The good news? China is going to weather this thing in better shape than Western economies. The bad news? You may not be in the part of the Chinese economy that will do well. Most expat-run businesses in China focus on private Chinese enterprises or other multinationals. But all of the Chinese bailouts & assistance are focused on State Owned Enterprises.

How does this affect international managers doing business in China?

If you are part of the B2B service chain in places like Shanghai or Shenzhen, then you are operating much closer to the epicenter of the global financial crisis than your position on the map would suggest. In fact, some of you minus well be in NY or London considering all the exposure you have to toxic economic trends. We’re already seeing the number of full-fledged expat packages dwindle. As MNC budgets get cut and headcount capped (or reduced), there will be less spending on other business services…and yes, that definitely includes F&B.

The part of the Chinese economy that will suffer the least and receive the most support is the state sector - particularly in the rough & tumble interior.

A study being run by www.ChineseNegotiation.com indicates that Westerner involvement with the Chinese economy is almost always through privately run Chinese firms. In other words, we might be barking up the wrong tree here.

Should you rewrite your business model to start accommodating CCP leaders and provincial governments in a frantic back-track to try landing SOE contracts? Only if it makes sense - and for many of you it doesn’t. But you might want to find out who you are already dealing with that makes money off of SOEs or state banks — because they’ll be the ones with the money next year. First secure THEIR business and good will, and then see if there is any way for you to move up the food chain.

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Survey: Negotiation with Mainland Chinese and Westerners

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.

Stop believing the ‘yes-men’ that occupy the upper ranks of your company’s decision-making hierarchy. Better yet, try your best to get them to stop telling you what they think you want to hear.

Don’t get me wrong – I love yes-men. They’re great to have around. If you’ve never had one, then believe me – you are missing out on a real thrill. They make you feel confident, intelligent and invincible. Most times, they’re an important management tool.

But now is not the time. Especially if they are sales managers, marketing managers or financial managers. This goes double if they are making projections about 2009.

Yes, of course you should drive into the brick wall, Boss.
Your yes-men will be your undoing in 2009. They will tell you that sales will be OK when in fact they will drop like a stone. They will tell you that the market is still hot for your goods when in fact the market has evaporated completely. They will tell you that your finances will be fine when in fact your AR is shooting through the roof. You may think that this is pretty bleak, but it’s not. If you want bleak, go to Dezan Shira’s ‘China Breifing’and check out their “worst case scenario” section. . They’ve got your bleak for you.

A Global Problem with Chinese Characteristics
This is particularly important when your top spots are filled by local Chinese with relatively little international experience. They probably learned their jobs during the go-go years of the 2002-2007 – and two of the most important lessons you may have taught them were

1) Rapid market growth absolves any and all sins, and
2) Measured, analytic advice was for losers.

During the bull-market you were a balls-out, go-for-broke, risk-taking hard driver. Now you have reinvented yourself as a nimble, niche-hunting survivor who will come out the other end of this global recession stronger and faster. Unfortunately, your senior people may not be quite as flexible. They’ve been listening to you demand great numbers and amazing feats of sales prowess since the day they started working for you, and it has served them well.

Turning the PR dial down a few notches
This is no time to believe your own PR – and that includes overly positive images being reflected back at you from the toadies, lackeys and marketers you have loaded you senior staff with.

What should you be on the lookout for?

Sales – Your close rate is going to plummet. ALL your rates – prospecting, qualifying, closing, referral, etc – are going to plummet. It’s a recession – and if you are selling anything to anyone on this planet, you can expect steep drop-offs in your revenue. Sure its bad news. But it’s far, far worse news if you expect a short-term 20% drop when the reality is more like 50% for the next 18 months. China-based salespeople have always had a hard time calling the likelihood of closing a sale – and their idea of ‘making things happen’ has been picking up the phone when it rings. You need to discuss issues like sales pipeline and the status of deals. You’ll have to probe for accurate data and it may take a while to overcome their initial reticence, but try to avoid looking all desperate and crazy when searching for the truth. There’ll be plenty of time for that later.

Marketing – Marketing people spend the first part of every recession justifying the continued existence of the marketing department. They will defend their ad spends, their website projects and their own compensation package as crucial to the future of the company. The irony is that they are at least partially correct – but it won’t help you if your company can’t open its doors after Chinese New Year. You need to have a serious heart-to-heart with the marketing guys to find out exactly how they REALLY see the outlook for your brand and products – and what you can do to turn it around. There’s an excellent chance that they have some ideas for new products or approaches that can help you survive – but you have to get them off of the “unlimited growth potential” rap. Right here, right now – your growth potential has limits.

