Buescher long term plan, open as many new theme parks, take over and renovate as many old theme parks as he can along major corridors and inbetween already established major tourist destinations. Be the low cost leader - the Mr. Sam Walton of theme parks. Cut expenses to the bone - he has negotiated with these africans because he is expecting to replicate his model all over the SE and then all over the nation and will need lots of cheap labor with his growth plans. He may fail flat on his face though. Still he has got a pretty cheap labor force.
Mr. China said those chops on everything really got to be a burden - how does any other western investor get around those issues. He said commies actually had very little central control and this was a misconception of outside investors.
abc.net.au
ELEANOR HALL: With Australia now set to negotiate a free trade deal with China over coming months, the recent publication of a cautionary tale about doing business in the world's most populous nation, is timely.
Tim Clissold's at times hilarious and surreal account of trying to ride the China boom is particularly instructive because this is not about an inexperienced westerner losing a bit of cash in an investment gamble.
British-born Tim Clissold is a Mandarin-speaking investment analyst with more than a decade's experience in China, and his book tells of his partnership with a Wall Street banker to invest almost half a billion dollars of investor funds in the burgeoning China of the 1990s.
They seemed to have everything going for them, yet rather than making money, they lost millions. So, what went wrong?
The Author of "Mr China", Tim Clissold, flew into Sydney from Beijing this
morning and joined me in The World Today studio.
Tim Clissold, thanks very much for coming in. Now, to start at the beginning, why did you and your partner Pat, the "Mr China" of the title, want to do business in China in the first place?
TIM CLISSOLD: I think there's something really unique about China. There are lots of clichés about it in terms of its size and you know, the 1.3 billion consumer market and so on. But there really is something very exciting about China, because it’s kind of like the last sort of frontier. It's really the last place where you can build a very big business from scratch, and we both kind of found the idea of creating something to be, you know, very attractive.
ELEANOR HALL: Now when things were in their early stages and they were going well, how big a high were you on then?
TIM CLISSOLD: Oh, I was completely walking on air. I mean we started out with you know, three individuals running around China with what we thought was a good idea and you know, we had no money and we were based in this grubby hotel on the east side of Beijing. And 18 months later you know, US$400-million under management and a company with 20 factory sites all over China, 25,000 employees. So, yeah, I mean it was fantastic.
ELEANOR HALL: Now you seemed to be doing everything right. You had local contacts, you did rigorous on the ground checking of all the factories you invested in, you had financial systems in place, you had watertight – you thought watertight – contracts and careful checking of the bank accounts and how they were going to operate. What went wrong?
TIM CLISSOLD: I think we just completely underestimated how wild business can be in China, and totally underestimated how far people would go in defending their economic interest. And just how much they think completely outside the box. I mean, the rules are there to be distorted and broken.
TIM CLISSOLD: The Chinese, you say at one point, have a very different view of contracts and indeed there's that system of the Chinese companies seal the chops. Are those sorts of things that westerners are going to have to get used to invest there, or are the Chinese going to have to change their approach?
TIM CLISSOLD: I think you've pointed out two really sort of fundamental things about doing business in China, and the first one is that you know, for a westerner, a contract's a contract. For a Chinese businessman, it's getting more to be the way that we view it, but certainly in the 90s and even still now, it's more of a snapshot of a set of arrangements that happen to exist at one time, and business relationships develop, and therefore, arrangements develop with it, and that obviously is very repugnant for a westerner. But if you can get over it, it actually can be a benefit, because if a Chinese guy wants to renegotiate his contract, then you can do the same. But if you ask the very simple question, can you enforce a contract in a court of law, reliably, the answer is still no.
And actually since that experience I have actually been helping out other foreign investors who get into similar messes as the ones that I did, where they need to enforce a contract, and you don't really do it via a court, but you can do it via sort of lobbying with government officials and so on.
So yeah, I think the system does work, it's just very different from ours.
ELEANOR HALL: Now, you don't actually say in your book. How much money did you actually lose?
TIM CLISSOLD: Um, we, we originally raised about $400-million, and I think that within sort of about four years into the investment cycle I would say we didn't have much more than 50 left, so it was absolutely catastrophic.
ELEANOR HALL: Could you have done anything different at that stage, or was it the case that, as you said at one point, you just couldn't convince the Chinese that you were on their side?
