The bookshelf of reads for people interested in China, business in China, and China’s role in international affairs.

China Goes West: The Coming Rise of Chinese Brands

China Goes West: Everything You Need To Know About Chinese Companies Going Global
Joel Backaler
Palgrave-Macmillan
May 2014

If there is one question that vexes many observers in China, it is this: how can Chinese companies begin to build – or become – global brands? Thirty-six years after the beginning of reforming and opening, only a handful of Chinese companies – Lenovo, Huawei, Haier, Tsingtao – have made the leap to global leadership in their sectors. This invites a rude comparison: 36 years after it was flattened by the US Army Air Corps, Japan had already produced dozens of leading consumer brands – Sony, Panasonic, Toyota, Honda, Canon, Nikon – that were disrupting industries around the world. Why has China not produced a similar – or even larger – crop of world leaders in the same time frame?

In an intriguing new book, China Goes West: Everything You Need To Know About Chinese Companies Going Global, author Joel Backaler offers us a glimpse into why there are so few Chinese global brands. And some of the reasons will surprise you. I won’t spoil it for you, but the reasons go way beyond marketing competency.

Backaler, who has spent the better part of a decade studying Chinese business and is the author of a highly respected blog on the subject, was given unprecedented access to the companies and their executives, and tapped the knowledge of some of the wisest observers of Chinese companies.

Through the stories of these firms, Backaler explains what drives Chinese enterprises to even consider going global in the first place. He describes the painful path that China’s pioneering Champions followed to get there. And he leaves you wondering why, despite the potential rewards, an more than a handful of Chinese companies would bother.

But Backaler pulls no punches – he clearly believes that we are on the cusp of a major change, one that will see a rash of Chinese companies go global, and in the process disrupt global markets much the same way the Japanese did in the 1980s. You may not agree – but Backaler’s makes a persuasive case, and he makes some pointed suggestions on what the rest of us should do in response.

China Goes West is not a marketing book, but it is a book all of us must read for a simple reason: it describes how China will build global companies, and it gives us the strategic insight we are all going to need to either help them – or to help their competitors stop them.

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Cross-Post: Rethinking How to Win Hearts and Minds

Soldiers from the U.S. Army's 350th Tactical P...
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In the Hutong
Thinking about my phone
1445 hrs.

In my day job as a corporate communications strategist, I work with companies who want other people to think good things about them and their products. As a rule, the companies who find that easy do not seek me out, so I wind up working with companies who are having a hard time connecting with the people they need to make them successful.

Anyone who has tried it will tell you that communications is easy, but influence is hard, and the Internet, cultural differences, and the psychic baggage of globalization challenge the best of us. We learn a lot from experience, but we are always hungry for ideas that will help us not only improve our results, but also make the process itself more transparent and eliminate spin and disinformation from the corporate playbook.

One of the places to which I occasionally turn for inspiration about what to do – or what not to do – is the growing mass of literature on what is euphemistically called “information operations,” including psychological operations. I reviewed a fascinating work from the RAND Corporation for my other blog, The Peking Review, and I share it (with some additions) below.

PsyOps is Dead

The theory and practice of military psychological operations find their roots in World War II, and for decades remained largely unchanged. There was good reason for this: the media via which psychological operations were conducted were largely of a broadcast type. Aside from the advent of television, psychological operations were conducted with media that existed since the early 20th Century.

Now that the Internet has become all but pervasive, and mass media have begun to change, the military is being forced to take a step back from the channels of its communications and start to explore the nature of influence before trying to decide how to exert that influence. The result of that overdue introspection is Foundations of Effective Influence Operations.

I am a communicator by profession, and in the fraught, complex, and often dirty world of business in Asia I face challenges that bear notable similarities to those facing Army PsyOps people on the battlefield. As such, I was interested to see what a team of seven really bright RAND scholars had to say.

Actions First, Communications Later

The result was both surprising and delightful. Surprising, because the book is so good that it could serve as a capstone or entry-level introduction for anyone studying communications or marketing; delightful, because I found so many of my own conclusions echoed in its pages. My favorite passage:

Put simply, because what we actually do often matters far more than what we say, influence operations frequently will focus on explain- ing and leveraging off tangible actions by casting them in a positive context and thereby building trust with an audience or by countering adversary claims about such actions with factual information that is buttressed by facts on the ground and averred by local opinion leaders whose credibility and trustworthiness is judged to be high.

The other conclusion that hit home with me was that there are no easy formulas that will translate across different situations, much less across cultures, and that artful improvisation in the development of communications campaigns was essential. I’ve long believed that great communications is not a template, and to have that affirmed in this study was edifying indeed.

These glimpses only scratch the surface. The book also surveys the full range of communications theory, offers pointers to further reading, and elegantly addresses the question of online influence. There is great depth and much insight in this book that can only be appreciated by reading it.

Free-Book-of-the-Week Club: Advice for Advisors in China

Outside Tower 2, China World Beijing

Waiting for the air to clear

1139 hrs.

Much of the work that we foreign-born and foreign-educated types do here in China is of a consulting or mentoring nature. Indeed, if foreigners have any long-term value in corporate China beyond serving as trans-cultural connective tissue , much of it lies in our ability to serve as conduits for soft skills like leadership, creativity, quality control, project management, and the like to the nation’s growing ranks of executives and professionals.

