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  • Foreign Real Estate Development in China 6.3.11

Going All The Way 

GOING ALL THE WAY

Jeff LoCastro, January 18, 2012

Founder & President, NCCREA



Some articles seem to exercise some people more than others.  My 

January 9, 2012 piece entitled Johnny Law has spurred hundreds of 

emails and much discussion.  Again, most of the comments have come 

from off-shore readers who are subscribers to the newsletter.  The 

suggestion by some was that Johnny Law was a back-door acceptance 

of the cultural business system in China.  The piece was neither an 

acceptance nor was it a rejection.  It was merely a statement of fact.  

 

Yet with such commentary lies the seminal issue; whether you will "go 

all the way" is the interminable question.  It is a part of every business 

transaction in China.  And the question is one that every businessman 

needs to ask and answer for themselves before they begin a transaction:

Will I go all the way?

 

During a recent meeting in Beijing with the all Chinese staff of a very 

well known American company, I asked one of the project managers, 

"How much are the extras going to cost?"  He looked perplexed.  I

restated, "How much is it going to cost to get Friendly Approval?"  

Perplexed now turned to astonishment 

and slight embarrassment.  He replied,

"you know about that?"  Of course I 

do.  He took out his calculator and 

began punching numbers.  While he worked feverishly I turned to my 

assistant and muttered, "my gosh, there is a actually a calculation for 

it."  After a minute or two he responded with,"¥100,000."  

 

Had I not asked it would have been rolled into any costs associated with 

our business relationship anyway.  But the cost of "extras" are real, they 

are expected and you better know going in how far you will go.  It is 

such a part of the culture it may as well be law.  It's not, but it may as

well be. Nationals all know it happens but will never frontally disclose it 

to the westerner as it is a source of silent mortification.  

 

While walking in Shanghai several weeks ago, a Scottish gentleman asked

me for directions (I guess I was walking with some authority as to be 

confused as a local).  I was able to help and we talked as we walked.  He 

works for a European compressor company that was recently purchased 

by an American company.  I said,  "I bet that has put a crimp in your 

ability to (using my fingers to make quotes) close deals."  He laughed a 

knowing laugh.  Per US law, American companies are barred from

participating in Friendly Approval and many companies require


managment and staff (including those with franchise operations) to sign

agreements that they will not engage in such. Therefore, in order to 

close sales, when it looks like deal-time, he sells the units to a Chinese 

company, which in turn handles all the "approvals" and they sell to the 

ultimate buyer.   Notwithstanding US law, he has answered the "how 

far will I go" question.  His answer:  One-degree of separation.


But it is something that you must get straight before entering the room.

Do you want to hold you nose and make direct "approvals" and keep

control on "expenses" or do you want a degree or two of separation but

potentially lose sight of where, when, how much of your budget is going

toward "approvals."  What if your "approvals" require more than golf

trips, electronics, and small white envelopes?  Are you comfortable with

having a woman (or women) of questionable character a part of the

equation?  

 

Know what you are getting into, determine you own personal and 

professional limits, draw the line and stick to it. Clark Kent won't get 

anything done in China.  "Golly-gee" and "Gee whiz" won't cut it.  But 

you don't have to be Lex Luther either.  Find your balance, know how

you are going to handle it, and that's as far as you go.  If you are 

unprepared and act as though you just stepped out of Dogpatch, your 

deal is dead.

 

If you won't go all the way (or as far as is required), be prepared to walk. 

You may be leaving your money on the table, but if that's where you 

find you best sleep, that's where you have drawn your own line, don't 

worry you'll live to fight another day.

 

COPYRIGHT 2012 JEFF LOCASTRO
DISTRIBUTED BY NCCREA
CHANGZHI, SHANXI, PRC

Contact the author at:  Jeff@NCCREA.com or  Jeff@CaliforniaSecured.com





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Jiefang East Road 161
Changzhi, Shanxi 046000

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