Vincent Lo: The King of Guanxi

Monday, April 9, 2007 2:53
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Just found this transcript of a CNN interview of Vincent Lo, and it is quite interesting.

For those that do not know the name, Vincent Lo is CEO of the Shui On Group – the developers of the famous Xin Tian Di (新天地) developments in Shanghai and Hangzhou (soon to be Wuhan??).

In Shanghai, the Xin Tian Di project is potentially the most famous development in Shanghai for not only its design (it was originally a rehab project of an old lane), its location (city center), but also its size (it not includes several completed commercial, residential, and retail developments).

During the interview, Lo covers how he has done business successfully here by leveraging relationships, taking the long view of things, being on the ground, and playing golf… .and given I am a horrible golfer, I am only going to be able to comment on the first three.

The first exchange that I found interesting was:

Stevens: Do you think that connections are that important, as important as many people think they are if you are going to do business in China?

Lo: Connections and relationships are important everywhere, anywhere. Of course in China, because the rule of law it is not as strong as in the west so a lot would rely on personal relationships. What is also interesting to compare is that because China is one party rule, so if you work with certain officials within a city when they move elsewhere they are actually bringing that relationship with them. And also other party members can always call up their comrades to check on you and that would be a very good reference.

I really couldn’t agree more. As I have written in previous posts (here, here, and here) the role of guanxi or relationships are important in China… just like they are anywhere else.

Of course, the role of relationships is very different on the east coast vs. on the west coast of China, and just because you have met someone and taken a picture with them, it does not mean that you can call them part of your network.

However, with that being said, Chinese and Westerners are the same in one way. they like doing business with people they know and trust. If you build relationships, REAL relationships, you will be able to leverage those relationships

The second exchange, and definately the one to pay more attention to:

Stevens: Obviously there are roadblocks to doing business in China do you have any simple rules or things to avoid when going into China for example?

Lo: Always take a long term view and never try to just read reports or newspaper clippings or things like that to try and understand what is going on there. Spend the time go and understand what is really is happening.

Stevens: So good intelligence?

Lo: Not just intelligence, that is why I think the decision makers should be there on the spot to try and understand and appreciate what is happening.

Stevens: Easier said than done I guess though isn’t it?

Lo: Well that is why a lot of multinational companies would have problems. Don’t try to make decisions thousands of miles away.

Stevens: Do you think that is a common failing of multinational companies that they try to do China by remote almost?

Lo: Quite a few multinational big companies are doing well but because they really have a stranglehold on the kind of business they are working on but for the smaller businesses they would have a lot of trouble if they try to control from thousands of miles away.

Stevens: So basically your advice is get your suitcase out and…

Lo: Or get someone who can make decisions on the spot.

Too often I see companies set up here for the short term and try to find every way to squeeze a budget. They view expenses as something to be minimized rather than as an investment to be returned in time.

Whereas few western companies take a long term view here, the Chinese plan for this much better. There are of course firms that will go for the quick buck publicly, but behind the scenes nearly every Chinese company I have looked at has a long term component to it.

Trying to manage from 6000 miles away. Don’t get me started. It is its own post

Vincent is a man who has clearly played the game well in China. He leveraged contacts to develop his projects, and then through solid construction and planning repaid his contacts in kind by giving them a lot of face.

In the end, guanxi will only get you so far. It will get you in the door like your dad’s introduction did, but the rest is up to you. Now that the Shui On group has successfully created one of China’s most famous developments, his need for guanxi is significantly less (or.. at least has change significantly) than the early days.

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