A View to a Skill

Success in these roles means mastering an important but poorly-understood skill set. Whether serving as an advisor to the localized operations of a foreign multinational, as a quality inspector in a factory, a consultant to a Chinese firm expanding overseas, or as a mentor to talented young professionals, the way we deliver our counsel is as important – and in some cases, more important – than the information we deliver.

Sadly, the set of skills one requires to be an effective counselor, mentor or consultant is taught in only a tiny number of the world’s business schools. It is as if these institutions – training grounds, as it were, for ranks of future consultants – assume that as long as the fundamental business knowledge is duly inculcated into their students, they will somehow magically graduate with the ability to appropriately, tactfully, and effectively passing on their acquired wisdom.

Worse, a discouraging number of professional advisory firms – not just management consultants, but law firms, advertising agencies, accounting firms, I.T. consultancies, and public relations agencies – also give short shrift to teaching advisory skills to their new hires. Off go their consultants, filled with knowledge and wisdom and no idea how to deliver it with the skill and grace to ensure its effectiveness.

The Missing Manual

The prolific professional-services guru David Meister has begun the effort to fill this vast gap, most notably with his work The Trusted Advisor (co-authored with Charles Green and Robert Galford), a book that should be required reading in any advice-giving firm. While providing an incomparable framework for building trust and selling yourself as an advisor, the book falls somewhat short on how to deliver good advice effectively.

Especially missing in Maister’s work and that of others is how do deal with the challenge of giving such advice across a cultural divide – a particularly thorny problem here in China.

The good news is that there is a corpus of literature available to help, from the people who have been advising across cultures for decades: the military.

The U.S. military has been sending trained officers and senior non-commissioned officers into the field around the world as advisors to local military leaders since well before World War II. The British have been doing it for even longer than that.

And keep in mind that when these people give advice, it is serious business. When we provide advice, money and companies are at stake. When the military provides advice to senior officers of another country, the stakes are far higher.

Wisdom from the GWOT

Recently, the Yanks began pulling together the collected learning of a century of that experience into a form the rest of us can use. Most notably are two volumes of the U.S. Army’s Combat Studies Institute Press’ Occasional Paper series on the Long War: Advising Indigenous Forces: American Advisors in Korea, Vietnam, and El Salvador; and Advice for Advisors: Suggestions and Observations from Lawrence to the Present, the first authored and the second edited by Robert Ramsey, a retired US Army officer. (Both books are available as free downloads from the CSI Press website.)

Despite the ungainly titles, these are easy and fast reads. The first volume, Advising Indigenous Forces, is largely an exploration of the American experience in advising since Korea. Before you start, set aside whatever political issues you might have with these conflicts or America’s role in them – they will only get in the way of you learning from the tactical, on the ground experience of people sent to advise strangers from a foreign culture.

The first two-thirds of the book will recount the experiences in detail so as to set up the last third of the book, which uses the conflicts as a means of deriving some extremely helpful lessons. It is worth slogging through – the insights and advice are poignant.

The second book, Advice for Advisors, is meant as a companion volume to the first, with fourteen supplementary articles from men who had been advisors in the field, starting with World War I and moving through Iraq. The first article, for example, is “Twenty-Seven Articles” by T.E. Lawrence, more widely known as “Lawrence of Arabia.” For reasons that don’t bear going into here, I am not a fan of Lawrence, despite having read his book, The Seven Pillars of Wisdom. Nonetheless, his simple list of dos and don’ts elegantly encapsulates his learnings from years of field experience.

Another notable article in this volume is Edward Stewart’s “American Advisors Overseas.” From his position on the faculty of George Washington University, Dr. Stewart was one of the pioneers in cross-cultural communications and wrote one of the continuing classic texts in the field, and his article underscores how important it is to know your own prejudices and cultural issues before embarking on an advisory effort.

If you are in an advisory or mentoring position – or want to be – these are both worthy additions to your reading list. The price is certainly right (and much cheaper than one of my training courses on the same topic.)

Update

Scott Emigh points out that the links to the two books published at CSI may be broken – the updated links (to CSI’s non-military site) are:

http://www.cgsc.edu/carl/download/csipubs/ramsey.pdf
http://www.cgsc.edu/carl/download/csipubs/ramsey_op19.pdf

The Right Tone

Third Ring Road, Beijing
The city is beginning to empty
1033 hrs.

I enjoy reading Christopher Hitchens’ work, even though he and I disagree rather frequently. Reading some of his high-handed dismissals of people who do not share his views or his tastes, however, makes me wonder: does he see himself more as a straight writer, or a provocateur?

Take this recent example from his paean to the late J.G. Ballard in the January/February issue of The Atlantic:

“As one who has always disliked and distrusted so-called science fiction (the votaries of this cult disagreeing pointlessly about whether to refer to it as “SF” or “sci-fi”), I was prepared to be unimpressed even after Kingsley Amis praised Ballard as “the most imaginative of H. G. Wells’s successors.” The natural universe is far too complex and frightening and impressive on its own to require the puerile add-ons of space aliens and super-weapons: the interplanetary genre made even C. S. Lewis write more falsely than he normally did.”

Clearly the paragraph is designed to do two things: first, to have a nudge and a guffaw with like minded readers who similarly don’t “get” science fiction; second, to belittle regular readers of science fiction as adolescent zombies.

(Full disclosure: about half of the fiction I read is science fiction, but this post is not a defense of a genre that requires no defense. For the sake of this argument, I will cop to being both puerile and a zombie.)