Financial – You need a best-guess estimate about Accounts Receivable – and you need discretion about Accounts Payable. AR is the tough one in China, since no one ever seems to pay their bills on time even when things are going well. But now the problem is that some people won’t be paying at all – and you need to know who they are and how much they owe. Remember those salespeople we were just talking about? Well, they’re out there pushing your rapidly accumulating inventory on their existing clients to boost sales revenue – but if you don’t get reliable, up-to-date financial and payment information on those buyers then you could be digging your own grave. Make sure your finance people have adjusted their projections due to the recession. Especially true of Chinese accountants who may not yet believe that a recession is coming to China.

Yeah, I voted. First I liked them both, then hated them both, then stopped caring, then got scared, then I decided. Usually I just vote against people — this time I actually voted for someone.

If you’ve got a ballot lying around, do something with it. It’s pretty simple and takes no time at all. Ballots are supposed to be postmarked the day before the election, so now is your moment.

And what about those of you who have never registered or received your ballots? Lie. Tell people you voted. Tell them you voted early. Tell people that you always vote and that everyone you know votes.

Nothing makes Americans look dumber than non-voting. Especially this time. So you know what you have to do. Get your story straight and stick to it. Live it.

Fedex is delivering ballots free of charge. http://shanghai.usembassy-china.org.cn/100708vote.html

Here are the addresses in Shanghai:

“Express Your Vote” Shanghai FedEx Drop-off Locations
US Consulate American Citizen Services Center, 1038 West Nanjing Road 8th F
美国驻沪总领事馆，南京西路1038号梅龙镇广场8楼
Hours: Mornings 8 - 11:30, Afternoons 1:30 - 3:30, closed Tuesday afternoons

American Chamber of Commerce, Suite 568, Shanghai Centre, 1376 Nanjing Road West
上海美国商会 中国上海市南京西路1376号上海商城东峰办公楼568室
Hours: 9:00 a.m. to 5:30 p.m. (Mon – Fri)

FedEx Xuhui Station, No. 28, Lane 411, Shi Long Rd., Xuhui District
徐汇区石龙路411弄28号
Hours: 10:00 - 22:00 (Mon - Fri), 10:00 - 18:00 (Sat)

FedEx Changning Station, D3, No. 291, Sui Ning Rd., Changning District
长宁区绥宁路291号D3
Hours: 10:00 - 22:00 (Mon - Fri), 10:00 - 18:00 (Sat)

FedEx Zhabei Station, No. 39, Lane 709, Lin Shi Rd., Zhabei District
闸北区灵石路709号39号
Hours: 10:00 - 22:00 (Mon - Fri), 10:00 - 18:00 (Sat)

FedEx Jinqiao Station, No.615, Xin Jin Qiao Rd., Pudong
浦东新金桥路615号
Hours: 9:00 - 24:00 (Mon - Sat)

FedEx Pudong Airport Gateway
Warehouse E, Int’l Express Center, No. 600 Hai Tian Wu Rd., Shanghai Pudong Int’l Airport
浦东国际机场海天五路600号国际快件中心E库
Hours: 9:00 - 24:00 (Mon - Sat)

Please note that many FedEx outlets in Shanghai will not participate in the “Express Your Vote” program.

Believe it or not, the latest crazy fad in China compensation trends (ie: your payroll spend doubling in the next 18 months) may actually have a silver lining. Sure, there’s a good chance you’ll be dead or teaching English in Wuhan by the time it gets here — but let’s just chuck a few ideas around for the heck of it.

Process efficiency and Productivity just stopped being punch-lines in China.

A Level, Lower Playing Field

As real costs in China rise across the board we’re starting to see local firms that used to compete as the low-cost producer or service provider are becoming less competitive. They’re still cheapers, but they are much more sensitive to price increases because it’s their only advantage. International businesses in China, who have already either focused on the lucrative B2B and high-income expat markets, may be feeling pressure, but at least they can raise prices without losing their client base.

For most businesses, the only way to deal with higher prices in the long term is to get more productive and efficient. Many local Chinese mid-sized companies that grew very quickly on surging consumer demand and guanxi financing are now facing a slowdown for the first time. When business slows, you need to understand how to cut costs without gutting the company’s brand, reputation and client list. Most Chinese managers out there have never had to deal with a real down market.

Efficiency and productivity aren’t just about cutting costs. We’ve done that. In a slow-down (or yeah, I’ll say it — a recession) it’s about raising value. It’s about minimizing your own price hikes while finding new ways to add value and improve your efficiency. You already know the bad news — overseas economies are getting hit hard and it’s just a matter of time before China feels it. The good news is that your local competition will be thinned out by the coming market chill. More good news is that you are familiar with the boom-bust cycle and your competitors are not. Make sure you take advantage while you can.

