The China Venture
The China Venture The China Venture
PBOC People’s Bank of China PDB Pudong Development Bank PM Portfolio Management PRC People’s Republic of China RMB Renminbi Yua n SBC Swiss Bank Corporation, now: UBS SBG Schweizerische Bankgesellschaft, now: UBS SDB State Development Bank SEC United States Securities and Exchange Commission SGD Singapore Dollars ShDB Shenzhen Development Bank SOE State-owned enterprise SSE Shanghai Securities Exchange STAQS Securities Trading Automated Quotation System U.K. United Kingdom U.S. United States (of America) UBS AG New Name of the united UBS and SBC (Juli 1998) USD US Dollars WFOE Wholly Foreign-Owned Enterprise WTO World Trade Organisation xii
1. Introduction: The China Venture Paul Krebs was perplexed and bewildered. Throughout his 22 years as an international businessman, he has never experienced such inexplicable treatment from his business allies and acquaintances as he did in China recently. It was not that they treated him badly, or they tried to cheat him or twist his arms. These would not have been surprising at all. The perplexing or even bewildering aspect of this episode lies in the fact that they treated him so very well, treating and feasting him like a VIP, and yet refused to discuss anything relating to the continuation of a supposedly on-going business, evading and postponing indefinitely every mention of work and business. This is definitely strange but should not be inexplicable. After all, these are supposedly business people and people his firm has been working with over the last 3 years. Indeed, everything went very well when Mr. Zheng was running the business for him in China. The business started up in China without a hitch and the deals struck were always profitable. There was no difficulty whatsoever. No problem was ever brought up to him. He only heard good news every time he asked. The accounts always looked good, in fact too good to be true. If everything else were not real, at least the money which flowed into his firm’s bank account in Switzerland were real. Is this what Guanxi is all about? He heard so much about Guanxi from others, yet never experienced any problem with it. Perhaps, his firm’s dealings with China has been bouyed by Mr. Zheng’s Guanxi. With Mr. Zheng gone, there is no more Guanxi. This seems plausible, yet it does not explain the extreme kindness and hospitality of the Chinese. If the Guanxi is still there, why then are the Chinese not talking business with him. If there is no intention of wanting to do business, why should they be so nice to him? If Guanxi was the web of relationships which helped buoy his business in China in the past, then it would seem to be a spider’s web which renders him helpless and unable to move his business now. Such thoughts have occupied Paul Krebs’ mind since he went on his business trip to China 3 weeks ago. There seems to be no logical explanation for all these. It is incredible how one man (Mr. Zheng) can do so much difference to a business. Mr. Zheng was an employee of Paul Krebs. He came to work for Paul’s firm after his graduation from a university in Germany. He was bright, and very hardworking and responsible. As a result, he soon ear ned the trust and respect of his boss, Paul. After working 3 years with Paul’s firm, he expressed his desire to return home to China. This was when Paul 1
- Page 1 and 2: The China Venture: Business Environ
- Page 3 and 4: Table of Contents List of Figures .
- Page 5 and 6: 3.2.3.2 Special Funds for Setting U
- Page 7 and 8: 3.4.1.1 National Culture ..........
- Page 9 and 10: List of Tables TABLE 2-1: THE AREAS
- Page 11: GBP Pounds Sterling GDB Guangdong D
- Page 15 and 16: After a short discussion with the p
- Page 17 and 18: co-operate with other firms, especi
- Page 19 and 20: The Chinese operating legal system
- Page 21 and 22: First of all, Britain’s predomina
- Page 23 and 24: democratic centralism, all governme
- Page 25 and 26: The courts are the state organs exe
- Page 27 and 28: more than three hundred intermedia
- Page 29 and 30: 2.2.8 Company Law China’s first n
- Page 31 and 32: Things seem have to become a lot cl
- Page 33 and 34: 2.3.1.1 Financial sector developmen
- Page 35 and 36: securities, trading, initial public
- Page 37 and 38: underdeveloped compared with market
- Page 39 and 40: established in January 1996 by 59 p
- Page 41 and 42: Chinese Banks Foreign Banks Financi
- Page 43 and 44: system formulation has been put on
- Page 45 and 46: The separation of production and co
- Page 47 and 48: swap centres (see also above). From
- Page 49 and 50: investors with little experience an
- Page 51 and 52: them, while a branch with a shortag
- Page 53 and 54: Loans, public offerings of shares,
- Page 55 and 56: is often to acquire foreign capital
- Page 57 and 58: 2.3.3.2 Debt financing As getting t
- Page 59 and 60: the approval of special authorities
- Page 61 and 62: control compared to national enterp
1. Introduction: <strong>The</strong> <strong>China</strong> <strong>Venture</strong><br />
Paul Krebs was perplexed and bewildered. Throughout his 22 years as an international<br />
businessman, he has never experienced such inexplicable treatment from his business allies<br />
and acquaintances as he did in <strong>China</strong> recently. It was not that they treated him badly, or they<br />
tried to cheat him or twist his arms. <strong>The</strong>se would not have been surprising at all. <strong>The</strong><br />
perplexing or even bewildering aspect of this episode lies in the fact that they treated him so<br />
very well, treating and feasting him like a VIP, and yet refused to discuss anything relating to<br />
the continuation of a supposedly on-going business, evading and postponing indefinitely<br />
every mention of work and business.<br />
This is definitely strange but should not be inexplicable. After all, these are supposedly<br />
business people and people his firm has been working with over the last 3 years. Indeed,<br />
everything went very well when Mr. Zheng was running the business for him in <strong>China</strong>. <strong>The</strong><br />
business started up in <strong>China</strong> without a hitch and the deals struck were always profitable.<br />
<strong>The</strong>re was no difficulty whatsoever. No problem was ever brought up to him. He only heard<br />
good news every time he asked. <strong>The</strong> accounts always looked good, in fact too good to be true.<br />
If everything else were not real, at least the money which flowed into his firm’s bank account<br />
in Switzerland were real.<br />
Is this what Guanxi is all about? He heard so much about Guanxi from others, yet never<br />
experienced any problem with it. Perhaps, his firm’s dealings with <strong>China</strong> has been bouyed by<br />
Mr. Zheng’s Guanxi. With Mr. Zheng gone, there is no more Guanxi. This seems plausible,<br />
yet it does not explain the extreme kindness and hospitality of the Chinese. If the Guanxi is<br />
still there, why then are the Chinese not talking business with him. If there is no intention of<br />
wanting to do business, why should they be so nice to him? If Guanxi was the web of<br />
relationships which helped buoy his business in <strong>China</strong> in the past, then it would seem to be a<br />
spider’s web which renders him helpless and unable to move his business now.<br />
Such thoughts have occupied Paul Krebs’ mind since he went on his business trip to <strong>China</strong> 3<br />
weeks ago. <strong>The</strong>re seems to be no logical explanation for all these. It is incredible how one<br />
man (Mr. Zheng) can do so much difference to a business.<br />
Mr. Zheng was an employee of Paul Krebs. He came to work for Paul’s firm after his<br />
graduation from a university in Germany. He was bright, and very hardworking and<br />
responsible. As a result, he soon ear ned the trust and respect of his boss, Paul. After working<br />
3 years with Paul’s firm, he expressed his desire to return home to <strong>China</strong>. This was when Paul<br />
1
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