You could argue (as Hitchens and his editors likely would) that ol’ Chris is just trying to get a rise out of the reader in order to bring more attention to himself and his publication. I’ve got no problem with that. I am a big fan of The Atlantic, and anything that keeps it out of the growing media slag heap is fine by me. But I suspect there is something deeper going on here. I wonder if Hitchens’ comments do not mask some deeper intellectual elitism?

Hitchens appears to be of that vocal fraternity who think that those who hold views antithetical to their own are by definition cretins or ninnys. Those who like the things they do not or who hold contradictory viewpoints are not only wrong, they are feeble-minded.

This sort of intellectual intolerance and the implicit ad hominem attack it implies is understandable when encountered at a high school lunchroom. It is barely tolerable among adults of limited education. It is an inexcusable mistake when it comes from an educated liberal (note the small “l”) who tries to influence public debate.

An wise man does not begrudge another his beliefs: he takes to heart that reasonable, intelligent men can hold different views or values and still be worthy of mutual respect. This is not just a page from some literary ethical treatise, but a core premise underlying the Constitutional right to freedom of speech.

Christopher Hitchens is an intelligent man, but by belittling his readers for their beliefs and predilections he does himself, his viewpoints, and his publication a great disservice. All three deserve better.

If, on the other hand, Hitchens is beginning to see in himself some 21st century incarnation of Samuel Clemens, please let him say so. I can then take what he writes as caustic, New Journalistic humor and forever cease to take seriously anything he sets to paper.

In the meantime, I am taking a lesson from Hitchens and this post about my own tone. I beg an indulgence of my readers: If, after this post, I start taking on an intolerant tone myself, please call me on it. Don’t let me go down that route.

History Friday: The Burma Road

Recovering on Orchard Road
Is this my second or third iced tea?
1318 hrs.

The image of unsung heroes scraping a truck route through the planet’s densest jungles and highest mountains – under fire, no less – to feed and arm the people of China was too good to resist, so it was with great anticipation that I picked up Donovan Webster’s The Burma Road.

What I was hoping for was a dramatic and detailed retelling of what it took to construct this feat of combat engineering and human endeavor, so initially I was disappointed. (Lesson one: pay more attention to subtitles.) Using the construction of the road as a backdrop, Webster chose instead to cover the entire China-Burma-India (CBI) theater in World War II, with an emphasis on Burma and India, and some of the more colorful personalities who drove the progress of the war in this part of the world.

CBI for the Rest of Us

As a campaign history the book suffers, perhaps unfairly, because the standard for World War II historians has risen drastically in recent years. Just when you thought everything about the conflict was that could be known or written has already seen the light of day, we have had a cascade of superb books that have, in many cases, redefined how we relate to and understand the war. Three examples among many:

  • The first two books of Rick Atkinson’s planned “Liberation Trilogy” (the Pulitzer Prize-winning An Army at Dawn and the even better Day of Battle) not only amount to the best accounts of the North African and Italian campaigns ever written, they are compelling a complete rethinking of how we must view the war in Europe.
  • Over in the Pacific, John Parshall and Tony Tully, both part-time American historians, have written Shattered Sword, an account of the Midway battle emphasizing the Japanese side that casts new, unexpected, and iconoclastic insights on the American victory in that pivotal battle. So much for the Hollywood version.
  • Edward S. Miller, another gifted amateur historian, offers in his superb War Plan Orange and Bankrupting the Enemy, together bringing to light the long overture to the war against Japan that most popular histories skim or ignore completely.

Burma Road does not approach the insightful yet accessible scholarship of those accounts. What Webster does instead is to consolidate the works of others with his own on-the-ground research to fill a gaping hole in the popular history of this “tertiary” but locally critical theater in World War II.

Most works about CBI have focused on either personalities (Stilwell, Merrill, Wingate, Chennault) or units (the Flying Tigers, the OSS, the Marauders, the Chindits). Webster pulls these disparate threads together into a single tapestry that gives a good feel for the region’s “War-on-a-Shoestring” as the world focused on Europe, Africa, the Atlantic, and the vast Pacific.

Picking Nits

I have a list of minor quibbles with the book, most of them rooted in Webster’s background as a journalist rather than a military hitorian, that are illustrative of the issues that might keep The Burma Road from taking its deserved place among popular World War II histories:

  • Webster refers to an officer “retiring his commission” when what was meant in the context was “resigning his commission.”
  • Throughout the text, Webster comes across as something of a Stilwell partisan. I tend to sympathize with “Vinegar Joe” myself (his assessments of Chiang were politically incorrect but fairly accurate), but his lack of political acumen consistently undermined his tactical strengths.
  • The maps in the work are far too few, and the few there are are not very helpful in orienting the reader.  What is worse, the symbology – the way he represents different units and their movements – would cause a corporal to giggle.

Despite these quibbles, I enjoyed Burma Road and at a well-written 335 pages, I found it a worthy read, if for no other reason than it gave me a new point from which to re-commence my own studies on the CBI theater. For anyone largely unaware of the progress of the war on China’s southern border, I highly recommend it.

A Clear-Eyed Look Ahead

The Parking Lot of the Heqiao Building

Smog smog blow away, go light on Tianjin today

1007 hrs.


The shelf life of a good China book, especially one that covers business, is short. The pace of change in China is so brutal as to render the best tomes obsolete all to quickly, and often before they even reach the bookshelf.

So when finally sat down to read James Kynge’s China Shakes the World last week, I was concerned that I had waited past the book’s prime to imbibe its insights.

I needn’t have worried.