The New Year is upon us. Happy Year of the Rat. Now let’s all get settled back in and back to work, thank you. The commission-earning segment of the Chinese economy is ready to get back to business.

In the world of Academia it’s the start of a different kind of year. A new semester is beginning – bringing a new class of international scholars to learn about the joys of China.

Welcome NYU Spring 2008 interns. Don’t worry. It gets warmer.

A couple of fresh-faced interns running around your shop can be a great morale booster. They’re young, clever and amusing as hell – if they’re happy. And they can generally be counted on to do a lot of the more mundane, monotonous and awkward tasks.

Unless you’re in the fashion industry, you can pretty much forget about sending them out for coffee and running errands. You can both do better. It all comes down to finding the right jobs to delegate to them - but that can be tricky. Aim too high and you’re sure to end up disappointed. Aim too low and they’ll lose interest and drift off.

5 Rules for a positive intern experience.

1) Projects are good — especially those involving research. I like having them help with things like competitive analysis and collecting data on potential new markets. Make the projects chunky – break them down into 2 or 3 week segments. You might be surprised at the quality of their work.

2) Explain the big picture. Teach them about your industry – and China business. They are here to learn and they may be very into hearing what you have to say. Or then again, they may not. If your firm has a standard orientation presentation, then by all means use it.

3) Keep expectations reasonable. Yes, they have high IQs. And I agree that they really are sharp as tacks. But they have absolutely no experience. They’re like 20 years old or something. They don’t want responsibility, and you don’t want to give it to them.

4) Interns love marketing. It’s immediate and quick and exciting. They get to go online a lot — and that’s what they do and how they live. If you need any market research or data collected, this is your chance. They’re also great at updating PPTs, orientation & sales presentations and anything else media related. And they make great impromptu focus groups or for on-the-street-pollers.

5) Their schedules are likely to be very flexible. Extremely flexible. They have homework and field trips. Plan accordingly.

I just found a great potential hire – in my assistant’s trash file. It’s not completely her fault, however. Someone applied for a sales position though a “send me information about your product” advertising button on one of my websites. Ironically, this is just the kind of person we always say we are looking for – an aggressive, self-motivated, out-of-the-box thinker. He found a creative way of reaching potential decision-makers, but only an equally creative, flexible, heads-up organization would be able to react.

I asked the receptionist and sales assistant how many emails like this one we receive in an average week. Though I never did get a straight answer, I get the feeling it is a significant number. My staff now knows what to do with unsolicited hiring inquiries. Does yours?

Business leaders have to be careful to make sure that the priorities of their team dovetail with senior managements’ priorities. Since most expat managers are constantly on the look-out for new staff, they sometimes assume that everyone else in the company is doing the same.

Tips for making your organization more recruitment-friendly:

1) Pay for the behaviors you want. Pay a significant bonus when ANY staffer on your team recruits a new colleague who stays with the company for 3 months. Your best workers make the best recruiters. Just plant the idea in their minds.

2) The HR department isn’t the only one with recruitment responsibility. If you are looking for college grads to fill a management trainee post or for senior managers, then you HR team is the only one who can help you. But if you want front line sales, marketing, artists & designers or engineering types, then your best bet is to get your existing team to recruit your friends. Make sure your HR managers are onboard with the plan.

3) Have a place for applicants to apply on your website, newsletters and other online publications. It costs next to nothing and reaches your widest possible readership.

4) Good, up to date contact information on your site. How would I reach you from your site? If I hit the “contact us” or “send email” button, where does that message go? I bet if you took a look, you’d find plenty of job inquiries along with the spam, advertising and bona-fide marketing inquiries.

5) Spread the word in-house. Make sure that ALL your people know that employment inquiries should be referred up the chain of command – either to you, your HR department or the relevant line manager.

According to Frank Mulligan at Talent Software, your twenty-something office staffers really are less mature and sophisticated than you were when you were their age. Mulligan quotes a Journal of Family Psychology study indicating that 80% of US parents do not consider their 25 year old offspring to be true adults – and the kids agree. Sorry, not kids. ‘Emerging adults’ is the politically correct phrase.

What age would Chinese parents consider their kids to be independent?

25 years old - like in the US? Maybe a little older, like 27 – or 29 – or 32? Now take a look at your front office. The fact is that most of us are operating with front-line teams made up of recent grads who feel somehow less than completely grown-up. What does this mean to you as a China-based manager? According to Mulligan, “…in your office you have professionals who have never gone through many of the normal rights of passage for a child, never mind those for an adolescent or adult. Young staff in China are roughly hewn from stone, and the final sculpture has still to emerge. Your job is to finish off the sculpture.”

