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05 August 2015

Go East, Young Man: "Mr China", by Tim Clissold

China has been all the rage for a while now, for brokers and traders as well as for a whole raft of other western enterprises desperate to get their share of the awakening market of one and a bit billion potential consumers. One of the results of that stampede has been the phenomenon of the China expert. There are of course notable exceptions to this rule, those who have invested time and effort over many years in developing knowledge of and ties with China, but I’ve always been struck by the way a couple of trips to Hong Kong and then perhaps a whistle-stop tour round Shanghai and Beijing turns some westerners into China Hands, “Old Friends”, with a special relationship. Mmm. Maybe.

Tim Clissold is in a different league from that. A Cambridge physicist who developed a fascination with China, he spent a couple of years learning Mandarin and travelling the country, before a fortuitous meeting with a Wall Street investment banker with a desire to invest in China offered him a huge opportunity. The banker had a vision of taking western capital and using it to modernise and streamline Chinese manufacturing facilities and then build the resultant joint ventures into a major manufacturing conglomerate able to produce substantial returns for the original investors, who provided the money, and the local Chinese partners, who provided the plants and facilities.

‘Mr China’ is the story of what happened, and it is an excellent read. Clissold starts from scratch. Knocking on the doors of factories and of municipalities and of Ministries investigating if they would be worthwhile - and willing - recipients of western cash, he shows us the true picture of sprawling Chinese industry. Factories high up in hidden valleys in the hills to keep them safe from external threats, plants where machinery still dates from the period of Sino-Russian cooperation after World War Two - and unchanged since that cooperation soured - over-manning and outdated products, and yet, nevertheless the prospect of a massive market. He draws a fascinating picture of a world already passing as Deng’s reforms finally begin to rouse the economy.

While Clissold prospects for investment opportunities, his American boss is busily raising capital from investors to fund the project. Finally, the two things come together and the money begins to be put to work. The book focusses on a number of particular factories - ranging from car components to a brewery - where the fund encounters specific difficulties. The stories are told with a light touch, indeed a degree of humour, but they make a very important point. The original expectations of the investors were that, with the power of cash behind them, they would be able to handle their joint venture investments in just about the same way as if they had been in Detroit or Birmingham or Essen. They learn, often painfully and sometimes expensively, that such is not the case and that in order to blend cultures, it is necessary to understand them first. The investors learn that their joint venture partners and their management employees are not necessarily playing by the same rules; as Clissold says “This brings into sharp focus a core difference between Chinese and Western business; for a Westerner, a contract is a contract, but in China it is a snapshot of a set of arrangements that happened to exist at one time.” Eventually, after seeing big losses as their capital was extracted by ever more ingenious methods, the westerners do come to a point of stability; indeed, the conglomerate they founded (and which Clissold has in fact now left) still exists and prospers, a major manufacturer of automotive components.

While it is true that this book is a picture of a particular era, the 1990s, when joint venture was the only way forward for western enterprises in China, which is no longer the case, and that one could argue that for that reason it is dated, I don’t buy that. It is a picture of the mixing of cultures, written by someone who has worked hard to understand both. As such, I would suggest it is useful for anyone trying to make progress with business in China; yes, things have changed, but five thousand-odd years of history doesn’t disappear in the blinking of an eye. 

I thoroughly recommend this as a holiday read; it’s well-written and entertaining, and it also offers a deep insight into why those ‘China Hands’ of my first paragraph are probably deluding themselves. Success demands more work than a few baiju-fuelled dinners.

‘Mr China’, by Tim Clissold, is published in paperback by Constable. It is also available as an ebook.   

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