A clear-eyed look forward

James has been in China for 27 years, but the tone of the book is one of humility. He approaches his subject – the economic rise of China and what it means for Chinese and for the rest of us – as a student, and he takes us along on his journey of discovery.

Thus unlike most books about China, China Shakes the World looks forward rather than back, using the past and an acute understanding of what drives China and its people to attempt to draw some faint lines into the future. The picture he paints is not always comfortable, but he resists the temptation of weaker writers to lapse into alarmism or make sweeping generalizations. His head remains calm throughout, and this makes his conclusions all the more disturbing because they cannot be dismissed.

When the going gets tough

What I treasured most about the book was the distilled insights that he gently placed throughout. My favorite – and, given the times, the most relevant – was his observation that reform moves forward in China at a brisk pace when the nation faces severe challenges, and when times are good the pace of reform slows, stops, and sometimes reverses.

Generalizations are always suspect in China, and it it has been my experience that when dislocations are severe regulation on media actually increases. That said, a review of the historical record bears James out, and if the Hu/Wen administration remains true to form, the next major policy initiative to address the current economic crisis (after the current round of Keynesian pump-priming) may be a liberalization in foreign investment policy.

(As such, this is a very good time for companies operating in highly-regulated industries and the associations that represent them to begin crafting the economic case for greater liberalization, because the opportunity to drive change will come quickly.)

A must-read

Once again, I have yet to read the single book that provides the key to understanding China, despite a quarter-century of looking. When China Shakes the World, however, should be at the top of your reading list of books that offer precious insight into where China is going and how we should prepare for it.

Free Books of the Week: Core Marketing Texts

In the Hutong

Counting Books

1606 hrs.

If you have an historic point-of-view on your chosen occupation or profession, chances are pretty good that you can point to one book – or several books – that laid out the need for and underlying assumptions of your craft.

For the marketing and communications professions, two of these texts are available for your perusal at no charge. Both were written during a period in which the behavioral sciences – including psychoanalytic theory – were just beginning to have an influence on the way companies communicated.

The first is Propaganda, the most important work of Edward L. Bernays, a man usually grouped with Harold Burson as one of the creators of the public relations craft. Bernays, a nephew of psychoanalysis pioneer Sigmund Freud, did much to incorporate his uncle’s theories into a means of influencing public opinion. Bernays was unabashed in his advocacy of the manipulation of publication as a means of governing in a democracy.

Before his ideas could get much public airing, however, they were adopted in significant part by the National Socialists in Germany, and as a result the word “propaganda” leaves a sour taste on the Western tongue.

Bernays’ ideas remain provocative, however, and they are worth a review in a day when the marketing craft seems to be going more quantitative and less human.

The other book on the Hutong Free Shelf this week is Claude C. Hopkins’ book Scientific Advertising. As wary as I am of overly-quantitative approaches to what is fundamentally a qualitative craft, Hopkins reminds us that we cannot leave it all up to our guts. Hopkins’ work was fundamental in the formation of some of the giants of the advertising business, including David Ogilvy.

If you work in or with the marketing side of your business, these two short books should be on your reading pile.

There is No Such Thing as THE Book on China Business

In the Hutong

Reading myself to sleep

2217 hrs.


In early May, Forbes’ Beijing correspondent wrote a scathing review of Jack Perkowski’s book Managing the Dragon.

(Full disclosure: I have met Jack, and I have good friends who work closely with him now or have in the past. I think it would be presumptuous of me to call him a friend.)

Forbes uses Jack’s book as an example of a stream of tomes that have emerged from the laptops of businessmen in China over the past several years. The reviewer’s issue with this flood of ink and pulp is that the books offer little in the way of original insight. He also believes that the people who really know what they are doing are not writing books about it.

“When it come to the actual business of making money in China, the real problem with today’s legions of experts is that the best ones are likely not selling their snake oil on television, the lecture circuit, or the bookshelf. The Masters of the Universe who are making (or losing) enormous sums in China now aren’t talking much about how they’re doing it; they’re too protective of their turf, and they’re too busy making the next deal.

The article also suggests Juan Antonio Fernandez and Laurie Underwood’s book China CEO and James Kynge’s China Shakes the World as being better reads.

Why read?

I agree with Forbes’ broader points (and not just because they serve to justify my own failure to write a book.) At the same time, I think the reviewer is perhaps over-dismissive of the body of literature on doing business in China.

The book did suffer from some of the issue the reviewer notes. And as a longtime resident in China, I can sympathize with the reviewer’s exasperation: the longer you live here, the more difficult it becomes to find a book on business in China that adds much to your own store of observations and conclusions.

But that does not mean we stop reading those books. Most of us want to hone our understanding of this vastly complicated place, or if nothing else compare our own ideas with those of others. Trust me, even the most jaded of China hands needs the occasional sanity check, some of us more often than others.

Even so, for most of these books are not meant for us, or for people like Forbes’ reviewer. They are aimed at the massive majority of business people in the world who know little or less about doing business here, and yet find themselves having to (or wanting to) contend with China in their daily work.

And for that reason this review, like so many others, misses the point: what the reader is – or, should be – looking for in a book about China.

Talkin’ bout my edjamication

When it comes to learning about China and doing business here, there is no substitute for actually planting yourself on the ground, struggling through Chinese lessons, and running a local business. Sadly, not everyone either directly or indirectly responsible for their company’s China operations is willing or able to do that.

There is also a silent legion of hopeful young people living in the Americas, Europe, and indeed elsewhere in Asia who want to pursue a business career – or part of one – in China.

