It’s time for some of you to start considering partnerships. The bad news is that you are facing an existential crisis – if you don’t find new sources of cash-flow, investment and markets, then this isn’t going to work much longer. The worse news is that Chinese partners are difficult to work with, hard to get value out of and China JVs are money pits.

Think different. Think about those established but shell-shocked service businesses back in the US. Old companies – with assets and retained earnings – are suddenly feeling very vulnerable and open to new ideas. They need long term growth options, they need markets, they need a big idea. They need China - or at least think they do.

Sure – the big guys are all here already, and so are a lot of the medium sized US service companies with solid track records and healthy balance sheets. But the one’s who aren’t here yet are sure thinking about it a lot these days.

Maybe this is something worth investigating – while you still have time.

China interest is rising again – as the market of last resort.
You have a bullet-proof opening line that will get you connected with any counterparty you want – and they will be interested, engaged and eager to hear what you have to say. The catch is that only works once, and you have to do it now (or soon):

“I’m an expat-managed / foreign-invested business in Shanghai, and I’m looking for a strategic partner who wants to help me grow markets in China and the US”. Then you shut up.

This is one of those great times when China accesses seems like the Holy Grail, and for all they know you are really capable and talented. You don’t have to tell them about your own struggles and headaches – not yet anyway. You are a much more appropriate partner for a newbie Westerner than 99.9% of local businesses or consultants – because you actually know what their problems will be and how to solve them! What you need to do is get the other guy talking about his goals — and then bookmarking spots where you can add value. Before you know it, you’ll understand HIS China wish-list better than he does. Then you can start discussing whether or not you have the beginnings of a deal.

If you are a Westerner in China, your value is shifting. You used to be valuable because you could make thinks work in Shanghai and Beijing. Now your value may be that you can make things work in NY and San Francisco.

—————–

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When I talk to people in New York about the economy, I know exactly how they feel. I’ve lived through recessions and long bouts of high unemployment. I know how it feels, how it looks, how it smells. I don’t know exactly how Shanghai feels right now – but the mood doesn’t seem all that gloomy. Shanghai wants to just keep plugging along like nothing is wrong. China has confounded doomsayers before, and we may be seeing it again.

How bad can the recession in Shanghai be? A little bit of slow business, a little bit of price-cutting… Soon enough we’ll have our new boom or recovery or value chain climb. Speculative bubbles, inflation, stock market crash, drop in global demand – we’ve been there, seen that, and were not impressed. No one is going around like this is the end of the world. People are still pretty relaxed and upbeat.

Maybe Shanghai is just that tough. Like New York, but on Prozac.

Inflation: GOOD, Deflation: BAD

Yeah, Shanghai could probably slow-dance through this whole global downturn without even noticing it much – if it stays like this. As long as the big global companies keep their Shanghai offices 75% staffed - the general level of activity on the Bund and in XinTianDi should be lively and fun. A few places will close and fewer will open, but it’ll still be hard to find a cab on Friday nights.

No, a standard NY-style recession isn’t going to throw the China train off the rails – it probably won’t even slow it down much. The only real danger is a deflationary spiral of price-cuts leading to bankruptcy leading to unemployment leading to lower demand leading to more price cuts… etc. Then people clear out. The problem with deflationary spirals is: A) they’re not really all that common in fact (though economists love talking about them because they’re about the sexiest thing in the dismal science of economics) B) you almost never see them coming because they look like something else. They look like business is lousy – which is nothing all that new to retailers and sales managers.

Deflationary cycles come from desperation and fear. You are a business owner who buys from a supplier and sells to a customer. When customers buy less, your inventory piles up – then you cut orders to your supplier. Now there are 3 people who don’t want to buy anything new – you, client and supplier. So what happens? You start lowering your prices to get your inventory out the door while it still has some value to someone. This not only devalues the rest of your inventory – but also your client’s and supplier’s inventory. The value of your entire supply chain sinks – all the way back to the processor of raw materials.

