This is China! BLOG

The China Price: Fishing for Fast Change

“Most of my fish have died,” I said wryly. Dave (not his real name) and I were having hot pot at a local Suzhou restaurant. Hot pot is a pot of boiling broth – spicy and non-spicy, depending on how you order it – into which hungry patrons dip uncooked bits of meat and vegetables until well done. I fished around the spicy side of the pot with my chopsticks for a thin slice of lamb, found one, pushed it around my bowl of sesame oil with minced garlic. Delicious. Dave is one of the few Americans I know who also likes hot pot as much as I do. But then, he’s been living here in Suzhou nearly seven years.

I had brought up the fish to make a point. Though the blank look on Dave’s roughed face indicated the point was lost on him. Tall by any measure, Dave was given to speaking in a sort of stream-of-consciousness way about whatever was on his mind. He was most focused, though, when it came to talking about work.

He had been telling me about his new company, the largest manufacturer of its kind in the States. The company held about 80% of the market State-side in its consumer products category. The company had been sourcing out of China for nearly five years, through a Taiwanese-owned trading company. (I think I already hear the groans from the readers more experienced in the Ways of China). The American company had hired Dave because it knew it needed someone on the ground in China: it had left all operations to the Taiwanese and felt it had no control over pricing and quality of the product flowing into America.

Dave had told me that during the interview he had asked the Americans rather pointed questions like: have you visited all the suppliers the trading company uses? do you know the markups on the products? how long does your contract say you have to continue using the trading company? The answer to the last question, apparently, was: we have no contract.

Dave’s role in the company as China Supply Chain Manager was a political football within the company, even before he had arrived. Some of the VPs knew they had no control over costing out of China and needed to get a handle on the situation; some did, but for a variety of reasons, chose not to act. On the side that chose not to act was the operations VP who had become chummy with the Taiwanese owner of the trading company over the years; and, the head of Purchasing, who was sensitive to any criticism of the pricing he was authorizing from the Taiwanese. Both felt they had a lot to lose should the other side of the executive team push the owner of the company toward cutting the Taiwanese loose; namely, they would lose Face.

“I estimate the Taiwanese is on average taking 30% to 50% off the top,” Dave once told me. That would be an embarrassing revelation for the VPs if, in fact, it were true.

Dave speaks a bit of Chinese, and understands it in the conversation. Dave, though, is particularly sensitive to Chinese mercantile ways; he’s been dealing with suppliers in China for years. He knows when suppliers are trying to pull a fast one on him during pricing negotiations and quality checks. So when he visited several factories in Guangdong, along with the Taiwanese trader, he knew something was up when the first thing the Taiwanese would announce upon introduction to suppliers in the Taiwanese stable was, “Dave speaks Chinese.” Staff would then switch to whatever the local dialect was.

Dave once asked for a purchase order from one of the suppliers, replete with line by line pricing. It would have been a purchase order the Taiwanese passed on to the Chinese manufacturer. After some wait, a manager finally passed Dave a sample purchase order. Most of the prices on the purchase order had been blacked out with marker. Dave didn’t let the presence of one of his new American bosses at the factory blunt his anger; he told the supplier and the Taiwanese what they had done was blatantly dishonest. Dave has few issues with Face.

“I treat the business like it was my own,” Dave told me as he fished a rubbery pork ball from the spicey side of the hot pot. “These guys, they figure as long as the costs they are getting out of China are lower than what they could get from suppliers State-side, anything the Taiwanese does is ok.” One example he gave me was the holding structure of a Hong Kong company the Taiwanese uses to supply his American customer. “The Taiwanese is a shareholder in the Hong Kong business,” Dave said dryly. “I told one of the American execs that was traveling with me: this Taiwanese guy is a millionaire now because of our company.” The exec acknowledged the revelation with a shrug.

“You know,” Dave told me, “I once tried to get these [American] guys out of the hotel to eat hotpot in Dongguan. They wouldn’t have it. They stayed in the hotel. In fact, whenever they come over from the States for the few days they are here [in China] they stay in the best hotels and never venture out. I don’t eat any Chinese food while they are here. They don’t want to know anything about China.” Indeed, it had been a couple months since he had had hot pot, one of his favorite Chinese dishes.

“Yeah, so, my fish,” I gurgled through a mouthful of broth. “They died, nearly all of them.” I explained how the little heating element in my aquarium at home in Suzhou had virtually exploded (outside the fish bowl; no chance of electrocution of the residents inside the bowl), and how the temperature had dropped in the tank over the interceding days before I could buy a new element. Well, I figured, while I was out buying the new element, I might as well buy new fish, several, in fact. Back at home with new fish and new element, I figured I should clean the bowl before I inserted both acquisitions in the tank; so I cleaned out about half the water (it had been a long time between cleanings). After I let the new water settle, I introduced the fish and the heating element to their new environment. By bedtime half the new fish had died; by the end of the next evening half of all the fish had died – including the ones that had been hearty enough to survive the changes in climate. The body count was climbing while we were eating hot pot, I was sure.

“Fish don’t like fast change,” I concluded. Dave still looked at me blankly. “And neither do people,” I said, trying to sound sagely. “Your bosses know something’s not right in the arrangement with the Taiwanese, but they’ve vested a fair amount of themselves in the collusion. It’s going to take them some time to wrap their heads around the idea of actually changing, and then it’s still going to be a delicate operation divesting the company of the Taiwanese, since he holds all the supplier relationships. But they want to do it; otherwise, they wouldn’t have hired you.”

“Yeah, you’re right,” he said, and offered me a fish ball from the hot pot. I passed on the offer.