These two groups want and need every drop of wisdom and experience they can absorb from a distance. And with respect to greats like Orville Schell, Bob Scalapino, the late John King Faribank, and our much admired James Kynge, the “big picture” can only serve as the most basic foundation of such knowledge.

And we need a more robust corpus of literature than a single study like that of Fernandez and Underwood.

Because here is the problem: too many of us in the middle- to upper-ranks of the China operations of multinational companies, in agencies, or in consultancies spend a mind-bending amount of our time explaining the very basics of doing business in China to individuals who lack even a fundamental foundation in the subject (or worse, who don’t and think they do). Believe it or not, a book on doing business in China – even a bad book on doing business in China – is a step in the right direction – as long as it is just the first step.

My problem, then, is not with the books, but how they are marketed and reviewed.

First, book marketers have got to stop selling their tomes as the “the bible for business people in China.” There is no such thing. China is far too large and complex (and doing business in any large country is far too large and complex) to be distilled into something you can comfortably carry through an airport metal-detector.

If you are going to auto-educate on China and not come live here, you had better be working your way through a shelf of books, a stack of really good articles, and a handful of decent blogs.

Second, book reviewers need to help manage the expectations of their readers. Tell people that, jacket copy to the contrary notwithstanding, the best book on China should be the starting point for anyone serious about China, and that any business person who is not sufficiently serious about China to read a half-dozen or ten good books about the place probably shouldn’t even bother. Then take the time to dig into every book and come up with where and how that book might find value on an executive’s shelf.

Because I can’t speak for anyone else, but I often find remarkable pearls in books that smart, knowledgeable, and incisive reviewers have scorched so badly that they wind up relegated to the bargain table, all hope of the paperback destroyed. It makes me wonder if the craft of book reviewing has gone horribly wrong someplace.

The Masters of the Universe Fallacy

Let us turn to the other suggestion Forbes makes, that the real smart guys are keeping their mouths shut, because anybody who REALLY knew anything is going to keep it to themselves and make money off of it.

I’m sure there are a lot of smart people holding fire – especially in the dealmaking side of the business. But there are a lot of wise people in the advisory professions who find it both smart and lucrative to give away some of their wisdom for the price of a hardcover because it is a great way to build up the value of their companies and to gain prestige both inside and outside of their organizations that they can turn into cash.

This is what I call The Heroin Model of Consulting. Give away (or sell at a low price) the first bit of really smart advice, and they’ll pay through the nose to hook into a stream of it.

One good example of this is Tom Doctoroff, Greater China Chairman of ad agency JWT, and his book Billions: Selling to the New Chinese Consumer. Tom packs – squeezes – a lot of thoughtful insight into a thought-provoking 217 pages. You can read this book and walk away better prepared to conduct marketing or product development in China, and at the same time feel like “man, if I wanted to build an advertising program to sell to Chinese, I’d sure as hell give Tom and JWT a shot at my business.”

Another example is Cyrill Eltschinger, founder of Beijing-based technology outsourcing firm IT United, and his book Source Code China: The New Global Hub of IT Outsourcing. Cyrill could have simply made the case that China was every bit as attractive a destination for IT outsourced work as India. But he didn’t stop there. He gives advice on everything from outsourcing strategy to the nuts-and-bolts of outsourcing in China.

These are just two that jump off my shelf, but they are examples of a growing genre of books by businesspeople who are successful in China and who are sharing a decent part of their hard-earned wisdom as a way to enhance their business.

Two real plagues

The business literature on China does face two other significant problems: subject matter and the publishing cycle.

As to subject matter, I think it is time that businessmen who would write books about China follow the lead of Doctoroff and Eltschinger and begin to write books that deal not with China or China business broadly, but take a narrower, more focused approach.

Part of the problem I suspect the reviewer has with the business books he is reading is that they are trying to be all things to all people. Arguably, when the China market was a backwater with more potential than real opportunity, this was probably the safe approach to ensure you would have an audience of sufficient size to justify printing 10,000 copies.

I would argue that the Chinese economy has grown to a size and diversity that will support books that deal with specific functions (human resources), sectors (retailing, fashion, technology, energy), and issues (environmental stewardship, ethics, etc.) in the context of China business. Given the environment on the ground today, this is where the need – and where the opportunities – lie.

The other huge issue is the publishing cycle. The speed at which China is changing and business is developing is simply not compatible with the amount of time it takes to move a book from a lightbulb in the brain of the author to the customers bookshelf. All too often, books that are timely when they are drafted are obsolete before they are available at Amazon.

A wise publisher ready to take a little gamble would do well to explore ways to slice the publishing cycle in half – or by 75% – and use books on China as a test bed for such an approach. Imaging having a book to market 20 days after the finished first draft. And if the book was, say, a Seth Godin-like 40,000 words instead of much longer, there might be a way to deliver something on China that is both insightful and timely.

Books in context

I deliver a training program on reading for young Chinese and foreign executives beginning their careers in China. Rather than teaching them how to read (I take that skill as a given), I try to help them find an answer a question that is incredibly common among the ranks of time-challenged businesspeople: what do I read, why, and how much?

A key takeaway in that course is that in the end, there is no such thing as bad reading – as long as you read critically and read for perspective as well as for content.

The key challenge for those of us in business in China is to stop looking for fast-food answers to perennial problems. Most of us who have read a few general business titles have learned that despite their own claims, at best a business book like Blue Ocean Strategy, Built to Last, In Search of Excellence or any similar “Guru Lit” is a new perspective on challenges that gets our brains thinking about a given subject in a new way.

