Green hats and grape –made wine
I want to start this first article in our new column for readers with two stories from long ago – from the 1980s, to be exact.
In 1984, I accompanied the governor of a U.S. State, and a mixed official/business delegation from that state, to China. Almost everyone in the group was making a first visit to the PRC, but business between that state and China was already starting to develop.
Among the officials in the group was the director of the state government’s Department of Agriculture. He was himself a farmer.
We visited a number of rural spots in various Chinese provinces. We had all brought souvenirs to hand out, and the Agriculture Department Director had brought peaked “baseball caps” – the kind so many Americans wear – marked with his Department’s logo and the words “X State Agriculture.”
As we travelled, we noticed that none of the men who received the souvenir hats ever put them on their heads, but we didn’t think much about it.
Only near the end of the trip did one helpful Chinese friend explain to us what “wearing a green hat” meant to most ordinary Chinese people. We all had a big laugh, but the Director didn’t hand any more hats out.
Around the same year, an American engineering company called me and asked me to join a dinner that they were holding for a visiting Chinese delegation; since I was a “China Expert,” my job would be to help the evening pass smoothly, make the Chinese guests feel comfortable, etc.
We went to the biggest tourist attraction in Seattle, the “Space Needle,” which has a revolving restaurant on top.
The Chinese delegation, all engineers from Liaoning, was all making their first trip outside of China. Language interpreting for the evening was left to the interpreter with the Chinese group. They had just arrived, and had not slept since landing in the U.S.
I quickly saw that the menu was going to be a problem, and helped order foods that newly arrived guests from China would find relatively easy to eat.
Then, the dinner host, who was leader of the American company, turned to his counterpart, the delegation leader from Liaoning, and began to discuss – in detail – each red and each white wine on the restaurant’s vast wine list. He talked “wine talk” in great detail, using all the special technical terms used by wine experts. He talked continuously for many minutes, never pausing for interpretation.
I watched and waited.
The Chinese interpreter, fresh from Liaoning, was dumbfounded. What the American was saying was beyond his experience and beyond his ability to render into Chinese. Finally, the interpreter took advantage of a moment’s silence, and said:“Excuse me. Are these wines made from grapes?”
Still the American host didn’t get the message. He gave the interpreter a strange look for a moment, then said, “Yes, they’re made from grapes,” and resumed his apparently endless discuss of all the different wines on the menu.
I watched and waited some more.
Finally, the end came. The interpreter said to his boss, in Chinese, “团长 ,你要喝什么 酒？”
And the boss answered with an exhausted grunt, “我喝啤酒。” The interpreter sank，exhausted, into his chair, the American host had no idea what his guest had said in Chinese, and I roared with silent laughter.
Those were the good old days!
The US and China have come a long way since then. We all know the rankings and the numbers: tens of billions of dollars invested by U.S. companies in China, two-way trade now more than half a trillion dollars, the U.S. China’s biggest export market and fourth biggest supplier of imports to China. China holds hundreds of billions of dollars’ worth of U.S. government securities. Around 200,000 Chinese students are receiving higher education and professional training at U.S. colleges and universities. American retail brands are omnipresent across China, etc. The list of astounding facts about US-China economic relations is endless. The two countries’ economies, as just about everyone acknowledges, are heavily “interdependent.”
Looking to the future, most observers foresee a growing wave of Chinese investment heading for the U.S. China’s “going out” strategy is more than a decade old already, but much of China’s overseas direct investment in the early years has gone for natural resources and energy supplies, often in developing countries. Now, as China’s economy gains technological sophistication and China’s national economic strategy attempts to raise the value-added proportion of Chinese industrial production, Chinese companies with plenty of cash are heading to the advanced industrial economies. They’re looking for expanded markets, of course, but also for technological and industrial skills that they have not yet built on their own.
It is generally believed in the world economic system that the maximum possible movement of capital is good for all sides. China, since the beginning of Reform and Opening, has opened its doors to a huge flood of capital investment from other countries, including the United States. The United States remains by far the largest single repository of foreign investment. Its national development and industrialization relied heavily on investment from abroad, and America continues to be a magnet for foreign capital, thanks to size of the American market and the historical strength of its institutions. Although the arrival of Chinese investors looks like not as the same kind of unprecedented, system-transforming development that “Reform and Opening” was for China after 1978, the wave of new investment does offer challenges as well as opportunities for both Chinese investors and U.S. business environment. Already, one recent estimate suggests, Chinese investors have placed around ten billion dollars in the U.S. – in “easy” sectors like residential real estate, but also in mergers and acquisitions and, occasionally, in green field production facilities. More of this is sure to come.
While the U.S. and China may have moved beyond “green hats” and “wines made from grapes,” and while many Chinese investors will have talented in-house staff that has lived, studied, or worked in the United States, these investors will face significant challenges in the U.S. along with significant opportunities.
American companies have learned in China, over periods as long as thirty-plus years, there is a great deal to understand about the host country environment – commercial, social, cultural, legal, regulatory, political. Failure to grasp the essence, and the details, of the host-country environment can lead to avoidable and costly mistakes.
Meanwhile, Chinese investors coming to the U.S. need to adapt to the complex American business environment – in the broadest sense as well. Two examples: the importance of mastering the complexities of the U.S. legal system, and the vital importance of building a positive company reputation among Americans – in government, in local communities, among the company employees, etc. On both of these important fronts, there will be much to learn and there will be much benefit to gain. These things are not impossible mysteries: Japanese, Korean, and other foreign companies have learned what it takes to thrive in the U.S. market. Immigrants – families and individuals from all over the world, very much including China – have come to the United States and have built their fortunes. Indeed, one of the strengths of the U.S. business environment is that entrepreneurs from all sorts of national backgrounds learn to do well and to contribute to the economic vitality of America. For instance, some Chinese companies pursuing mergers or acquisitions in the U.S. may not fully recognize the strength of labor unions within the companies they are acquiring, or their understanding of U.S. labor unions may derive from their experiences within the very different Chinese political and economic system.
Another example could involve the effort to promote a company’s brand recognition: understanding how American consumers react to very specific English-language slogans and word formulas can make a huge difference to business success. To be fully effective in communicating with American consumers, it is not enough simply to know such basic facts as the dates of traditional American holidays. In the free-wheeling, relatively open, and multi-ethnic social environment of the United States, businesses thrive when they master all aspects of acquisition, listing, and corporate finance.
Like anywhere else in the world, success in the U.S. does not happen by accident. Chinese investors coming to the U.S. bring special strong points originating in their Chinese experiences. But they may also bring expectations not entirely realistic in the U.S. business environment. Now, more and more Chinese companies are ready to seek investment opportunities in the U.S. Their hard work will help them succeed. Unlike China where they are familiar with everything around business perspective, in U.S many Chinese companies will need to work with experts who are deeply familiar with all relevant aspects of the American business environment, no matter they are from investment banks, auditing firms, policy and regulatory research firms, government relations or communication consulting firms.
Just as U.S. business in China is truly a cross-cultural endeavor blending the experiences of Chinese and Americans, building Chinese business success in the U.S. will call for Chinese and Americans to work closely together “on the ground” in the U.S. Without that integration, who knows? Without the integration, maybe the age of “green hats” and “wines made from grapes” is not yet behind us after all!
Burson-Marsteller’s U.S.-China Specialty Group provides communications counsel to U.S. clients with business needs in China and vice versa – helping them build business by understanding each other’s’ different cultures, consumers, political and regulatory environments, business landscapes, financial markets and best practice.