Home / Book Reviews / The more things change, the more they stay the same. Lessons in business from Shanghai’s past.

The more things change, the more they stay the same. Lessons in business from Shanghai’s past.

Wise words from Shanghai’s past: “Letters of a Shanghai Griffin”

I am amazed and amused to find that although over 100 years has passed since they were first published in 1910, that the inherit Chineseness of Shanghai’s locals and the experience of foreigners coming here has barely changed at all. From stomach turning stench and the insufferable summer heat to the fact honesty and trust are a sign of stupidity, the more Shanghai and China changes the more it stays the same.

In reading the letters I cut and pasted nearly 6 pages of quotes detailing the similarities of a Shanghai existence at the turn of the 20th century with that of the current state of affairs at the heads of the 21st. For the sake of this article, I have narrowed down the quotes to those that can be reasonably associated with doing business on the mainland focusing on the character of Chinese people and what a newcomer seeking his or her fortune are likely to encounter today. 

“Chinese cheat the foreigners in every conceivable way, and also in every inconceivable way…”

And thus begins our trek down the road of the Chinese business environment. Anyone doing business in China today can readily attest to the fact that there is currently no shortage in ways for a Chinese business man to rip you off. Whether it be sourcing ready-made products in China where the first samples shown are of the highest degree of craftsmanship and composition only to readily deteriorate in all aspects of quality as subsequent orders are placed, a phenomenon known as “quality fade”, or having contracted a local Chinese factory to manufacture your product only to find that within a very short time all your copyrighted designs have invariably made their way into the hands of the factory owners friends and relatives and now you are forced to compete against copies of your own product domestically and internationally, you will have encountered a longstanding attribute of the Chinese business person, dishonesty.

 “One hears employers here openly confess that it is useless trying to prevent servants from stealing, and that one must “allow” a certain amount for “squeeze.”

This is equivalent to saying, “I am not to be worried about the Chinese servant; he is going to rob me very well, I give in, I am tired “-and is one of the symptoms of Maskeeitis, which disease is explained later on in this letter.”

In doing business in China, particularly in manufacturing, this kind of situation is considered par for the course. Big international firms doing business in China fully accept the reality that whatever they produce here is going to be stolen and copied in some format. In the end it is just considered one of the added hidden costs of doing business in China.

A friend of mine’s wife was hired a year ago to help a European firm perform an audit of its joint venture partner in Shanghai. The foreign firm had requested audits in the past that had supposedly been performed by members of the local company’s employees. Predictably they found nothing to be amiss in the factory’s operations. But when my friend’s wife took over the task of performing an audit for the foreign partner she found that a significant proportion of equipment payed for and supplied by the foreign firm to be absent from the Shanghai factory, and that was just for starters. Upon further investigation it quickly became apparent that a large amount of the raw material needed for manufacture that had been entered in the books as being stored in the warehouse had also mysteriously vanished. In tracking down the missing equipment and material she she discovered that all were in full productive use at a nearby factories all not surprisingly owned by relatives of the Chinese partner’s owner making exact copies of the product the joint venture was supposed to be producing.

Whether this occurs in other countries, I am not sure, but I am sure that the European partner had never imagined this would happen in their Shanghai venture, or they would have probably not set up shop here in the first place.

In answer to your inquiry as to the principal occupation of the Chinese peasant class, which, by the way, forms 90 per cent of the population, I must inform you that their time is spent mainly in the vocation of agriculture, the chief productions there from being smells, graves, and rice, in the order named.”

Fast forward 100 years and 90% of the population are still basically peasant farmers, although today many of them have migrated to the cities to work in factories manufacturing products poorly. This may come as a shock to those who erroneously believed the rosy expectations of over 1 billion Chinese customers when moving their production to China over the past decade or so. Cheap labor abounds as 10 local employees can easily be hired for the price of 1 Western employee, and if you are lucky they may produce the same amount as 2 or 3 of their Western counterparts, but on an individual basis, almost none can afford to purchase the products they help create.

Most of what gets made in China, for this reason, has to be exported and as wages climb, already twice the level of South east Asian countries, and manufacturing moves West requiring the transport of goods across the vast expanse of China’s interior in a country with the world’s highest logistics costs, it becomes immediately apparent that doing business in China is fast becoming a much more expensive endeavor. If there had been a large domestic market created over the last 30 years of development, one can only logically conclude that the increase in these costs would be offset by the available local market, which would bode well for China’s immediate economic future.

If you show him the right way to do anything foreign fashion, he obeys, goes home at night, thinks out another way, and follows his own method ever after.

When you ask him if he understands, he invariably says “yes,” in order to save you a lot of useless explanation; for he knows quite well how he is going to do the job-he is going to do it his own way. He has the idea somewhere in his mind that he knows better than you do, and nothing will ever drive it out until he is killed either by the bursting of a boiler or the explosion of a match-factory.”

These quotes reveal another “fact” of doing business in China that has scarcely changed over the last 100 years. In short, Chinese refuse to be educated. A foreign firm can show up in Shanghai, clearly explain what it is they want and how they want it done only to have find finally upon delivery that either it has been manufactured wrong or so poorly that it is deemed unusable.

