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Mr China – lessons on doing business with China

21 February, 2006

After 18 years business experience and investments of over $400 million in China, Tim Clissold has amassed experience in China few other business people can match. He is now sharing his experiences with the business community through his book; Mr China.

Australian Business Limited

Mr China recounts both his positive and negative experiences, providing valuable insights for businesses currently or intending to do business with China.

Clissold’s interest in China began at a very interesting time; before the first wave of investment, before Tienaman square and before the economy began to open.

“My initial interest in China was more cultural than business,” said Clissold. “I arrived in Hong Kong for work and found a place totally different to anything I had ever experienced before. It was incredibly energetic, the streets were teeming at midnight.

“I got more and more interested in it mainly because of the latent energy which you could feel, but hadn’t really burst out yet.”

Keen to get involved in China, Clissold resigned form his job to move to China and study Mandarin.

“Two or three days after I resigned Tiananmen Square happened. And I must admit it did wobble me. But I believed China was unstoppable, that it was going to be a force in the world no matter what happened. So I just ploughed on.”

Clissold began working as a Mandarin speaking accountant for a large firm looking to develop business in China. He liaised between investors in England and Hong Kong and government officials and business people in China.

One of the investors Clissold met was “a very charismatic Wall Street banker” and over a few years the two, with the help of a few helpful government officials, invested $400 million in 20 factories in the automotive industry. However they soon discovered that establishing the investments was not the tricky part.

“We were the largest direct investment company,” said Clissold. “It was tremendously exciting, but once the money went in we started thinking ‘this isn’t right’ because it was tremendously hard to manage.

“It got pretty hairy. We had every kind of fraud you can imagine and I was even held hostage.

“However in the end we figured out how to manage China.”

After his experiences, Clissold has some valuable tips for doing business to get the most out of your Chinese partners.

“You have to constantly work the relationship. The best partnerships, even in the West, are based on real trust where as circumstances change you adjust the relationship.

“That is really true in China, because business is based on long term relationships which work to mutual benefit. If circumstances change and you try to stick to the original contract but your Chinese partner isn’t getting the same level of benefit, then he will peel off.

“You need to be brutally honest with yourself about what benefits you are giving your Chinese partner. It means at times being very flexible, but also at times sticking up for your own rights as well.

“If a Chinese partner comes back and wants to re-negotiate a contract, you can trade with them to get something that originally you didn’t get, like more control over cash flow. There is always some balance you can find and a Chinese partner will never think badly of you for sticking up for your own position as hard as you can.”

Clissold also learnt to be careful to avoid offence on the topic of Chinese history.

"Chinese people are very difficult to offend, except on the subject of history. If you offend their sense of nationhood by a disparaging remark about their culture, history, language or government, you can get into deep water.

“Educate yourself about Chinese history, then express an interest, and you will get tremendous rewards.”

Clissold has also been able to develop knowledge of the Chinese as employees.

“You need to spend time with them, particularly if your methods to motivate your employees are not working. It may take some time to find what the real issue is as they rarely complain. Methods such as talking to employees one on one and informal group meetings often work.”

Clissold has seen remarkable changes in the Chinese market in the years he has been involved with the company. Most he believes have been positive.

“The market has completed a remarkable transition in ownership. When I first went there basically everything was state owned but it was starting to change with the encouragement of township and village enterprises [TVEs].

“TVEs worked far better than expected. Then ownership of state owned businesses started to change. That transition still has some way to go, but the most difficult part has been done.

“China is no longer a planned economy; it is much more a market economy. That transition is extraordinary and it changed the way Chinese people think. It has allowed them to release the incredible latent energy they have and start building their own businesses.”

Despite these drastic changes, Clissold does not believe the market reform is over.

“The massive investment boom was used to build up businesses. Now they have got to the point where businesses have retained earnings from the sale of simple products. They have retained earnings. Now they are using this capital to come out of China and start buying companies in Europe and the States which have higher technology. They are starting to move up the value chain.

“And this is going to continue in the coming years, either by Chinese companies developing their own technology or more likely by companies buying businesses outside China.

However, Clissold believes that there are still many opportunities for foreign companies to work with Chinese companies.

“There is still a massive imbalance in wealth between the coastal regions and central region. But the Chinese Government is very aware of it and is making strenuous efforts to share wealth more equitably.”

Much of this is dependent on the development on infrastructure. Clissold predicts there will be need for infrastructure for a very long time.

“I think Australia has a fantastic opportunity because Australia has something that China desperately needs – the resources to continue powering growth. And that gives Australia a fantastic opportunity to reach a market of 1.3 billion.

“Also Australia’s relationship with China is quite different to that of Europe or the United States. I don’t think Australia threatens China in any way, they are wary of businesses from the United States.

Despite all the changes, Clissold is quick to emphasise that there are still many barriers to doing business with China which businesses must be aware of.

"Understanding China is so important because it is going to be influential in the world.

“It is important to gain an understanding of the Chinese language, business style and recent history. And the way you do that is by going there, and when you go the first time you need to be chaperoned. If you can find a course like what the National Centre for Language Training offers it is great.”

When asked if would do it again now, Clissold is very quick to answer.

“Absolutely. I am doing it again.

“But I’m doing it in a completely different way. I think what Chinese businesses need is access to technology, meaning new product development skills, and access to markets outside of China.

“They don’t need money. So as a private equity investor going to China now just with money you are not going to be very attractive. You are not going to get good terms from a Chinese business man.

“If you go to China with a combination of money, technology that is relevant to their industry and a big market, they will listen to you.”

Australian Business Limited’s International Growth Specialists provide personal assistance for Australian businesses entering the Chinese market. For more information please call the team on 13 26 96.

Tim Clissold is visiting Australia as a guest of the National Centre for Language Training, an Export Partner of Australian Business Limited.

The National Centre for Language Training have also awarded a China Immersion Scholarship to Australian Icon Victa Lawncare.

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