It is James McGregor’s absorbing account of his tenure in China as Dow Jones’s China boss. I am fascinated by China and its rapid rise and I have been wanting to read this book for a while now. The book is littered with insights about China and its culture. I picked out some of insights that intrigued me the most in the first chapter:

1. [P10-11] While the West in built on a guilt-based foundation where eternal damnation or sinning curbs bad behavior, China is built on a Shame-based foundation. It is the fear of exposure and resultant shame that is a problem. So Chinese can do anything as long as they don’t get caught. China has adopted the civil law philosophy of Japan and Germany, unlike India which has adopted the common law philosophy of the UK and USA.

2. [P15] McGregor talks of how Hong Kong has been surpassed by mainland China and quotes a chinese proverb “Fu Bu Guo San Dai” meaning “Wealth can’t last more than 3 generations”.

At the end of every chapter McGregor gives a neat summary of the insights in what he calls the Little Red Book of Business that serves an excellent summary of that chapter.

McGregor goes onto give a brief but well written synopsis on China’s history to explain why Chinese are extraordinarily suspicious of foreigners.

Morgan Stanley’s Debacle: The next chapter [Chapter 2] discusses the audacious marriage of Morgan Stanley and the Chinese government controlled China Construction Bank to create China’s first investment bank which ultimately unravels after years of struggles between the 2 partners thanks to the clash between western and chinese styles. The chapter is summed up nicely with a chinese proverb “Tong Chuang Yi Meng” meaning “Two people sleeping in the same bed having different dreams”. But interestingly, Morgan Stanley though badly bruised and battered by the joint venture, laughed all the way to the bank with a 50% share of Chinese IPOs.

Corruption is Endemic: Chapter 3 chronicles the spectacular rise and the equally spectacular fall of a peasant turned wheeler dealer. Indians will find eery similarities with the descriptions of endemic corruption involving the police, military, smuggling nexus with graft from the businessmen to get preferential treatment. McGregor also gives some recipes for succeeding in China without selling your soul – emulate GE by training Chinese executives at their famed crotonville center. Or create opportunities for Chinese to work in your company for temporary periods to learn. It all seems to boil down to Know How. This is the biggest thing the Chinese are looking for. If you can give that to them you can succeed without having to be corrupt.

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Beating Xinhua: Chapter 4 McGregor talks about how he emerged victorious from the fight of his life – Xinhua (the state news agency) which wanted to take over Dow Jones’s business with new regulations. He enlisted the support of Reuters which was the other major player in China. Working in tandem they got the support of the US Government and parts of China’s bureaucracy that were opposed to the Xinhua regulations because it hindered China’s entry into WTO – a prized goal for China.

McDonnell Douglas’s Flight of Fancy: Chapter 5 discusses McDonnell Douglas’s ill-fated joint venture in China to manufacture MD-80s. The initiative was led by Gareth Chang who became a China Expert eventhough he left China as a 6 year old. I see parallels to this, when an Indian IT engineer becomes the India offshoring expert at our client sites with the only qualification being the Indian origin. This chapter ends with a telling conclusion “A final lesson is that basing your business on special deals from the Chinese government is foolhardy. The Chinese Government offers special deals because you have something they want, not because they want to help build your business. Unless there are clear and competitive commercial underpinnings, you will lose, no matter what the government has promised.”

Rupert Murdoch’s Fox Hunts: Chapter 6 covers how Rupert Murdoch established a successful presence in China in partnership with Liu Chongle, a chinese media entrepreneur. But what caught my attention is the inspiring story of Hu Shuli’s rise in the Chinese Media with her fearless investigative reporting magazine Caijing. Caijing mainly covers financial news but also jumped into the SARS epidemic by reporting the real state of affairs much to the chagrin of Chinese officials. I am reminded of India’s own fearless Tehelka.com.

Telecom Juggernaut: Chapter 7 is dedicated to the Chinese Telecom industry which has made dizzying progress by leveraging foreign technology and assets to build a state of the art telecom infrastructure with the Government firmly in charge. In just 10years starting 1993, a whopping 500 million phonelines were added. While the monopoly buildout was going on customers had to wait for months to get a phone line and had to pay hundreds of dollars in bribes (Sounds familiar to our BSNL story,right?). Into this quagmire, UTStarcom steps in, a startup founded by Chinese American entrepreneurs, with a Fixed Wireless technology which proves to be enormously cheap and signs up customers at a rapid clip forcing the government to not interfere with UT Starcom much to the dismay of the telecom ministry which was intent on destroying UTStarcom to retain the monopoly. In India, a similar fixed wireless technology is used by Airtel, Tata Indicom and Reliance to offer landlines competing with BSNL People in India are switching to the private phones in droves.

Another interesting tidbit – “Chinese love to point out that they invented porcelain, silk, eyeglasses, paper, the printing press, and gunpowder. They were eating with sanitary chopsticks for 1000 years while Europeans reaching into common bowls with dirty hands. But the crush of politically driven information and thought control, and Confucian traditions, have left China today a place where the people are capable of incremental innovation, but not innovativebreakthroughs. Breakthrough ideas come from the West.”. I see this as sort of similar to India – for any meaningful pride we have to point back to the Vedas where supposedly (mainly supported by conjectures) everything that has been discovered or invented or to be invented is present and today’s India is mostly a workforce for the West without any major indigenous breakthroughs.

The final chapter 8 is a broad sweep of coverage. First up – China’s first American MBA introduced by a consortium in 1993. By contrast India’s IIMs have existed for a long time.

Second, some key business and management issues of which there are two that I found interesting.

1. Rote Rules: Chinese students are among the best. But they learn under a system self-deprecatingly called ‘Tianyoshi Jiaoyu” or “stuffed dick-style education”. Essentially they learn by rote which prepares them mainly to be led and not lead. Sounds very similar to the Indian education system where rote rules.

2. China is Queue-less: Nobody waits in line in China – at banks, on buses, everybody elbows to the front. Same thing happens in business by rapidly diversifying into anything and everything to make money fast which is the overriding goal. This has resulted in a situation where the average life of a company is 5 years or less.

McGregor then covers 3 management styles from 3 different companies to show what is working – a husband-wife pair that runs a real estate business using a combo of western and chinese principles, a beverage company Wahaha that is run using the benevolent dictator model which works very well in China and lastly Lenovo – the IBM-Lenovo joint venture which has a blended team of IBM managers and Lenovo managers working together in what is being seen as the prototype of the future
Chinese company.

Overall McGregor has covered almost every topic that is connected with doing business in China. Because he uses colorful characters as protagonists and their stories, it makes for a surprisingly fast read considering the dry subject matter.

I’d strongly recommend reading this book if you are interested in China.

While McGregor comes across as fairly unbiased, I would be curious to know whether a Chinese would agree with his observations?

Can anyone recommend another business book on China written by a Mainlander?