China is particularly vulnerable to deflationary cycles, because so much of its economy is tied to manufacturing – which is particularly vulnerable to deflation. Think of 3 guys – one sells coal, one sells computers and one sells vegetables. The vegetable guy has a couple of days before his inventory loses most of its value. The computer guy is next – he has a couple of weeks or months, but once a new model comes out his inventory loses value as well. The only one that can possibly benefit is the guy with coal – or other natural resources. Coal and oil can stay in the ground and wait for better days. China’s economy is heavily weighted towards deflation-prone manufacturing. That’s why people keep talking about how damaging deflation could be in China.

The last place you want to be is on the tail end of a deflationary spiral. They’re bad enough if you know what’s going on – but if one sneaks up on you then you’re dead. If you do have idle workers sitting around with time on their hands, have them do a detailed competitive analysis of people targeting your demographic. Are they cutting price gradually, or aggressively? Are they cutting back on product lines, or introducing new services? Make sure you understand what’s really happening in your sector of the market. If the ground is melting under you feet, you’ll have to step quickly or get sucked down.

When I talk to people in New York, I know exactly how they feel. I’ve lived through recessions and long bouts of high unemployment. I know how it feels, how it looks, how it smells. I don’t know exactly how Shanghai feels right now – but the mood doesn’t seem all that gloomy. Shanghai wants to just keep plugging along like nothing is wrong. China has confounded doomsayers before, and we may be seeing it again.

How bad can the recession in Shanghai be? A little bit of slow business, a little bit of price-cutting… Soon enough we’ll have our new boom or recovery or value chain climb. Speculative bubbles, inflation, stock market crash, drop in global demand – we’ve been there, seen that, and were not impressed. No one is going around like this is the end of the world. People are still pretty relaxed and upbeat.

Maybe Shanghai is just that tough. Like New York, but on Prozac.

Inflation: GOOD, Deflation: BAD

Yeah, Shanghai could probably slow-dance through this whole global downturn without even noticing it much – if it stays like this. As long as the big global companies keep their Shanghai offices 75% staffed - the general level of activity on the Bund and in XinTianDi should be lively and fun. A few places will close and fewer will open, but it’ll still be hard to find a cab on Friday nights.

No, a standard NY-style recession isn’t going to throw the China train off the rails – it probably won’t even slow it down much. The only real danger is a deflationary spiral of price-cuts leading to bankruptcy leading to unemployment leading to lower demand leading to more price cuts… etc. Then people clear out. The problem with deflationary spirals is: A) they’re not really all that common in fact (though economists love talking about them because they’re about the sexiest thing in the dismal science of economics) B) you almost never see them coming because they look like something else. They look like business is lousy – which is nothing all that new to retailers and sales managers.

Deflationary cycles come from desperation and fear. You are a business owner who buys from a supplier and sells to a customer. When customers buy less, your inventory piles up – then you cut orders to your supplier. Now there are 3 people who don’t want to buy anything new – you, client and supplier. So what happens? You start lowering your prices to get your inventory out the door while it still has some value to someone. This not only devalues the rest of your inventory – but also your client’s and supplier’s inventory. The value of your entire supply chain sinks – all the way back to the processor of raw materials.

China is particularly vulnerable to deflationary cycles, because so much of its economy is tied to manufacturing – which is particularly vulnerable to deflation. Think of 3 guys – one sells coal, one sells computers and one sells vegetables. The vegetable guy has a couple of days before his inventory loses most of its value. The computer guy is next – he has a couple of weeks or months, but once a new model comes out his inventory loses value as well. The only one that can possibly benefit is the guy with coal – or other natural resources. Coal and oil can stay in the ground and wait for better days. China’s economy is heavily weighted towards deflation-prone manufacturing. That’s why people keep talking about how damaging deflation could be in China.

