Learning how the Chinese approach business is important in understanding how you might be able to sell your business there.
Is it true China is really are buying up the world, and at high prices? What's going on with China as a buyer of companies?
I truly believe it's a myth that China has the money and will buy everything at a high price. In real estate, for example, the buying spree from the Japanese about a quarter of a century ago isn't going to happen with the Chinese. For the Chinese, unless the pricing is attractive or unless there is strategic investment value, they're not going to buy anything at a high price.
We need to understand what the Chinese are looking for before we can look at the right strategy to sell to them.
Let's use real estate to demonstrate certain principles. In China, the real estate capital gain in China itself is a lot more attractive than going overseas for them. And if the Chinese are buying overseas in a foreign country they are also exposed to foreign exchange risk as well -- and with the Chinese currency, it's a risk the Chinese will have to consider. And if they're buying abroad, they're not really familiar with the environment. If it is an attractive price, or it is strategic, then they will look further into it.
When the financial crisis started to get serious, I got calls from lawyers and bankers here in the U.S. inquiring if the Chinese are interested in real estate development. And it seems there was not much enthusiasm from the Chinese in development real estate at that point. When the economy in our side is slowing down, the better thing for the Chinese is to buy already-built projects at good prices in China.
So the same business rules apply. It has to make sense. These are savvy business people, there's no easy money to be made here. They can potentially make more money domestically within China than they could here, and with less risk.
Yes, there are very smart Chinese business people, but there are also Chinese businesses coming out from China or doing business abroad for the first time that they are just trying it out. They may not be very experienced. In doing business with foreigners, China learned from their own experience, but they also learned from the experience of others. Knowing where they are coming from is important for us to better understand and strategize in our business so that we can more effectively work with the Chinese.
When I worked with U.S. companies looking to go into China, I learned that the Chinese highly value education as part of any deal.
Education and respect. If we look at the Chinese background, it's only opened up about 30 years ago. I should say open again. It's opened up again to the world because of the closed policy before that. And the Chinese local government in particular is very helpful to foreign investors who look to invest in their territory. They want to have the foreign investment and, because of that experience, the Chinese think they should get the same kind of treatment and respect when they invest overseas.
They expect that the local government and the businesses would be helping them to understand or giving them perks when they do business here. But only after they are here, they realize that there's a big difference in the two countries on the rules played by the government and how outside investors were being accommodated.
It's quite interesting that, when we go to China, we visit with the government and we visit with the businesses, knowing that we have to approach it from different levels before we can get the respect and get the trust.
On the other hand, when they come out this way, the Chinese want to see the governor or the mayor; because, in China, the government is leading the economy. Whereas in the U.S., the mayor and the governor are helping business to move forward, but they cannot influence business as much as the Chinese mayors and governors do.
So there's kind of a mismatch in reality and perhaps respect. But again the Chinese are learning very, very quickly.