Running a business in China / Google’s woes

Oooeeee 1.3 billion people!

Profits await the occasional foreign entrepreneur in China, but not without sacrifice and some turns of a blind eye.

In the first few weeks of doing business in China, I confirmed that I’d need to put up, shut up, or leave. Of course, I was well briefed on this prior to first visiting the country, but youthfully believed it worthy of a boundary test anyway.

A close friend organised a meeting with members of the Communist Party Youth League at a leading Shanghai university. We discussed Australia-China relations, debunked each others’ cultural myths, and skirted – but nevertheless acknowledged – some of the more sensitive topics of the day. While most of those present were happy and willing to engage in the discussion, there was one member present who, with smiles masking his intent, reminded me on a few occasions where I was, thank you very much, and the acceptable limits of public discussion for an individual who wanted to live in China.

Though I ran small businesses in China, the general corporate rules applied across the board. There are a raft of regulations to be complied with, some of which go against the grain of ‘Western’ norms. Google, nor any business really, was exempt from these. I am not going to dissect Google’s exit from China at all, as it’s been adequately covered to a level I couldn’t achieve gracefully. Google it instead 🙂

For a primer, check out these great perspectives and narratives on the situation and its major stakeholders. No, I am not going to look at whether Google should have stayed in China. I applaud the fact that they will not be, and relate to some of their sentiment.

Whatever, man.

The pragmatist in me has no problem with the Chinese government’s policy of censoring information. I’m not a Chinese citizen. Those who are will change the system when it becomes necessary to do so.

China’s extended crackdown on mainly foreign-based social Internet sites in 2009 annoyed and frustrated many expats including myself, but also riled some of the country’s intellectual progressives. Whether that action and future moves likes it will, over time, create some catalyst for change, we’ll just have to wait and see. Don’t expect it anytime soon.

Chinese netizens have been said to be the greatest losers in Google’s decision to quit China, but the Chinese Internet community is savvy enough to quietly organise ways and means to get the information they want. They’ve done it for years and will continue to do so. Separately, there is also a concern about Baidu monopolising China’s search market. This also seems a flawed argument. On the contrary, it provides a huge market opportunity for a raft of competitors (Tencent, Sina, Microsoft, anyone?), not to mention the upstarts and copycats that may well now spawn. Google will take a commercial hit, sure, but the Chinese Government lost this battle. Not only was there a significant loss of face, with one of the world’s most well-recognised brands extending their proverbial middle finger, it also seemed to show an ultimate lack of confidence in the country’s business practices and environment. This is something a foreign business just does not do.  Not publicly, anyway.

Small business and the threshold of tolerance

In the course of doing business in China, I and other small business owners tolerated all sorts of random information-control-related rubbish, several of which I will list in a follow-up post. There is not much room to whinge, granted, as every foreign business owner operates in China by choice. We would bitch and moan amongst ourselves nevertheless, and this co-counselling helped many in the small business community maintain some perspective and control of their emotions in a tough operating atmosphere.

Over the years, I came to know many foreign peers running businesses in China. For those of us who went through the hassle of incorporating Chinese corporate entities and maintaining a local payroll, there was a common bond. We would often meet – sometimes officially through chambers of commerce and other business groups, but mostly casually over a beer or three – to discuss the wide range of problems and annoyances we all continually faced. Many of those problems, naturally, had to do with THE DARN SYSTEM. Uncertainty about antiquated labour laws, accounting rules that evolved faster than accountants could handle, and regular surprise regulations that had to be complied with last week, all contributed to an unpredictable environment for a small business. For those who hung around for at least a few years, this environment became an accepted and expected cost of doing business in China. Dealing with randomness became standard operating procedure.

The 2009 crackdown, however, did have a marked impact on how we conducted business (the unreliability of Google Docs being just one of many problems), and on how we communicated with the outside world. Despite the many business storms weathered over prior years, this was the point when my passionate entrepreneurial zeal in China started to wane. Together with frequent perspective-polarising trips to Hong Kong throughout 2009, I started to question why I was in China, and what level of regulation I would be willing to tolerate to keep leading a business there.

<To be continued>

Written by

Suren Gunatillake

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