Every book you read on China will add to your overall store of information, but in the end it is how you swish that soup of facts, insights, and perspectives into your own conclusions that give those books value. Selling or judging a book on its own is a worthy endeavor, and reviews of books by themselves must and should continue. But such reviews should recognize that even mediocre, biased, or bad books are valuable in the context of a long reading list and a wide shelf.

Otherwise, we run the risk of perpetuating this idea that somewhere out there is a bible on doing business in China.

And it just ain’t there.

Funny, I Thought It Was a New Kind of Herb…

In the Hutong

One month to go

2039 hrs.

There are a lot of terms people use that they do not really understand, and I am as guilty of that as anyone out there. I didn’t understand “soft power” until I read Joseph Nye’s book. I had no clue about social networking until I actually started doing it.

And even though I deal very rarely with finance, there have been two occasions when I’ve used the phrase “Basel II requirements” in a conversation about Chinese banking when I realized I only understood a single specific piece (the minimum capital requirement) of the global standards by which banks are increasingly judged. I kept smiling, but I broke into a cold sweat.

You know that feeling, right? That feeling like you are walking happily across a frozen lake, and then you wake from your reverie to realize that you are on thin ice, that you have walked the conversation right up to – and sometimes beyond – your real level of knowledge. And you are about to be exposed for the pretentious idiot that you are for having had the conversation in the first place.

Okay, well, maybe you don’t. But I’ve felt it, and I hate it. Once my internal baloney alarm kicks in, there are only two solutions: never, ever, go there again; or set about learning more.

So I went hunting, and I found this juicy little pdf at the Bank for International Settlements website – the full text of Basel II: International Convergence of Capital Measurement and Capital Standards Revised Framework – Comprehensive Version. At 347 pages of dry text, it was probably more than I needed, but being the finance tyro that I am I kind of get a kick out of reading it. I feel like I’m a fly on the wall at a meeting of central bankers. The wikipedia entry was a little too light on detail anyway.

Responsa: Thunder Out of China

Deep under China World Trade Center
Is it me, or is this town getting…quieter?
1257 hrs.

In my recent post reviewing Thunder Out of China, a work I believe belongs on the history reading list of anyone interested in understanding modern China, I incorrectly implied that Theodore White was the sole author of the work. I failed to point out that Annalee W. Jacoby was the work’s co-author and was (in my opinion) instrumental in setting the balanced tone for the book’s critique of Chiang Kai-shek. This was not only careless on my part, it was dumb: Ms. Jacoby’s life could be the subject of at least a movie, if not a miniseries. (I have since corrected the post.)

I am indebted to Professor Jeffrey Wasserstrom at the University of California, Irvine, not only for pointing out my omission, but for doing it with far more collegiality and professionalism than my elementary mistake deserved. Dr. Wasserstrom contributes to the excellent collaborative blog The China Beat, which we have added to our Heroes of the People list.

One of the reasons this book is important is that it helps balance a bit the effects of America’s wartime and Cold War near-canonization of Chiang. Any objective reading of modern Chinese history will find few true heroes among the leaders on either side, yet while The Great Helmsman has been thoroughly muckraked, The Generalissimo has been denied the scrutiny of a scholarly iconoclast. Until that changes, the more balanced contemporary accounts are all the more important to keep on our collective reading lists.

Chiang and Modern China

Jingshun Road, Bridge on the River Wenyu
Give a man a car, he thinks he’s Michael Schumacher
1426 hrs.

Whether in writing or over an adult beverage, at some point or another each of us who live in, study, or frequently deal with China find ourselves in a conversation that focuses on China’s faults. I have heard these conversations take tones that range from the respectful to the patronizing, and from people who have motives ranging from a genuine desire to build a better China to those who seem to have made a hobby of gratuitious panda-slugging.

The common thread running through each of these conversations is a focus on things as they are, and usually how they compare to some other place. They are rarely infused with a perspective on China’s own history and conditions.

In the passion of such moments remarkable things are said, but one thing I hear with numbing regularity from people who have never lived in Asia is the suggestion that perhaps China would have been better off under the Guomindang, or KMT. The sole support offered to this argument is usually someone saying “after all, look at Taiwan.”

The Last Warlord

Regardless of where one might fall in one’s leanings on that issue, such an assertion begs for some context, and I usually recommend Theodore “Teddy” White and Annalee Jacoby’s seminal 1946 book Thunder Out of China. Not only did White and Jacoby write without the benefit of the hindsight we have, they did so before the Red Scare and the McCarthy hearings forever changed the nature of the debate over communism and its alternatives.

White and Jacoby did, however, write with the benefit of years in China dealing with and around the Nanjing (later Chongqing) government. They had the kind of access granted to reporters working for a publisher – Henry Luce – who was among Chiang Kai-Shek’s most vocal and dedicated overseas supporters. The pair’s insights are biting.

While they must have been tempted to use the power of the pen to vilify Chiang, White and Jacoby strive (and occasionally struggle) to retain a journalists objectivity. Their descriptions make clear that while Chiang had clearly cobbled together a polity of sorts, China even before World War II was not so much a nation as a loosely unified confederation of local warlords and special interests. Herding such a band of cats could not have been simple. Chiang’s first mistake, from the perspective of White and Jacoby, was that he saw himself and the tentative order he imposed as the only viable solution for China.

If history – both Western and Eastern – has proven anything, it is that hubris bordering on a messiah complex is not a formula for successful leadership, and the authors show Chiang a man blinded by his indomitable self-confidence.

