A 'pretty girl' with her choice of suitors

Personal relationships, known as 'guanxi,' are how things work in China. A Washington state delegation does everything it can to make way for business.

September 19, 2005 

SHUNDE, China – The Washington state trade delegation is making all the right moves.

The delegates donned their darkest business suits. They bowed slightly and used two hands when presenting their business cards. They gamely tried portions of the pickled squid and stir-fried crocodile.

Then their leader, Lt. Gov. Brad Owen, seated at the dais with the mayor of the Chinese city of Shunde, pulled off a brief but masterful sales job for the state.

Speaking through an interpreter, Owen managed to work Boeing, Microsoft, Washington wines, Starbucks coffee, biotech labs, Washington State University and the ports of Seattle and Tacoma all into a three-minute address.

The mayor appears impressed.

Speaking through his interpreter, the mayor says, “We are deeply honored to have such distinguished visitors from Washington, D.C.”

Wait a minute.

Washington, D.C.?

It’s another day in the quest for “guanxi,” the personal relationships thought to be so important to doing business in China.

With China’s economy rocketing forward, the world is desperately looking for handholds to catch a ride. Washington state is part of the crowd, sending trade missions, establishing sister cities, paddling dragon boats, all in hopes of closing lucrative deals.

Does this stuff really work?

It doesn’t hurt. Few would argue that former Gov. Gary Locke’s visits to his ancestral Guangdong Province did not raise the awareness of the first American state to elect a Chinese-American governor. And, while specifics are scarce, his visits probably helped create a friendly climate for Boeing, Microsoft and Starbucks.

But the competition is stiff.

Ira Kasoff, historian and the principal commercial officer at the U.S. Consulate in Shanghai, watched quietly as Washington delegates and their high-profile Chinese guests recently shared dim sum and threw back glass after glass of maotai, China’s high-octane economic lubricant.

“The eating and drinking is part of the business,” Kasoff said. “They believe that by having the governors visit they can get good business for their companies.”

Well, obviously. But does it work?

Kasoff shrugs.

“The governors of Idaho and Kentucky were here last week,” he says. “The governor of Hawaii is coming the week after next.”

Businesses eager for contacts

“China is like a pretty girl,” said Chilean businessman Fernando Carrasco Spano, smiling. “The whole world is chasing after her.”

Spano was attending a trade conference in Chengdu, hosted by China’s Sichuan Province.

The province, a thousand miles inland from China’s booming east coast, is looking for a little guanxi itself. Its distant location puts it at a disadvantage in attracting foreign investors.

To compensate, Sichuan officials organized a conference this summer to advertise their attractions. Nineteen countries attended, including Russia, Germany, the Czech Republic … and Washington state.

Washington has had a “sister state” relationship with Sichuan since 1982. But at the opening ceremonies, this fact suddenly seemed less important. A Chinese government official announced his country has established 2,259 sister city relationships since 1989.

Owen attended the conference, too, accompanied by his wife, with a Washington State Patrol trooper assigned as their bodyguard and an entourage of hopeful Washington businessmen, eager to make personal contacts that might end up paying off in business deals.

Owen and the delegation were treated like royalty, with police-escorted motorcades, constant gift exchanges and, occasionally, even big red-and-white welcoming banners tacked to the tops of buildings.

Owen is a natural guanxi guy, balancing political poise with a down-to-earth sense of humor. On several occasions, he helped break the cultural ice with a saxophone, playing songs like Frank Sinatra’s “My Way” and the theme from “The Godfather.”

Sometimes, though, the details were hard to control.

At a Shanghai banquet he hosted, Owen made his standard pitch for Washington wine. As usual, he noted the state is second only to California in terms of the amount of wine produced in the United States.

He got a murmur of amusement, as usual, when he followed up with, “We’re No. 2 in quantity; No. 1 in quality.”

But as the glasses went up, filled with Washington’s Hedges Cellars wine, it became clear that Washington had been out-guanxied.

Each glass was etched in red with the word, “Gallo.”

The importance of shared interest

Gig Harbor entrepreneur Irl Davis was one of the delegates on the trade mission, looking to expand his already considerable China operations.

He’s a good guanxi guy, too.

“Making friends really does lead to making money,” he said. “It’s all about shared interests.”

Davis grew up in the isolated ranch country of eastern Oregon, which he remembers as a place where people left their keys in their cars and neighbors automatically turned out to help one another.

No one ever gave a thought to how they were going to get paid back, he said. “It would have been offensive to ever bring it up.”

Now, Davis says he’s found he can operate in China pretty much the same way.

For example, he estimates he has $300,000 invested in a factory near Shenzhen with a Hong Kong partner, all on the basis of handshakes and good faith alone.

“Not one piece of paper has been signed,” he said.

Sidney Rittenberg, Chairman Mao Zedong’s former propagandist and perhaps America’s most respected China dealmaker, agrees the importance of personal relations cannot be overestimated when doing business in China.

“Companies ask me, ‘Who should I send to manage our operations in China?’ said Rittenberg, who runs a China consulting business from his home on Fox Island. “I tell them, ‘Send a man who can get along with his neighbors.’ You can’t do anything in China except by consensus and shared interest.”

Dipeng Sun, former chief financial officer of China’s Baosteel, the world’s third largest steel company, agrees, but only to a point.

Sun arranged many joint ventures with foreign companies as head of the Baosteel Business Development Corp. Now he’s a business consultant in Shanghai.

Sun has a reputation as a tough businessman in China, where he is famous for being the first Chinese employer to fire workers. That made him front-page news.

In a conversation at the Marriott Hotel Hongqiao in Shanghai, Sun punctuates his remarks by jabbing his finger and raising his voice loud enough to attract attention from across the room.

In general, he says, Washington state and anybody else who wants to do business in China needs to get focused, do their research and put serious resources behind their efforts.

“Eating, drinking by itself is useless,” he said. “The first step must be research and developing strategy. Many of these people have no strategy. They don’t know what business to do in China.

“They need to ask themselves, ‘What is our product? What is the advantage of our product?’ They need to compare their products with similar European products, compare their companies with other companies.

“Everything else is surface.”

Bernie Yau, an American businessman who has made a fortune in China making parts for jet engines, also is skeptical about friendship being the key.

Yau has an unusual perspective on doing business in China. His father was one of Chiang Kai-shek’s generals who fought against communism, then escaped to Hawaii when Mao’s side won.

Guanxi is fine, he said, but at its core, the Chinese approach to business is relentlessly hard-core and practical.

“Friendship works,” he said, “but only if the facts are there to back it up.”

Rob Carson: 253-597-8693

rob.carson@thenewstribune.com

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