Caixin
DOING BUSINESS IN CHINA

As Halloween Looms, Scary Foreigner Stories From Past Offer Insight Into Present

By Doug Young

With Halloween just around the corner, I thought I’d take a look this week at some of the scarier stories from foreigners doing business in China, as well as what kinds of lessons such tales offer about this complex market. Such high-profile stories are relatively common over the last couple of decades, and I’ll review a few of the more memorable ones shortly.

But I should start by saying I was somewhat surprised at the relative lack of truly horrific stories many of my contacts could muster, which speaks to the growing rule of laws in China’s business landscape. That contrasts with a more Wild West period of the 1990s and first decade of the 2000s, when local connections were still equally important, if not more so.

Relative newcomers to China were least likely to have good horror stories among the people I polled this week. Even the old-timers, including me, had to dip a bit into their trick-or-treat bags to come up with some interesting tales for this Halloween edition of the column.

That said, China certainly does still have some country-specific pitfalls that can trip up the uninitiated. The worst of those could actually land you in prison, as unfortunate foreigners have discovered from time to time. Many such cases involve trading in sensitive data and other information, which can end up being classified as illegal under China’s relatively vague laws if you end up upsetting the wrong people or swimming against the tide in the latest government campaign.

One of the most recent high-profile cases involved a British man and his wife who set up a consultancy that helped customers get information on individuals, companies and so forth, often called market intelligence. I won’t go into too much detail here, beyond to say he was doing some work for the big British drugmaker GlaxoSmithKline. But the bottom line was that he and his wife ended up being convicted for obtaining such sensitive information and spent several years in prison as a result.

Another recent case saw several employees of Australian gambling giant Crown Resorts imprisoned for illegally recruiting local high rollers to come to its properties, which seemed to be tied up with Beijing’s campaign cracking down on excess and corruption by government officials.

Thankfully, those kinds of cases appear to be quite rare, and I don’t personally know of anyone who has ever gotten charged or even accused of this kind of business-related crime. Another similar kind of case from about a decade ago shows how you’re often on your own when you get into some of China’s smaller cities, where the rule of law isn’t quite as strong as it is in big places like Beijing and Shanghai.

That case involved a Chinese-born naturalized American named David Ji, who ran afoul of a major TV-maker based in a smaller city in Sichuan province over unpaid bills. The details of the case were never really completely clarified, but the gist was that he was detained at least once and possible several times even though he was never charged with a specific crime. His relatives said he was also forced to sign documents and transfer assets during that detention.

I haven’t heard about more major cases involving that kind of dispute resolution recently, though you do hear about companies based in smaller cities occasionally using their connections to get local police and other officials to take action when business disputes occur.

Unexpected Ambushes

Then there’s the insurrection, which seems to still occur from time to time. A couple of my contacts described such cases, both involving employees of their own companies banding together and mounting uprisings when they were unhappy about something. One case back in the 1990s was quite extreme, and saw the employees actually hold my contact hostage in his office until the matter was resolved. Another occurred about a decade ago, and saw my contact’s employees rebel just before an important meeting over what they viewed as the boss’s cultural insensitivity.

These kinds of cases make the headlines a little more frequently when they involve major companies, and IBM and Motorola have both been the subject of such mass protests when they sold assets or were preparing to lay off workers. Obviously such loosely organized discontent also happens in the West. But in nearly all of those cases, things are usually resolved without ever reaching this kind of crisis level.

Then there is the hodgepodge of other mini-horror stories involving things like visas that weren’t renewed on time, packages that took weeks to arrive, flight and meeting cancellations, and so forth.

One contact told me how he rearranged his schedule and incurred thousands of dollars in added expense to attend a meeting in Hong Kong only to arrive and be informed the meeting was canceled due to a public holiday. Another recounted the story of a friend who ordered a boatload of cars to be shipped from China to Russia only to discover the goods were badly damaged upon arrival because no one bothered to properly secure them before the trip.

At the end of the day, it’s clear that like many things in China, this kind of scary story is quickly receding into the past as the local business climate becomes more Western in many of its practices. The biggest takeaways from these Halloween-ish tales are that many gray areas do still exist when doing business in China, and when in doubt it’s probably best to err on the side of caution. Similarly, disputes of any kind should always be taken very seriously, especially when they involve government institutions or the latest political campaigns. Failure to do so could not only result in bad feelings and lost productivity, but in extreme situations could even land you in the middle of an unwanted insurrection or something even worse, depending on whom you upset.

Doug Young has lived in Greater China for two decades, including a 10-year stint at Reuters, where he led China corporate news coverage. Send your questions or comments to DougYoung@caixin.com.

Share this article
Open WeChat and scan the QR code
Copyright © 2017 Caixin Global Limited. All Rights Reserved.