The Generalissimo believed he knew China better than the Americans. Granting that most Americans in China offered little, those that offered genuine insight – the Army’s General Joseph Stillwell and the State Department’s Jack Service among them – were systematically ignored, then banished.

Worse, the authors suggest that Chiang believed that he knew China better than any other person in China. As events bore out, in this he was patently – and fatally – wrong.

Caught in a Landslide

What pervades White and Jacoby’s descriptions of Chiang and his government is a view of a man whose ability to govern had been overtaken by events – not just the war, but the pace of change inside of China.

Indeed, through the narrative we see a Chiang who was so overwhelmed by the speed and scale of China’s own internal developments that he had no idea that the political ideas and social programs formed in the crucible of the 1911 revolution were, a mere thirty years later, obsolete. The authors subtly remind us that in the course of two decades Chaing himself had migrated the breadth of China’s political spectrum, starting as a leftist revolutionary and ending as a conservative on China’s far right, as clear an indicator as any that he had not only lost political initiative, he had also lost touch with the country.

Nobody living in China today – or even visiting periodically – can help but sympathize with Chiang’s plight. Keeping ahead of the pace of change in China is a brutal race for any government, party, agency, bureaucrat – or merchant. But to govern at all demands a means of governing that is attuned to change, and White paints a picture of a government in pre-revolutionary China that had ossified some years before.

Chiang lost, to use a phrase from von Clausewitz, his fingerspitzengefuhl, his finger-tip feel for the actual situation on the ground, and as a result presided over a bureaucratic apparatus that was incapable of either caring for the welfare of the Chinese people, holding his coalition together, or fighting the Japanese, much less all three at once.

A Picture in Time

Regardless of where you stand on the matter of the Chinese Revolution, you will probably agree that among the great tragedies of the millennial changes that began in 1911 was the long line of missed opportunities for a more harmonious ending than the national bifurcation that is still called “the Wound of History.”

More vocally than any other foreigners of their era, Teddy White and Annalee Jacoby yearned for a unified China that took care of its people. Armed with a belief in that future, they wrote Thunder Out of China as witnesses to the events that set China on its current course, and their words deliver insights into the national soul of China that after 62 years have lost none of their edge.

Crystal Balls: China Into the Future

Jingshun Road, Bound for Town
Rain + Smog = Smain or Rog?

1046 hrs.

Good books about China – by “good,” I mean those that are worth reading for the insight they deliver, rather than those written to settle scores or for personal aggrandizement – generally fall into one of four categories. They are either histories (like the works of Jonathan Spence or the late Iris Chang), the occasional memoir (Reginald Johnston’s Twilight in the Forbidden City, or Sidney Rittenberg’s The Man Who Stayed Behind), a deep-dive look at a certain aspect of China (Joe Studwell’s The China Dream, or Andrew Nathan and Robert Ross’ Great Wall and the Empty Fortress), or what I think of as a high-resolution snapshot of China as it is at a given moment.

The latter type of book actually live two lives. The first is when they are current, which in China time gives them about 18-24 months of shelf life before China completely passes them by. The second is when they become history, which usually happens 10-15 years after publication. My favorites among this category are Theodore White’s superb Thunder Out of China, Edgar Snow’s writings, and the more contemporary works of Orville Schell.

To that list I am adding China into the Future. The book serves well as an excellent overview of the issues facing China and in providing some new takes on the issues facing companies doing business here. It steps beyond those expectations when it concludes with a detailed scenario exercise projecting 16 routes China may take into the future.

The contributors are a group of experienced China watchers, and the book reads like the extended proceedings of a CEO-level conference on China – and I mean that in a good way. Reading this book gives one the feeling that one is sitting in the back of the room of the conference. I found the book is best read in sessions, sitting down and concentrating on a single chapter at a time and appreciating it for its fullness, thinking through the authors’ assertions as you go.

Those of us living and working in China will inevitably have quibbles with the book in different places. Throughout the book, and particularly in early chapters, one is occasionally touched with a suspicion that this is a work created by people whose primary view of China is from the window seat of the Dragonair flight from Hong Kong to Beijing and back. There is a palpable detachment, a distinct feeling that street-level insight is lacking throughout. Little wonder: all contributors except the estimable Ken DeWoskin were based outside of mainland China as of the book’s writing.

There were other little things as well. The references in the preface to the contributors as China “experts” only served to remind me of a conversation I had with Professor Fan Gang of the Chinese Academy of Social Sciences eight years ago, when he noted that he would hardly call himself a “China expert,” and he was suspicious of those who did. “There are only China specialists. There are no China experts.”

As I said, quibbles. None of that serves to make to book less valuable – indeed, the sooner you accept that this is the archetypal fifty thousand-foot view of China, the more quickly you will appreciate its value. No book about China can possibly be all things to all people, especially to we self-designated China hands who pride ourselves on the kind of knowledge and insight that can come only from immersion.

But all of us need the benefit of a wider view from time to time, and China into the Future delivers it in a way that is bound to be valuable to anyone with an interest in China.

At the very least, China into the Future is a sanity check, a reminder that as as always in China the threat of chaos lies sufficiently close to the placid surface as the world’s largest nation hurtles sans historic model into the murk that lies ahead.

Quote about Books

From the Lanai in the Treetops, Honolulu
Watching the submarines dive and surface
1241 hrs

Thumbing through the pile of used books I picked up in LA last week, I am reminded of an old saying.

