China Law Blog
China Law For Business. The Business of China Law.

• China's Mao School Of Business.
  I just finished The Little Red Book of China Business, a book written by Sheila Melvin. Ms. Melvin called me a few weeks ago, told me of her book and asked if I would be interested in reading it. I told her I would, but that I was highly skeptical of its thesis: that understanding Mao's thoughts is critical for doing business in China. I have read the book, very much enjoyed it, but remain skeptical. Here's the deal. Ms. Melvin clearly knows her Mao and she clearly knows Chinese business and those two things combine to make this an enjoyable and highly worthwhile read. I have not read about Mao for a long time and reading this book refreshed my recollection of his thoughts and taught me new things about him as well. I give the book an A for this. Ms. Melvin spent seven years with the US-China Business Council and she obviously has a deep understanding of how business is conducted in China and she does an excellent job of conveying this. I give the book an A for this as well. This book makes for an excellent introduction of both Mao and China business and I highly recommend it. But. I still question its thesis, which is as follows: The current generation of Chinese businesspeople grew up with the lessons and teachings of Mao's Little Red Book, and these lessons guide their actions in business and culture. If you don't understand Mao and the Little Red Book, you don't understand China business. Mao Zedong and Management The funny thing is that all of a sudden there has been a spurt of writings on this very topic. The Harvard Business Review (h/t to Sox First) says that China’s capitalists are deeply influenced by Mao Zedong thought: Our research on the practices and attitudes of Chinese CEOs offers abundant evidence that Mao’s principles continue to influence top executives: All but one of 15 CEOs we interviewed told us they often turned to Mao’s teachings for management ideas. Consider the manner in which Mao wielded power: by keeping the country in a state of chaotic flux, often playing one group against another. To make a change in the political landscape, Mao would orchestrate a movement that sucked in the entire population, such as the campaign against Liu Shaoqi (the number two leader in the Chinese Communist Party) and his allies, then resort to a mixture of agitation, networking, and rallying to mobilize people at the grass roots to denounce certain cadres, or senior officials. Most of the cadres would be forced out of their jobs, and Mao would rehabilitate a few. Deng Xiaoping was denounced in this manner, rehabilitated, and denounced again. China Hearsay ain't buying: I don’t like doing this, but I’m going to have to call bullshit here, even based on my limited knowledge of this. First, I can think of lots of reasons why Chinese CEOs might want to cite Mao when asked about significant influences. Doesn’t necessarily mean it’s true. Second, the type of management style described sounds a lot like every boss I’ve ever had, most of whom couldn’t tell Mao from Ayn Rand. Third, the "management techniques" described also sound a lot like other world leaders over the years. Was that style really something that Mao invented? I don’t think so. Cute angle for an article, but not so convincing. Many years ago, I was discussing the role of women in China with a female lawyer friend of mine, with whom I have worked on many cases. This lawyer holds a very prominent position with what is arguably Dalian's top law firm and I remarked upon how something like this would almost certainly not be possible in Korea. I then (thinking myself very wise) asked her if her position might not have been made possible, at least in part, by Communism. She immediately pointed out to me that China has a long history of strong women and that Communism has had little impact one way or the other on that. Good point. My Chinese history is too weak to state this with any degree of confidence, but I wonder if Mao's thoughts as applied to business are not really just Chinese thought, particularly since Mao was himself such a student of Chinese history and thought. In other words, is knowing Mao really any different from knowing China, at least as applied to business? And anyway, is it not more efficient to focus on China's current business culture, rather than digging one level deeper to see where that culture originated? I give the Mao as business professor portion of the book a C, subject to possible revising based on comments received. Is it just a gimmick? Mao's birthday was yesterday. He would have been 114.
• China Corruption. It's A Guy Thing?
  Read an absolutely fascinating article in the Wall Street Journal on Gambian airline safety. The article is entitled, "In Africa, Aviation Woes Defeat a Zealous Watchdog," and its focus is on apparently trumped up corruption charges against aviation reformer, Ms. Maimuna Taal-Ndure. Gambian Solicitor General Henry Carrol, "described Ms. Taal's indictment as an "action of the government in fighting corruption." Ms. Taal, he added, "was fighting with everyone and being very arrogant. Women in high offices do that a lot. They tend to be arrogant and bully men." The very same WSJ issue also has an article, entitled, "Shanghai Industrialist Sentenced For Embezzlement and Bribery," on the provisional death sentence handed down to Wang Chengming, former chairman of Shanghai Electric Group Co., for "collective embezzlement and taking bribes." Of course it is a male. I have been living in or doing business with corrupt countries for over thirty years and one of the things I have noticed is corruption far more often runs with men then with women. I have a number of clients who are so convinced of this that they favor hiring women in emerging market countries. I once had a client who was offered a major fishing concession by the Gambia. This client researched the hell out of the project and determined he would be able to secure at least a 100% return on his investment, assuming no need to make improper payoffs and no chance of having his business confiscated by the government. However, due to a complete lack of confidence in the truth of these two assumptions, he chose not to go forward with the project. So am I right to think corruption is overwhelmingly a male phenomenon? Is this true in China? If so, why? I realize men hold more positions of power, but even on a percentage basis my experiences tell me women are far less corrupt. Do you agree? Is it sexist even to postulate this?
• 41 Chinese Companies Are Changing The World
  Boston Consulting Group just came out with a report entitled, "The 2008 BCG 100 New Global Challengers: How Top Companies from Rapidly Developing Economies Are Changing the World" [pdf]. Written by Marcos Aguiar, Arindam Bhattacharya, Laurent de Vitton, Jim Hemerling, David C. Michael, Harold L. Sirkin, Kevin Waddell, Bernd Waltermann, Kim Wee Koh, the report identifies "100 large and particularly successful companies that are based in rapidly developing economies and going global fast." According to BCG, multinational companies "will soon encounter" these 100 companies -- "if they haven't already -- as formidable competitors in markets around the world, but also as potential suppliers, customers, and partners. The authors outline these companies' performance, analyze their motivations and strategies, and set forth key implications for incumbents. The following 41 Chinese companies made the list, Aluminum Corporation of China (Chalco) BYD Company Changhong Electric Chery Automobile China Aviation I China FAW Group Corporation China International Marine Containers Group Company (CIMC) China Minmetals Corporation China Mobile Communications Corporation China National Heavy Duty Truck Corporation (CNHTC) China Petroleum & Chemical Corporation (Sinopec) China Shipping Group CNOOC COFCO COSCO Group CSIC (China Shipbuilding Industry Corporation) Dongfeng Motor Company Founder Group Galanz Group Company Gree Electric Appliances Haier Company Hisense Huawei Technologies Company Johnson Electric Lenovo Group Li & Fung Group Midea Holding Company Nine Dragons Paper Holdings PetroChina Company Shanghai Automotive Industry Corporation Group (SAIC) Shanghai Baosteel Group Corporation Shanghai Zhenhua Port Machinery Co. (ZPMC) Shougang Group Sinochem Corporation Sinomach TCL Corporation Techtronic Industries Company Tsingtao Brewery VTech Holdings Wanxiang Group Corporation ZTE Corporation India had 20 companies on the list, Brazil 13, Mexico 7, Russia 6, Turkey 3, Thailand 2, Malaysia 2. Indonesia, Poland, Chile, Argentina, Hungary, and Egypt all had one. UPDATE: