Tuesday, December 20, 2011

Doing business in China ....... I

I have been posting a series of my thoughts on topics of China for a while. I have been pressured to grow our presence there because growth else where muted. Does that means China is immune from the on-going in the Europe? If the world is slowing down, how can you grow? The answer is the cake may be getting smaller however the opportunity is still there. Everyone, I mean literally everyone, flags from the US, Taiwan, Japan, South East Asia countries like Singapore, Malaysia, Thailand, etc are flying on the companies poles. The reduced cake is still larger than anywhere in the world. So, it's a question of how can you win market share in a slower growth environment.

Doing business in China can be difficult. Having raised in a conservative Chinese background helps but is still difficult. One of the difficult concepts for a westerner to understand is guanxi. At the surface, it sounds like something like a brotherhood bond. It may sound so noble and thinking of these people are so nice but at the business level, it's much deeper than that. A lot of people understand guanxi means reciprocal, giving face, not offending them, pleasing them but ultimately means money or help them to rise up in power.

The Chinese government is portraying an image that they are fighting very hard on corruptions. Yes, I believe they are but the followers may not. They have been inventing creative ways. I was told that people who buy Maotai usually won't drink it, and people who drink Maotai usually don't have to buy it. Maotai is like gold. It's a currency, they can resell it and turn Maotai into cash.

I thought it was a joke, when I goggled this, this is what I found.

This year so far we have seen eight rises in the price of Maotai. The potent Chinese liquor now costs four times what it did five years ago.

According to the overjoyed manufacturers and the press, the rocketing price, fueled by a booming demand experienced by no other commodity in the world, is just another manifestation of China's booming economy. But surveys show that only 10 of every 100 smokers of Zhonghua brand cigarettes buy the cigarettes they smoke, and only 1 in 100 drinkers of Maotai pay for their own drinks.

Liquor culture is an essential part of traditional Chinese civilization. In Chinese, the expression for government "review and approval" sounds very similar to "cigarettes and liquor", and in reality approval often requires the giving of cigarettes and liquor.

In other words, by bribing officials with cigarettes and liquor, one can avoid troublesome bureaucratic formalities and obtain approvals and permits with ease and speed. The popular Chinese sayings "no cigarettes and liquor, no approval or permit", and "buyers of Maotai don't drink it, drinkers of Maotai don't buy it", lay bare the hidden rules for dealing with government officials.

Nowadays an increasing number of officials puff only on Zhonghua and nip nothing but Maotai. It's not uncommon for officials at municipal and county levels to keep a store of cartons of Maotai at home, which, one cannot fail to figure out, are gifts from people who have approached them for help. As to how much Maotai they have consumed on public money, we will never know.

It's said that every year the mayors of many mid-sized cities assign their most trusted subordinates to travel to the Maotai distillery to source precious liquor, as it is an indispensible drink at banquets staged for important guests. The task is glorious but arduous, as it is neither easy to secure the amount required, nor to ascertain that every bottle is genuine. For this task, funds are not an issue at all. With their best efforts, some manage to secure 2 tons or 4000 bottles for their cities, but that is far from enough. On average, a typical municipal government holds 5-10 banquets every day of the year, and at each such banquet, 3-5 bottles of Maotai are drunk.

Since liberation, Maotai has been the designated liquor for state banquets. But in line with China's reform and opening up, it has also become the liquor of choice at banquets organized by provinces, cities, counties, towns and even villages. For officials to treat their guests, toady to the higher-ups, favor their subordinates and socialize, Maotai is absolutely indispensible.

It is common office gossip that a lack of capacity for liquor is equivalent to a lack of capacity for work. Therefore, in order to demonstrate their capacity, some officials drill themselves to acquire the capacity to pour two bottles of 53 percent alcohol Maotai down their throats at one sitting without getting drunk. Some of them become so addicted that they don't feel themselves if, for some reason, they don't get their daily fix.

The leading group of a city usually comprises 10 people including the party secretary, the mayor and vice mayors. For them, 4000 bottles are far from enough. As a result, the number one man usually assigns an aide to manage the precious store of Maotai and ensure that his demands take precedence over those of the other leaders.

At a Party meeting the number one man might extend some words of consolation to his subordinates: "Comrades, it's not that I set out to abuse my position to monopolize the Maotai. It's just that the supply is too low. Consider the annual supply of 25000 tons a year, equivalent to just half a billion bottles. How can that meet the rising demand from all over China. And our buyers are below par. Once again they have failed to lay their hands on enough."

Our army officers have a special fondness for Maotai liquor, reflected in the oft-told tale of former premier Zhou Enlai engaging in a drinking contest with General Xu Shiyou.

For a civilian, to be able to drink a whole bottle (or half a liter) of Maotai at dinner is something to boast about. But many army officers are not satisfied with drinking only one bottle, which cannot fully demonstrate their heroic mettle. Also, they disdain to drink in the same manner as civilian officials. Consequently, Maotai liquor has begun to appear in liter bottles, produced specially for the enjoyment of our army officers. As to what proportion of our military expenditure is actually spent on drinking Maotai,nobody has the guts to try to find out, as it is undoubtedly a military secret.

People may say that I am out of date to regard the consumption of Maotai as the epitome of corruption in today's China. Though high, the price of Maotai has not yet gone above 1,000 yuan a bottle, and even the strongest drinker can drink no more than two bottles during one meal. Now, we have entered the age of ice liquor, of which high-end brands can cost 1,500 yuan a bottle. A person with a good capacity for drink can consume 8-10 bottles during one meal.

Friends, don't be shocked by this, as the era of consumption of Lafite is approaching. This well-known wine is made in France, and costs about 20,000 yuan a bottle. A capable drinker can drain 3-5 bottles at one sitting!

It sounds absolutely inscrutable. But the point is who the buyers of these liquors are. If they are owners of private enterprises, it does not matter too much, as all that is lost is some state assets to which we ordinary people have no access at all. However, if they are government officials or army officers, the tax payers of China can do nothing but lament, as what is wasted is their hard-earned tax money.

Mr. Chunyu Jinzhang, president of a well-known stationary company in China, has been working as an amateur teacher of English for over 30 years and was the first man in China to promote the Queen's English.



dukuhead said...

Interesting article and i can attest to the scarcity of maotai wine today. Try buying maotai at any duty-free outlet in any airport in China and chances are that you will be told that they are all out of stock. Chinese businessmen visiting Malaysia ask for maotai here because in China they can't source any neither for love nor for money. I can't fathom why a liquor should attain such cult-like status, but then again, as you rightly pointed out, it's part of business in China which is "guanxi" sealed with toasts of maotai.

Kris said...

Good article about maotai. I never knew about this before. Although, i know that in chinese culture, the act of giving face is a must.

Why don't people manufacture it outside China? lol

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