In the 1990s, I represented a number of international fishing and timber and mining companies that did business with Russia. This was not so long after the fall of the Soviet Union and there were a bunch of large Russian companies — many of them formerly state-owned — looking to do deals with my clients, mostly American and Western European companies. My clients would set up long term deals with these Russian companies which nearly always went bad quickly because the Russian company would grab whatever money there was and walk away.
This would leave my clients dumbfounded at how the Russian company would so “irrationally” sacrifice so much money in the long term to grab a relatively small amount of money in the short term. I would find myself explaining the following to them:
You have to understand that for most Russian companies there is no long term. They are used to the Soviet Union where the rules and the laws constantly and unpredictably changed to their detriment. They do not believe they will be able to operate freely five years or even one year from now. So though you see them as having irrationally sacrificed massive long term gains for much smaller short term rewards, they see themselves as having quite rationally grabbed what they could while it was still there.
I am writing about this now because China today is feeling a lot like Russia in the 1990s. I am getting the sense that many Chinese companies are pessimistic about their futures and they are acting accordingly. Our China lawyers are seeing evidence of this everywhere.
Read it all. Their bad behavior will permanently damage their relations with the rest of the world, whether the trade conflict resolves or not.
I recall an uncle telling me years ago that doing real business in Mexico was nearly impossible, because if you managed to build anything up, business wise, the Mexicans would just take it away from you - no recourse to fair law or respect to property rights available to the gringo. Seems like a similar problem developing now in Red China.
I hear the very same things from friends of mine in China.
ReplyDeleteIt's better to leave the Red Chinese behind a bamboo curtain and do business elsewhere. Isolate the tumor.
Worked for an IT shop in the '90s that tried doing business with Chinese banks.
ReplyDeleteThe coding turned into one programming death march after another. The design specs had to have both a date AND time stamp on them, as the customer's requirements would change - often hourly. Our execs had visions of lucrative, long term contracts. The Chinese took the finished code and told us to go away and leave them alone. As there had already been several examples of this, the programmers were highly skeptical that this was a good idea.