“Books are like wine: the good ones age well, the bad ones are vinegar.”

One book that remains excellent is Robert Mason’s Chickenhawk, which was arguably the first book to give a helicopter-pilot’s eye view of the Vietnam war. I had lost my old copy so I picked up a used edition to slide into the library. I’ve read probably a half-dozen memoirs by pilots from Vietnam, and Mason’s remains the best so far.

A Lu Xun Archive

In the Hutong
Better read than dead
2039 hrs.

The good cadres over at Marxists.org have put together a decent archive of some of Zhou Shuren’s (Lu Xun) works. It is not, of course, comprehensive: his literary legacy exceeds ten million words (figure 110 book-length works), and this collection tends toward the more radical of his writings, but the stories here are excellent.

If you are new to the man eulogized as “the national soul” at his funeral in 1936, stop by and check out this collection. If you pick out one only, I recommend The True Story of Ah-Q, a short book-length work that is superb.

They have additional sections of interest to non-Marxists interested in China (like me,) including Frank Glass,Li LisanLin BiaoLiu ShaoqiMao Zedong, and others.

Dell and the Wal-Mart Effect

In the Hutong
Relieved to be out of October
1926 hrs.

One of the reasons I review books here at Peking Review and not at some more established venue is my conviction that some books – or movies, or plays, or music, or art – cannot be reviewed on deadline. Or, more accurately, should not be reviewed on deadline.

Simple fact: some works need to be fully absorbed – “grokked,” to borrow a phrase from Robert Heinlein’sStranger in a Strange Land – before they can be fully understood and appreciated.

I very rarely get feeling when I read a book about American business. But when I finished The Wal-Mart Effect, Charles Fishman’s highly readable endoscopy of the infamous retail leviathan, I found myself unable to write a single word about it. So I passed it across the bed to the Party Secretary here in the Hutong, and I proceeded to meditate.

That was about six weeks ago. And now it is grokked.

Seeds of Destruction

Not that there is anything particularly complex about The Wal-Mart Effect. It is a deeply researched, highly readable, straightforward journalistic examination of Wal*Mart and the effect it has had on the economy, its customers, its communities, and its vendors.

Yet, despite what I thought was a highly balanced treatment of the subject, I walked away feeling like I had just read a modern tragedy. I haven’t been able to figure out why. Now I think I know.

Fishman ends the book with an imprecation, urging readers to call upon their solons and regulatory bureaucracies to write an entirely new book of laws to shackle this Beast from Arkansas and prevent it from doing a Godzilla on vast swathes of the US economy. Yet by the time he issues this call to arms, you are already left with the conclusion that it won’t be necessary.

What has made Wal-Mart successful, the book teaches us, will eventually kill – or at least cripple – the retailer.

Wal-Mart has grown immense by promising low prices, every day. It has created a business that is structured – financially, operationally, and psychologically – toward the single purpose of driving prices on every item it carries to the absolute lowest level possible, and then going one level lower.

All of which sounds great, until you begin to read about the compromises vendors are having to make to deliver that price. At some point in that spiral, something has to give, and all of the smart design and offshoring to Mexico or China will only get you so far. One is left with the unmistakable impression that if it ever comes down to a question of quality vs. price at Wal-Mart, the system inside the organization dictates that saving the extra nickel will win.

Low Prices…Forever. Bwaahahahahahahahaha!

The only problem with that for Wal-Mart is that it runs the risk of not only becoming the guarantor of low prices, but also gaining a reputation as a purveyor of the cheap. Say what you will about Americans, there are not many people in the world who will be happy trading in their hard-earned for a whole lot of inexpensive junk. Not, at least, when there are alternatives.

That tends to build a pretty high wall that looks set to limit Wal-Mart’s organic growth, and limits the cash hoard it can use to change its strategy or acquire a new growth engine. Wal-Mart is stuck with Always Low Prices.

What will happen when Wal-Mart stops growing? When low prices aren’t enough anymore? When competitors – in unreasonable defiance of economic logic – prove that people are willing to pay a little more for a noticeably better product and a more fulfilling buying experience?

Ask our friends in Round Rock, Texas. Michael Dell pioneered the idea that good computers could be made cheap and sold cheap. He also found out – the hard way – that a lot of people in the world wanted more out of a computer than just a low price. Now he is trying to turn the ship around and take another tack, and he is discovering that simply changing the way you think about your business – much less the way you do it – is really, really hard.

The Sad Ballad of Bentonville…and Bubugao

What happens when any major listed corporation stops growing? The hounds begin braying for blood. The takeover artists and hedge fund types move in. If you want to look into the Wal-Mart’s future – or the future of any major retailer shackled to a stagnant business model – look at what happened to Sears. Store closings. Games with intellectual property. Facelifts. And then the vultures move in.

Personally, I’m ambivalent about Wal*Mart. I get a better experience at other retailers for about the same price, so when I am back in the U.S., I go to Target, Costco, Barnes & Noble, and the Apple Store.

But I feel a bit sad for the company. After all of its promise, after all of the superlatives, the hyperbole, the hope, and the fear, uncertainty, and doubt, the company has peaked, and it’s going to be a long, ugly downhill run.

Living in China, one need only look at the host of companies battling each other to offer lower and lower prices, be they retailers, electronics manufacturers, or even online auctioneers, and see fodder for the financial carrion-birds. It is painfully clear that a lot of wealth is set to be destroyed as China’s business leaders learn that a race for the basement means your company is pointing straight down at the ground.