In Poorly Made in China the author recounts a tale of his experience in soap manufacturing. At one point he travels to Hong Kong to seek out the expertise of a scent expert in choosing a new smell for his client’s product. The scent selected and sample in hand he returns to China and gives it to the company doing the manufacturing. A few months later he gets a call from his client who complains that the scent on the new soap is dreadful and not at all what he had ordered. Returning to the factory he finds the company’s scent scientist and asks him what happened. “Oh”, he says “I thought this one smelled better so I changed it.”

“His main object in life is to avoid “losing face,” though to look at him is to wonder why. Losing face actually means “blushing for shame.” No Chinaman “loses face” by stealing, but by being found out; which is a point of resemblance between the Chinese and our great financiers.

No trick is too subtle for him. He mixes little clay balls with the soya beans that he sells, and you cannot detect them unless you are an expert. These imitation beans are offered for sale quite openly in the native shops situate in bean-growing districts. He introduces a special kind of white clay into his vegetable tallow. When live cattle were being sold to the Army, they were driven on to a scale and weighed as they stood. Re pumped water into their stomachs with a force-pump to increase the weight.

His genius for deception and fraud is not content with the scope offered for its exercise within the limits of the material world: his insatiable appetite for chicanery is therefore pandered to by the puerile deceits he practices upon that spirit world in which he implicitly believes, and takes into account from the cradle to the grave.”

“Face” and deception are the two mainstays of Chinese cleverness. To cheat and get away with it is considered intelligent; to cheat and get caught is shameful. There is nothing however, wrong with cheating. When doing business in China it has to be accepted that people are going to attempt to cheat you. It is the greatest game afoot in the mainland and I am convinced that without it Chinese would have seriously little as to occupy their time with.

If the Chinese, as a whole, were reliable, what a business nation they would make! The habit of lying appears to be much more universal, deep rooted, and a far greater obstruction to progress than that of opium-smoking.

Dishonesty is the only quality possessed by the Chinese that enables foreigners to make a living here. If they were honest they could beat us out in trade in six months. Fortunately for us, the only way to eradicate the cheating instinct would be to flood the entire country to the depth of forty fathoms for six weeks.”

I can’t help but wholeheartedly agree with the author here. If mainland Chinese were to conduct business in an upstanding honest way, China would probably have a chance at actually developing and perhaps one day becoming a world leader. Unfortunately, a great amount of their effort is consumed by underhanded deeds.

In the short term it adversely affects the foreign manufacturer who comes to China to do business, but in the long term it only hurts China herself. China has been “developing” for over 150 years and yet today, the vast majority of Chinese still live in squalor, many not much differently than they did hundreds of years ago, and China as a whole hasn’t even reached the level of development that their neighbor Japan had at the time these letters were written. And when new things do come to China, high-speed rail for example, manufactured in the most part from stolen technologies, the disingenuous nature of the people set it up for eventual failure and ruin. For example: The construction of China’s high-speed rail network has been plagued from the outset by endemic “cleverness” (read “corruption”). From pylons filled with dirt instead of cement, construction contracts being awarded to unskilled cooks, signaling equipment being manufactured with zero quality control, to control center staff and operators who refuse to learn how to do their jobs correctly, China’s high-speed rail is a disaster waiting to happen. Or, I should say, “More disasters waiting to happen.”

In closing, I find this quote quite appropriate:

“Notwithstanding the disadvantages under which their lives are spent however, our civilization doesn’t appear to better them, despite the fact that we do all we can to improve their lot. We sell them millions of cheap cigarettes which smell like a wet dog that has crawled under the stove; they take over most of our Australian horses that have got spavins or string halt, and our provisions that were stored too close to the ship’s boilers.

We send them missionaries who would do far more good at home, we sell them rifles in order that they may kill themselves like civilized beings, and build them war ships so that we may have something to sink if we go to war with them, The Municipal Council takes numbers of them in hand, and teaches them useful trades, such as making coconut fiber matting, road-mending, stone-breaking, etc., and is so considerate as to chain them together in case they might get lost.

We allow them to come into the settlement and trade, spit on the floor of our offices, and give us both aural and ocular demonstrations as to the ridiculous way we waste our money in the purchase of handkerchiefs We lend them money Upon land at the absurdly low rate of 12 per cent., taking upon our own shoulders all the risk of that land being stolen during the night.

We allow them the privilege of mixing socially with our Indian police, and, in short, do all that we can to show them that our aims are not selfish, and yet these ingrates call us “foreign devils.”

But maskee, we will continue the good work in the hope that someday we may be able to save enough to go home and live quietly on two or three thousand a year, with the knowledge that we have done our best to introduce the blessed gift of civilization into China, and in the hope that its acquisition will be as profitable to them as its disbursement was to us.”

The author’s sarcasm is not far off the mark. Time and again large multi-national corporations have payed lip service to the realities on the ground in China stating that through their development of industry reliant on low waged uneducated peasants that they are somehow bettering the country they manufacture in. The truth is that companies arriving in China care very little about the people they seek to employ at slave wage levels. They just want money and when the money stops coming, they’ll happy move their operations to another poor corner of the planet where they can consoled themselves on how much they are helping the locals while only caring about filling their own pockets. Because of this I don’t feel so sorry for those foreign firms that get taken for a ride here by unscrupulous local business people, but at the same time I can’t help but feel hat China would be better off in the long run with a sense ethnics at the very least in its handling of business.

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