The last place you want to be is on the tail end of a deflationary spiral. They’re bad enough if you know what’s going on – but if one sneaks up on you then you’re dead. If you do have idle workers sitting around with time on their hands, have them do a detailed competitive analysis of people targeting your demographic. Are they cutting price gradually, or aggressively? Are they cutting back on product lines, or introducing new services? Make sure you understand what’s really happening in your sector of the market.

There will soon come a time when courageous China entrepreneurs huddle around a map with blue pins that represent new openings and red pins showing planned new opening. But not today. Today we are thinking about staying the same size – or about getting smaller. Lots of people should be thinking about the most orderly way to get smaller – maybe 25 – 50% smaller for the few quarters.

Let’s talk about 3 ways for managing the size and scope of your China business when it’s not expanding.

Let’s say you run a business in Shanghai and you are considering ways to cut back on operating expenses. You’ve done the easy stuff, but your sales are collapsing even faster and you need to perform some surgery. What are your options?

1. The tie-up. An informal agreement with a related business to work share costs, swap services or cooperate in some other way. Marketing tie-ups are common – two non-competing businesses share fees to advertise to the same target market. Some firms split costs on materials or expenses, others swap services. The idea here is that it is a NON-BINDING, informal arrangement. Don’t make things unnecessarily complex by exploring another joint venture. The good news is that the right tie-ups can really stretch your expenses and help maintain a marketing presence. The downside is that building and maintaining this kind of network is easier for some people than others. If you’ve been in town forever and lots of other businesses like & trust you, this is a no brainer. Just make it systematic and know when to walk away. If, however, you’ve burned lots of people in the past than this is no time to try to gain their trust. Not worth the effort.

2. The roll-up. In China’s notoriously fragmented market, recessions are ‘roll-up’ season. The goal of a roll-up is to buy up or burn out all the small players in similar businesses that are serving essentially the same market. Let’s take commercial printers as an example. XYZ Inc. is a medium-sized printing business in Shanghai that decides to adapt a roll-up strategy. XYZ begins buying up competitors and re-branding them. Those it can’t make money on it shuts down, diverting useful resources to other XYZ locations. It’s size and buying power allow it to market and purchase more effectively, driving competitors into danger of failing. It can then buy those weakened competitors at more favorable terms. The roll-up is a time-tested strategy that works if you have capital, good systems and understand your target market.

3. Getting rolled up. Some of us won’t be doing the rolling – we’ll be getting rolled. What do you do if you are in a weak position at the start of a long recession? Scaling down may help – but specializing and seizing on good niches early will help even more. This is especially true if you are a sales-oriented operation in the B2B market. If you are a generalist with a roomful of guys manning phones or over-working tired 3rd party databases, you are not going to have much leverage when negotiating with large, aggressive competitors. But if you have specialized products, services or market channels, you stand a much better chance of getting attractive terms when the Death Star pulls into town. Any business model that gives you access to a key, discrete, measurable demographic is powerful.

Ok, so maybe ‘ashes’ is a bit much. Shanghai is still a mixed picture, and we may all benefit from a ‘wealth effect’ re-rating – our bottom lines were only cut in half during the Millennial Depression (buzzword credit!) – while US and European businesses were slaughtered like hogs in the marketplace. We win.

I think its time for the expat/fie (foreign invested enterprise) to take a look out to the future and see what medium-term business trends we’re going to be working with in a post-recessionary China.

I’ll tell you the end of the story first. There will be a new breed of JVs popping up in Shanghai and other international business centers in China. This time, however, they will be high-functioning service organizations that are able to unlock real value from two sets of counter-parties: On one side are the Chinese entrepreneurs with tested models who have access to parts of the China market but are starved for cash. Their new partners will be established US service businesses that are financially strong enough to survive 2009 – but are looking at a future that will be increasingly bleak if they don’t find a way to boost the size of their potential international market

New Circumstances, Old Biases
US planners hate JVs because of nightmares from the old days. These won’t be the ‘policy JVs’ of previous decades, but rather market oriented combinations that seek true Win-Win outcomes. Most will focus on business entry and marketing for Western firms that can’t expand in the US do to competition, market weakness and the differential in long-term market trends. Chinese partners, on the other hand, will be successful locals or small & medium Sino-Western JVs of the last decade that have survived – and now look to expand to the US or Europe. These new JVs will be focused on B2B services that are higher on the value chain, like design or outsourced back-office services.