TIM CLISSOLD: It was a complete mismatch in between our perception of business and the Chinese side of, their perception of doing business. I think that there were, you know, obviously a lot of mistakes that we made, from which you can learn a lot.
ELEANOR HALL: Yes, how big a gulf was it that you were straddling between the expectations of your Wall Street investors, and those businesses in China?
TIM CLISSOLD: Well, I mean that was the biggest problem that I had, was trying to explain to the Wall Street bankers back in New York what was going on without sounding as though I'd sort of completely lost my head.
So, for instance, you mentioned earlier about chops. In China, chops are these little red seals which you use to prove everything in China. And if you control the chop, you control everything. If you lose the chop, then you know, you've basically lost control of everything. And trying to explain that you know, to Wall Street bankers who are used to, you know, hard and fast contracts of signatures being used to approve things is incredibly difficult.
And I'd stand up in front of this board and hear myself talking, it was almost out of body experience and saying you know, I can hardly even believe that, so how can I convince these guys? You know, it's terribly difficult.
ELEANOR HALL: Well there was that lovely story of one company head shutting himself in a room and calling you and saying they're at the door, what am I going to do? And you said, whatever you do, don't hand over the chops. And I think he did in the end, didn't he?
TIM CLISSOLD: He did, he did eventually hand over the chops because the people who had barricaded him in that room, they only had one objective and that was to get the chop, because they know that the chop controls everything. They weren't going to harm him or anything, they just wanted the chop.
ELEANOR HALL: It does in some ways sound as though you're not talking about the centralised authoritarian stereotype of China that we in the west see. Has the west got the stereotype wrong?
TIM CLISSOLD: Very, very, very important point to understand about China. We look at China and we think of this sort of big, monolithic, grey, heavy, communist state pressing down on the Chinese people, and it's actually the exact reverse. You know, China is incredibly difficult to govern. It's an absolutely vast country. And really it's got very loose control from the centre. africa too no?
In fact, one of the biggest problems China has is they don't have enough control of the centre.
ELEANOR HALL: Now, you may know that Australia is set to negotiate a free trade deal with China. What advice would you give to Australian officials setting out on that negotiation process?
TIM CLISSOLD: I mean I think that the people that they will meet in the central government in China will be incredibly smart, incredibly aware of all the issues, and I think that they will live up to the commitments they give, so I think it's just kind of a normal negotiation process at that level. I mean these are very, very smart people who've come up through an incredible selection process, and you know, they'll be ducking and weaving and you know a bit of pushing and shoving and trying to bend rules and so on, but I mean that’s, that's kind of normal, I mean that happens between the EC and the States, so I think that you know, negotiate hard and you know, reach a deal if you're happy with it and then have reasonable confidence that it will hold.
ELEANOR HALL: It won't be seen as one of those contracts that you were describing where the situation will change later?
TIM CLISSOLD: No, I think that the Chinese Government is incredibly serious about these WTO commitments. I think that China has to be given enough time to sort itself out, and it definitely is moving in the right direction.
ELEANOR HALL: If China does become the dominant economic power, will it be on a western model, or will it be something completely different?
TIM CLISSOLD: I think ultimately it's likely that China will move quite a long way towards western ways of doing business, just because they've been successful. I mean, you know, business is underpinned by contracts with independent courts of law, so I think they will move towards that, yeah.
ELEANOR HALL: So presumably it'll be a long way then from what your business partner described. He said China was the Vietnam War of American business. Do you agree with that description still?
TIM CLISSOLD: It was in the nineties, and I think you can still get tremendously burnt in China, and I think you really have to know what you're doing and be cautious. But the main thing is don't go there with these wildly unrealistic expectations which, you know, I was guilty of.
Lots of people they want to be Mr China, and that's why I chose the title for the book. They want to be the only guy that ever gets it right in China, and cracks China. And it's just not really going to happen. You've got to go there with very clear ideas about what you want to achieve and not get mesmerised by the hype.
ELEANOR HALL: And that's author of the book Mr China, investment banker, Tim Clissold, who arrived from Beijing this morning and who's in Australia this week for the Sydney Writers' Festival.
Hehe now General, you are documenting all your wild adventures right? SO you can sell a business book like your family members did documenting rise of chinese and how you got western investors around the chops - you will make hundreds of millions as an author - hehe. |
