Shoe Shining Is Better Than Deal Signing
If you are an investor in practically any of Hong Kong's leading companies your best hope is that the high level 'Go West' delegation to China, which ended its 10-day tour on 29 May, is nothing more than a gigantic shoe shinning exercise.
The very worst result of such a trip is that some of these companies would get so swept away by meeting senior Chinese officials and being treated as VIPs that they suspend business judgement and start dabbling in projects which are more or less guaranteed to lose money.
Few of the SARs leading companies are not represented in this delegation led by the Chief Secretary Donald Tsang. Its purpose is to promote Hong Kong investment in China's Western regions.
As ever when the Hong Kong government seeks to meddle in business or indeed to get involved in the mainland's affairs, it does so with bad timing and more or less guaranteed poor results.
China has been pushing its internal Go West campaign, with little success, for quite some time. Having failed at home who better to turn to than the large bunch of eager shoe shiners in Hong Kong? They are always ready for a chance to demonstrate patriotism and loyalty to the old men in Beijing. As long as they do little more than go through the motions, shareholders in their companies have little to worry about. Indeed they may well be reassured by any company busily engaged in shoring up its guanxi, even though the value of guanxi, or connections, is often overstated.
The reality of these big, politically-infused business delegations is that they rarely produce much business. When they do it is largely confined to letters of intent or their weak cousins MOU or memorandum of understanding which usually turn out to be memorandum of misunderstanding as they rarely survive passage to the next stage of implementation.
However it has been known for usually sensible business people to loose their heads when being flattered, feted and well fed. It is at this point that they enter the danger zone and start thinking less about the bottom line than about how nice it is to be flattered, feted and well fed.
Practically all those on the Go West trip are already doing business in Eastern China, especially in the coastal provinces. This, of course, is where most of China's own entrepreneurial business people are also heading. There is no need for high level delegations to get them there. Instead they are lured by the simple motive of profit.
It may well be that similar profits are going to be made in Western China in the very distance future and that there is some merit in being a pioneer. However there is little to support this view in recent Chinese business history.
The facts are that most of the pioneers, who ventured much further than the Hong Kong border and the Special Economic Zones in Guangdong, have not made a cent from Chinese business. On the contrary they have lost a great deal of money. The real money started to flow once the pioneers managed to persuade the government to take its hands off the business rudder and let them get on with their work. In other words it was those who came in behind the pioneers who reaped the real rewards.
In circumstances where governments got involved in the pioneering work, notably in Suzhou where the Singapore government led a regional development effort, the results have been even more disastrous.
This is not to say that there are no profits to be made by going West, nor that big delegations do not have some purpose in highlighting the potential of the area, however this is by far the most cumbersome way of finding new business prospects. Western Chinese provinces are underdeveloped thanks to a lethal combination of reasons, including unfortunate geographic location, poor land, political problems -(particularly in Tibet and Xinjiang) and, perhaps worst of all, poor government.
Signs of this poor government were evident even during this showcase Go West trip led by Sir Donald. Participants complained of being subjected to ill conceived and insubstantial presentations which were totally inadequate for their purposes. Various contract signing ceremonies were engineered although it was later admitted that they had nothing to do with initiatives arising out of this trip.
Most telling however was the fact that the Hong Kong delegation swelled to its biggest size when it reached Beijing which, according to my map of China, is no where near the western provinces. But is, of course, the seat of government and the place where the businessmen had to go to shake hands with Premier Zhu Rongji.
Frankly I take this as a good sign that shoe shinning is in the ascendancy and that dubious business deals will remain unconsummated.
quamnet.com |