In China, B2B service firms already operate with a two-tiered target market. The services provided to MNCs in Shanghai can be offered to SF and NY. But Chinese service companies are going to have to develop growing markets in 3+ (3rd, 4th & 5th Tier) Chinese cities. Some are looking for access to US markets (climbing the value chain from OEM to ODM) and trying out the brands they’ve already built her (or brought in from Singapore or Taiwan). Whatever options they pursue, they are going to require access to credit and marketing savvy to succeed – which means that western JV partners suddenly have a lot more to offer.

US service companies will have to expand to China as a matter of course. This is a ‘market pull’ type of move. We’re about to see MNCs’ global revenue stream go lopsided in favor of China – and as the giant firms revive their cash flow in the coming years, a greater share is likely to be reinvested back into China. Even if smaller service firms don’t want to go international, they’re clients are pulling them there. Meiyou banfa. If you lose the business in Shanghai, that same competitor will soon go after your Chicago or NY business.

Cost cutting will be the new priority on both sides. These new JVs and cooperative arrangements will seek to capitalize on the marketing channels and IP that each side already owns – but will now try to make more profitable through international scale. Look for areas in your own shop where labor and IP blur. Design, print, engineering, IT, research, marketing, and back-office services. New JVs will combine low-cost intellectual labor and market opening on both sides of the Pacific.

This recession is going to have a strange affect on your local Chinese staffers – and customers. They’re going start aging before you eyes until they turn into their own grandparents. Physically they will appear the same as they ever were – but emotionally and mentally they are going back in time to a time 15 or 20 years ago when Chinese life was characterized by shortage, deprivation and insecurity.

The good news is that suddenly a steady job is one of the most important things in the world to them as they save every mao in anticipation of tough times ahead. The bad news is that Chinese customers and purchasers are going to do pretty much the same thing.

Ostentatious consumption is out. Paranoid saving is in.

I know this script well. My grandfather was an accountant at Western Union when the Great Depression hit. He felt it was his duty to indoctrinate all of us grandkids to be good savers and to beware of the specter of ‘hard times’. I grew up during the optimistic go-go years of the 60s and early 70s, but my parents would often invoke the spirit of Grandpa Sol and the Great Depression to get us to waste less and save more. Even though those particular hard times ended 60 years before I was born, they still made up part of my consciousness and identity.

Local Chinese have the same type of memories – but theirs are stronger and more recent. China has only been open to the West since the late 70s, and wasn’t really prosperous until very recently. Sure, they love to spend and to job-hop so much that it seems like part of their DNA. But that’s a blip on the radar of Chinese history. Deep down, the Chinese consumer is skeptical, conservative – and a cutthroat negotiator.

If your market includes Chinese middle-class buyers, you may want to moderate your approach. Try a tack that is less aspirational and high-status, and more practical and value-oriented. This item is more expensive- but not because it is European or the same one used by movie stars and royalty – it costs 20% more because it will last 75% longer. It is a better value.

Local workers are going to become more dedicated and committed to their jobs – which is both good and bad. Of course it will be great to field a team that really cares about holding on to their positions – and will be a refreshing change from the revolving door HR reality that plagued managers in the past. But you can also forget about voluntary head count reduction or furloughing unneeded staff until business picks up. If you have gotten used to Chinese staffers who don’t even bother to show up to tell you they are quitting, then you’re in for a shock. Any western manager who tries to fire Chinese staffers had better consult with their HR specialist AND a well-informed lawyer before moving forward. There will be trouble.

