Foreign Entrepreneurship #1: China

I just returned from nine days in China, and nothing was as expected.  Since I was so surprised by almost everything, I thought I'd share my perspective.

Recent Changes:  The first thing I noticed was how recently everything has happened.  The numbers are staggering, and the buildings show that it is true, at least in plan.
 Nothing was more striking than a film shown at the "bottle opener" building that compared the growth of the New York, Tokyo and Shanghai skylines over the last century.  New York and Tokyo were both basically done in 1950 (NY) and 1960 (Tokyo), while Shanghai was still a big farm in 1995.  Here it is today, with the highest observation deck and another record-breaking building under works that has already surpassed it. So far, about 500 million Chinese people have moved from the countryside to urban areas in the last 30 years, and they are starting a plan to move another 250 million in the next 12 years.

Cranes & Smog:  I had heard that a lot of building was going on,
but this was beyond incredible.  Point your camera in any direction, from almost anywhere, and on the horizon were cranes.  I flew into Shanghai, and around Shanghai the air was like Los Angeles--quite stinky to my Appalachian Mountain lungs, but tolerable and not unexpected.  When I landed in Beijing a few days later, though, things changed.  As you can see--there are cranes--but you can barely see them though they are only a few miles away.   And a twist of irony--all the cabs I rode in were powered by natural gas, something that won't happen here for 10 years.

Pizza Hut:  I had lunch at Pizza Hut. 

Fed three of us a five course meal with wine and soft drinks for about $30.  For $100/night, I stayed at a high rise Marriott.   Local high speed train tickets were $30-50, and I spent an hour in a cab for $11. In 1982, the RMB was worth about $0.60.  Now it is worth about $0.15.  It hit a low about 10 years ago at $0.09, and has been increasing ever since. This is artificially low, and it makes it easy to export and hard to import.  I may do an exchange rate blog later, but for now its enough to know that everything made there is cheap, and everything made outside China is expensive. And it's artificial. But China plans to change from exports to internal consumption (thus the migration) as a growth driver, and so the rate will change over the next dozen years in the right direction for US exports.  Once they have the money to consume, they will want things made
elsewhere as well. And be able to travel abroad, which the middle class cannot now afford to do.

People:  I found the Chinese to be a gentle, gracious and humble people.

 In all cases--even when there was likely to be no future business relationship--they treated me as an honored guest.  Though I have had Chinese friends for over twenty years, I hadn't appreciated the stark difference in cultures until I visited.  The emphasis on family, on durability, on relationships, was far different from business in the United States, where the emphasis is on transactions, on contracts, on money.  They have a patience we do not have.  This suited me well on this trip, because I was going solely to build relationships, to understand the opportunities, to get the lay of the land so that later, when we are ready to really do business in China, we have some idea of what is in front of us.

Entrepreneurship Then:  I had the opportunity to meet several Chinese entrepreneurs who now ran large businesses (most >$100 million, 20 years old, and usually 100% owned by the founder).  In each case, they had found something that was ready to manufacture, but not available locally, and so they made it and sold it to local companies, who then integrated it into the parts and pieces used to make the items we buy from China.  These were amazing individuals, who had been on the front edge of a wave that has been running now for 20 years.  They were not exporters, but rather selling the picks and shovels to the miners (exporters).  I did not meet any rich exporters, who I believe get squeezed by their customers (think Walmart).

Entrepreneurship Now:  I also had the opportunity to meet with several startups that are in the early stages.  There are a lot of parallels between entrepreneurship in China and in South Carolina.  Most startups do not use their own home-grown technology but rather, if they have technology, look to acquire it from someone or license it from another company or university.  However, they are developing state-of-the-art products, jealously protect their technology and are quick to point out where they are the best.  I saw battery energy densities that rival the best in the US, made through technology licensed from Japan.  (Similar US companies license technology from Korea.) 

The capabilities and the potential of the country are astounding, and the pace at which they are realizing them is breathtaking.  How it matures is anyone's guess, but we are in the middle of the S-curve, and so the next decade or so is assured to continue the same trajectory.  There is no question that there are challenges, and pollution is one of them, but the capability and spirit of the Chinese people is enough for the task.

A Closing Story:  I was warned by a business associate that my usual practice of wearing a cross on my lapel may not be well received in China.  Having checked with a few other associates, I decided to leave it on anyway and risk being run out of town by the Communist Party.  It turned out it was too hot to wear a jacket anyway, so the cross sat in my suitcase or closet for the entire trip.  But rather than suppress or degrade my faith, several of my hosts had researched my background and commented on it, and one even offered to have my book translated into Chinese and help me publish it, where it could affect many young people. I was asked on my next trip to speak to students and to entrepreneurs. I was humbled by this show of openness to someone who is clearly a Christian (capitalist) entrepreneur, something that  would stereotypically be rejected in China.  Rather, this person, was offering to hold me up as a role model student, scientist, entrepreneur, and someone with strong faith.  I told him I would be pleased, and left the country knowing that the heart and soul of the Chinese people were bringing forward a new China which was willing to learn from many different perspectives.