 5 years. The lawyer negotiating the jv was single at the beginning of negotiations, got married and had 3 kids by the time the negotiations were finished. She had triplets.

A similar office in Hong Kong in 1982 was opened in four hours. Mel Searls rented an office, had a phone put in, hired a secretary and to a business license, all in one morning. By the afternoon he was in business as the representative for Dravo.

In Taiwan, a $50 million jv with GE for manufacturing turbines was approved in 2 weeks in 1982.

These examples illustrate the relative speeds of doing business in these three economies. The details in the examples give you creditability when you are discussing business conditions with your clients or your perspective employers.

You can use these examples, until you have your own, better examples … the more details the better. While business conditions may have changed in the last 20 years, the relative speeds of doing business have not changed much.

Also, the business climate in Mainland China is still not very good. For example a survey conducted about 25 years ago showed that only 20% of Taiwan investors in Mainland China were making money. A 2008 survey shoed tht only 10% of Taiwan investors were making money in Mainland China. A 2009 survey showed that only 33% of all investors in Mainland China. The lesson from this is that while changes will usually take place, those changes may be improvements or may be worsening of the business climates.

The above give you some details that some students did not have or remember. These examples were discussed in class. If you attend the classes, you must take notes on these. If you don’t attend classes, you are still responsible for knowing these examples.