A recession in China will clear out the underbrush – but the survivors will be tougher and more competitive than ever. You need a new business plan that will do two things: help you survive the downturn – but also position your business for the next growth phase.

Use your down-time constructively. You’re up against two dangerous trends, but you can use both to your advantage. First you have to survive – but you also have to transform to meet the needs of a post-recessionary China market that is more sophisticated, demanding and value-oriented.

A recession in China is going to wipe out a lot of marginal businesses. Your first priority is surviving the downturn. But in China, simply surviving isn’t going to be enough. When this economic meltdown is finally over, the landscape will be different. China will become a more sophisticated, competitive and service-oriented economy. That’s why your second priority should be to re-engineer your business to take advantage of the new Chinese economy.

Look for these trends in a post-recession China.

1.More sophisticated consumers. They’ll pay more – but will demand more. It’s not about low cost – it’s about higher value. In the past, there were 2 Chinese economies – the high end luxury market and the mass low-cost, low-value market. Lux is going to take a hit, but the masses of Chinese consumers are going to be much more conscious of value and service.

2.More competitive SOEs. China’s State Owned Enterprises are not going away. A severe recession in China is going to make them stronger as it wipes out competitors and starves smaller companies of cashflow. Anyone who competes directly with state-owned companies had better plan on seeing them grow their market share and come out with new products and services. Chinese SOEs have been the real engines of growth and transformation, and that trend will intensify.

3.More nimble competition. They rent-collectors are going to get wiped out, but a new breed of fast & furious local competitors will emerge. There is an army of Chinese entrepreneurs who have been crowded out of the service sector by international competitors with deep pockets and international marketing savvy, but in the post-recession Chinese economy these fast, smart, little service companies are going to steal someone’s lunch. Make sure it’s not yours.

4.Networks are not a buzzword – they’re people who are connected by a common need or interest. It’s not enough to build up big lists. You need to interact and to monetize. Social networks are real – but they aren’t an end unto themselves. You can’t just shout your message – you need to monitor and analyze and listen.

5.Trends are friends – or bad ends. Parts of the Chinese economy will come back to double-digit growth – but it will be a different kind of growth. No more advantage for first movers. You won’t get paid for showing up in the new China. Whether your firm services multinational corporations or markets directly to consumers, you are going to find yourself in a more competitive, demanding marketplace after the world economy rights itself. You can use this to your own advantage by positioning your company to meed the demands of the new China market - or you will be playing catch-up with a host of new competitors who focus on delivering value.

Things are slowing down at a lot of international firms here in China. Use the down-time to your advantage. Put your top people in a room and make them imagine that it’s November, 2010. What will your industry look like? Who are your customers and clients? What will THEY consider your value-added services? What does the 2010 Chinese consumer look like, and why will they care about your business?

Last night I went to the China Chicago Club meeting in Shanghai. If you are in Shanghai and have ever been in or near Chicago (or heard it mentioned somewhere), you should get on their mailing list: Chicago.china.club@gmail.com and drop by the next meet. I don’t usually think of the CCC as a barometer of Sino-US business trends, but last night I definitely saw a sign of things to come. At least 3 people handed me business cards with handwritten cross-outs and new local phone-number, accompanied by long explanations instead of short introductions. They’re here. America’s economic refugees are washing up on Shanghai’s shores.

The pattern is subtle, and if you haven’t been here a while you might miss it. You meet a respectable looking grownup(35+) and you introduce yourself. “Hi”, you’ll say. “I’m Andrew. I lecture at NYU and consult with MNCs about sales management and negotiation. I also write a few websites on China-US business. What do you do?” Then you get a story. It’s always he same pattern. ‘I didn’t want to come here, but my company/ clients/ partner/ senior management absolutely demanded it. We have so much business in Shanghai that we needed a senior manager out here right away. I had no choice.’ Then they give you a card that doesn’t match their story.

