Why Canadians Don’t Belong in China

Saturday, February 3, 2007 1:16

I am sure that got the attention of a few of my northern neighbors, but unlike most Americans who chide our northern brethren, this is apparently the sentiment of some Canadians according to the article How to Lose Your Shirt in China.

Like in the show The Office, this article is a painful read that leads to laughter.

Whether it is the Canadian who bet it all on a Chinese American with connections, or the company that failed to due through Due Diligence, the author holds nothing back when reaching the conclusion that Canadians don’t belong in China.

For those that have read Mr. China, this is really the Canadian version. It offers a mix of exaggerated “watch outs” for everyone doing business in China… not just Canadians.
Some of my favorite quotes are:

“Every joint venture [between a Canadian and Chinese company] that I knew of, they all failed, all except one, and even that ended.” Gervais Lavoie – Beijing director of Canada China Business Council

“Canadians come to get screwed and the Chinese go, ‘okay, we’ll give you a run for your money.’ “ Gervais Lavoie – Beijing director of Canada China Business Council

“The way Canadians, particularly, suspend good judgment when dealing with China is absolutely outstanding,” says Balloch, the former ambassador

Mildly entertaining, this article is really another case of cherry picking horror stories… although, I was impressed by the list.

The fact is that most of the JVs failed (70% of a single big 4 portfolio), and many were designed to from the start as companies looked to gain access any way possible and then roll out into their own WFOE once it was allowed.

There is often a rush to get started, and a belief that the person they have hired will have the “connections” to make all their dreams come true (see our posts on connections here, here, and here)

Doing business in China is not the same as in Canada, the U.S, or in the U.K. DUH!

How anyone would bet a million USD on a guy that someone knew who spoke English is beyond me, but maybe the managers are now reviewing that decision??

Entering China, does not guarantee that companies have to end up in the FWOKED section of our blog either. Making sure to do the proper due diligence and hire the right people is step one, and it is a step many do not take.

And as we have shown in other posts, one cannot just assume that a Chinese manufacturer will be the perfect partner when you have no one here to oversee them… would you leave your 5 year old for one year of unsupervised kindergarten?

Companies that take the time to research the market, develop a plan, construct a team, and put in the safeguards are ones that are most likely to succeed. It is not always a guaranteed success, but taking those steps will definitely provide the data and structure necessary to ensure the best chance.

That is true when developing the Manitoba province, or the Sichuan province.

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3 Responses to “Why Canadians Don’t Belong in China”

  1. Gervais Lavoie says:

    March 2nd, 2007 at 8:38 pm

    Dear Ron,

    I have to say that I agree with your comments on the article “how to loose your shirt in China”. It is very interesting even more since you quote me twice. I am pleased to see that our comments lead to laughter, which I hope is a sign that things are changing. When I gave the interview my comments referred to what has been happening up to very recently. The intentions was to make sure that it wont happen in the future or will happen less then before. I have to admit that the title is quite provocative, but it reflects the intention of the author and I agree with it.

    As you say: “Companies that take the time to research the market, develop a plan, construct a team, and put in the safeguards are ones that are most likely to succeed”. Unfortunately this has not always been the case. Carrying Due Diligence on Chinese Company was almost impossible less then 10 years ago. Doing market research was an extremely difficult tasks and although it is now becoming more and more easy, there is still many DD that are carry without too much diligence. In the past many Canadian Companies came to China because they were pressure by their Government to do so or more simply because mentioning China would increase their share value by a few points.

    As you say again, how can somebody do not know that:” Doing business in China is not the same as in Canada, the U.S, or in the U.K. DUH!” Unfortunately, again, this has been the attitude of many Canadian businesspersons. But, the mistake would be to think that they did it because they did not understand that China was different. To my view I think that they clearly understood it, but did they want or needed to understand? What was their real motivation to begin with? Doing business in China or simply pretending to?

    As for now we see more and more successful story of Canadian Companies in China and I am very pleased to see that. Alcan, Bombardier, CAE Electronic, Sunlife Insurance, just to quote a few, are getting their share of the Chinese market and harvesting years of financial and human investments. There is also many more in the service industry and that shows that not only Canadian have been able to adjust to the situation on China, but mainly that they now intend to do business in China, now that China is changing and, getting closer by day to the international business practices.

    Still, as an adviser on China, I don’t agree to say that everything is perfect and that China does not have a program for itself. Last month, a German friend doing market research in China asked me: “why do China opens its market to the BMW and Mercedez of this world? Is it to give them access to the market or to take them over?” The answer is obvious; it is to take them over. Still, Chinese Companies tried the same, in the 80’s and 90’s, in the soft drink industry, in the personnel care and cosmetic industry, in the food industry, etc. Today we all know where Pepsi, Coke, Nestle, Procter-Gamble, Carrefour, Danone, LV, etc. stand in the Chinese market.

    Therefore, the answer is: look at what happened in the past. Lessons from the past are always of some importance and to that effect I would say that the future success of Canadian Companies in China depends on how much they learned from the past. And our role is to help them to understand it.

    Regards,

    G. Lavoie

  2. rbrubaker says:

    March 4th, 2007 at 9:06 am

    Gervais Lavoie,

    Thank you for writing in with your comments. It is the first time the original author of a piece has written a comment, so we are in new territory.

    Your piece was excellent, and I found the dead-pan honest approach to the article to be very refreshing.

    While I was not operating in China 10 years ago, I have seen a lot of change just in that time, and I still think that it is those companies that have done their homework and made appropriate plans that have the highest probability of success. Of course, it does not prevent failure…

    I find the insights of your friend to be interesting. I am not sure that a Chinese firm is ready to take over BMW. I think that BMW’s products were given free access because government officials wanted access to the best sedans.

    With that said, I do think that one of the big 3 U.S. manufacturers will be taken down by a Chinese firm. There have been a number of interested Chinese parties lately in Chrysler, and several large component manufacturers are bidding for very large projects that would effectively put them in a place to gain the tech and expertise to take over sometime in the future.

    Anyway, I hope that you will continue to write on the above topic and cover some of the successful companies with the same sources providing background commentary … it would be interesting to see how their opinions would change.

    Hope all is well and have a good week.
    Rich

  3. Gervais Lavoie says:

    April 29th, 2007 at 11:27 pm

    Thanks for commenting my answer. I will be pleased to contribute to this website in the future.

    G. Lavoie

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