Well, yes. But during that brief period between the signing of their new employment contract and the moment they find a new job, these ‘emerging adults’ are still running big chunks of your business.

Tips for managing a team of “emergidults”:

Over orient, over manage. Good orientation programs are key for young staffs that may have zero real experience. You have to explain WHY your firm operates the way it does and why it is in business. Assume nothing.

Follow up – early & often. I favor ‘checklist management’ in China. Systematize your processes so that you can easily identify exactly how much of a task is completed. Young staffers in China tend to view 70% done as good enough, so don’t be satisfied with simple assurances.

Frequent, short meetings. When an American manager is under pressure, internal face time with the staff is the first thing to get cut. Maybe not a great idea. You’re better off with 3 or 4 quick sit-downs with the team. Yes – you have to have a meeting where everyone sits at a table and takes notes. Informal chats over a cubicle divider don’t always register as business conversations.

Train & manage in groups. There are several advantages to this seemingly cumbersome strategy. Young Chinese tend to be much more group-oriented than their western counterparts and can find enforced independence stressful. Groups are also efficient in multi-lingual environments when not everyone has 100% listening comprehension. Finally, group training and assignments make huge amounts of sense when the average length of employment is around 18 months. The more people who know about your project, the easier it is to maintain continuity in the face of high turnover.

Control your expectations. When you were 27 you had the judgment of a sage, the Wisdom of Solomon, the work ethic of an ox. Yes. We know. Kids today can’t compare. You can try scowling and huffing a lot (I have), but you’ll probably find that it doesn’t do much good. So build a better control and feedback loop into your operating procedure. Devote time and energy to training supervisors – and don’t make rules that can’t or won’t be followed.

Young Chinese staffers tend to be more process-oriented than those back home, and you have to make sure that you aren’t confusing them with a flurry of new rules and regs that never get followed up. Keep it simple – and keep it serious.

Meet Bob Chen. Born and raised in Shanghai, Bob graduated from a well known Chinese university with a degree in business 6 years ago. He was recently promoted to the regional sales manager position at a famous multinational with headquarters in Germany. He travels frequently to HK, Singapore, Sidney and Taipei – with the occasional trip to Seoul and Kuala Lumpur. In the office he speaks English to his bosses, Mandarin to his colleagues and Shanghaiese to his friends and assistant.

On paper Bob Chen is a ‘traditional local Chinese’ manager, but his spending patterns tend to approximate those of western ex-pats. Bob and the legion of Mainland managers like him are part of an emerging demographic we refer to as “international Chinese”. Your ability to market effectively to Bob (and those like him) will make or break your China business in 2008.

The bad news is that no one is quite sure what Bob wants – including him.

10 years ago it was pretty simply to identify the Chinese consumer. They wore Chinese clothes, ate Chinese food, rode a Chinese bicycle and spoke some form of Chinese. If they had a passport it was standard PRC-issue. Managers selling into the China market in 1997 didn’t have to worry about new product design or focus group surveys – they were more concerned about sourcing raw materials and getting finished goods to market.

The new class of ICCs (international Chinese consumers) defies explanation. Their consumption patterns don’t match traditional Chinese models from just a few years ago – but they don’t necessarily have much in common with overseas Chinese either. The business press keeps talking about the ‘Chinese middle class’, but that label tends to cause more problems than it solves as it groups second-city housewives with Shanghai jet-setters.

They aren’t ABCs, overseas Chinese, returnees, expats, or sea-turtles. They have never lived or studied overseas, but speak English and read US and HK business sites. They are willing to pay extra for international brands (even though they pretend not to be impressed), but don’t blindly follow western trends.

How do you market to the emerging ICC market?

Aspiration without condescension. Western names don’t have the shock value they once did, but Prada and Mercedes are as highly regarded in Shanghai as they are in New York. Quality & value count – but you have to understand how the Chinese view quality and value. Don’t be surprised if your Chinese clients have a completely different notion of how your product should be used – or what the brand stands for.

International products - Localized promotion. International Chinese know the global brands, but they approach them in their own way. You are best off sending an IC to sell to an IC. The good news is that the universities are churning out more ICs at a rapid clip. Make sure you are staffing your sales floor with sophisticated, well-trained locals who can shift effortless from ‘traditional’ to ‘international’ without missing a beat.

Assume nothing. Your big-spending local client may have an overseas passport and international bank accounts – or he may never have left China. He may be obsessed with 5 star service and status brands – or he may be a cheapskate who couldn’t care less about image and cache. Some are strongly nationalistic while others believe in globalism. Leave the preconceived notions at the door when you are marketing to this new type of Chinese super-consumer.