November is an odd time to transplant ones’ self to Shanghai. International business tends to slow down in China a few weeks before Christmas and stays slow until after Chinese New Year - which ends this year around the first week of February. I imagine that the real inflow of western refugees will start showing up around then. Late winter, early spring. After the holidays.

I hope these guys do their homework and figure out exactly what they plan on doing. Shanghai isn’t as bad off as NY or LA, from what I hear about those places, but no one is handing out consulting contracts at the airport. It’s expensive, competitive and slowing down.

Last month ChinaSolved compared a recession to a quagmire. Continuing the whole “horrors of nature” analogy theme, today we use the example of rip tides to look at different ways expat entrepreneurs and managers can deal with a down economy.

Rip-tides are strong currents that head away from the shore of large bodies of water like oceans or big lakes. They are notorious for pulling swimmers out to sea before the hapless victim is even aware he is in danger. By the time he know he’s in one, he has already been dragged out of your safety zone. The irony is if you know how to handle one properly a rip tide isn’t all that dangerous.

Entrepreneurs and expat managers in China should think of recessions like getting caught in a rip tide at the beach. If you ignore it, you’re going to be carried away. If you fight it, you’ll exhaust yourself and drown.

So what should you do?

Escaping a Rip Tide

If you try to swim against the tide you will think you are making progress at first, but will really end up panicked, exhausted and far from safety.

If you just ignore or don’t notice what kind of danger you’re in, then that will destroy you as well. Just because you’re not drowning right now doesn’t mean that you are safe.

No, what experts tell you to do if you find yourself caught in a rip tide is to swim parallel to the shore until you are out of its grip.

This is hard for two reasons. One, you are being dragged out to sea. Two, you are still expending energy without knowing when you will be out of danger. Scary – and still a bit dangerous. The only advantage this has is that it is the only thing that will save you.

How to avoid getting dragged out to sea in a recessionary rip-tide.

1- No thrashing. Sales are going to be slow for the next few months. Exhausting all your
sales options isn’t going to help much in the short term, and will squander the resources you’ll need in the longer term. Remember – a serious recession can last for 18 – 24 months.

2 - Know where you are relative to where you want to be. Metrics and planning are more important than ever. Check you benchmarks and make sure they still make sense. Just because you may have to move sideways for a while doesn’t mean that you can trash your business plan completely.

3- Maintain a steady pace. If you just lie there floating and waiting for it to end, you are going to get dragged out to sea. This is the business equivilant of cutting all your marketing, training and HR expenses completely. Companies that don’t keep up some kind of marketing effort are going to survive the recession but will squandered all of the hard-won customer mind-share they built up in better times.

4- Check your relative position. A swimmer in the ocean should use the shoreline to confirm his position and make surer he stays on the survival course he’s set. China entrepreneurs have a bigger problem, because it’s hard to set your course when the whole world is shifting. Competitive analysis and market research is even more important during tough times.

5- Its ok to rest when you need it. Some young entrepreneurs who have never seen a recession will try to whip their team into non-stop action through intimidation and bullying. Don’t view down-time as capitulation. Use your team’s slack-time constructively. Don’t try to get blood from a stone, or you will exhaust your company’s resources for no gain.

China Recession Strategies: Raise, Check or Fold

Not everyone loses out in a recession. As a matter of fact, if you were a second-tier or start-up company 6 months ago, the current economic crisis could represent a rare opportunity for you. But of course, you have to play it correctly.

Some companies will find that an economic slowdown is a great chance to make inroads on the competition’s territory. Others will find that the best strategy is to consolidate pre-recession gains and simply stay the course. Some, of course, will have no choice but to shut down branches or product lines and downsize in order to stay in the game.

There are no sure things, except this: If you don’t make a plan, the market will make one for you. Recessions are lousy times to be reactive and play catch up.

3 Strategies for Dealing with Recession in China

1) The Roll-Up. If you are flush with cash, have your operating systems tuned and are in a fragmented industry, you may find that this is a great opportunity to benefit from your competitors’ misery. You can leapfrog his market position, poach his best people, undercut his price and even lock him out from key suppliers. You can try a vulture approach and wait until he’s already dying – or you can be a little more proactive and hunt down the weakest members of the competitive herd. Whether you are buying a competitor outright or cherry-picking his best people, you have to remember that integration is your key challenge – not acquisition. It’s easy to stuff a salesroom with your dying competitor’s best people during the early stages of a recession – but it’s much harder to make your new additions profitable. This is even truer when you buy a company outright. The danger here is spending lots of money on M&A or a collection of superstar talent and finding out that all you’ve bought is an empty shell. Digesting new acquisitions is one of the toughest challenges for a management team, and a single misstep could end up costing you a lot of money, time, energy and managerial bandwidth. Still, the ‘roll-up’ is a proven winner for small, flush firms in fragmented industries (no one controls more than 30% of the market) – if you’ve got the managerial talent in place. (Note – Those of you who have never been through a merger or acquisition but are saying, “This will be no problem” probably do NOT have the requisite experience. Sorry.)

2) Consolidate. You were tracking well before the moorings came off the ship of commerce, and you think your craft is sound. It’s just a matter of waiting for demand to come back. If this is you, then a Consolidation Strategy might be right. You want to stop the clock and wait for sun to come out again. Your jobs are to cut costs, secure your key staffers, and freeze expansion, marketing and HR expenses as best you can. Consolidation makes sense if 3 conditions exist: 1 – the recession is brief. 2 – you are really able to hold your position in near-hibernation mode. 3 – you markets remain fundamentally the same once the recovery starts. Most China managers will find that these 3 conditions won’t exist for more than 6 months. Still, if you are trying to figure out what to do and how to proceed, then a consolidation approach makes sense in the short term. If the downturn in your key market lasts more than a few months, you will find that this strategy feels a lot like carrying a heavy suitcase up the down escalator. You are exerting an awful lot of energy to get nowhere.

3) Downsize. The expansion plans are dead. The branch office in Beijing or Suzhou will have to be shut down. The product line is being trimmed from 15 items to 5. You will no longer offer certain services to anyone but key accounts. You are aggressively reducing headcount – and may even shut down for a while. Or forever. Either you are being realistic and pragmatic, or the market has made the decision for you. Downsizing works best when you are in control and ahead of the curve. The time to decide on cuts is when you have enough cash to cover all your expenses, have a full team of high-morale key players, and are still in control of your markets. Owners that come back from Chinese New Year to find that they have only 6 weeks of operating funds left tend to do poorly with downsizing strategies.

Obama won. That’s good. US manufacturing AND the service sector are reporting the worst numbers in decades. That would be the bad.

America is being admired again. Yesterday in Shanghai I saw more expats wearing hats and t-shirts with flags and American images than I’ve seen in years. It’s nice to be well thought of again. Enjoy it while it lasts.

We’ll all come back from Christmas and/or Chinese New Year to a new US administration, a new world, and a new beginning. But the rest of the 4th Quarter is still business as usual.

What will a new administration mean to your business?

Probably not that much. The US economy is so bombed out that even if a strong recovery were to begin tomorrow the first half would still be a disaster – at least for the China businesses servicing US or international companies and their China branches. The stock markets are volatile, but industrial figures are consistently negative. China is almost certainly going to be dragged down – the only question is by how much.

One thing to look out for – Democrats tend to favor trade restrictions a bit more than the other guys and China is an easy target. House Speaker Nancy Pelosi has suddenly become the second most powerful person in the US – and she is not a friend of China. This is probably more of a medium-term issue than a ringing alarm bell, but we can expect the occassional bout of fireworks between Washington and Beijing. Google Pelosi, China if you don’t know what I mean.

As usual, The Onion proves that it truly is the World’s Finest News Source. Read it.