Google jumped whole hog into China last year, investing in search leader Baidu.com and doubling down on its own Chinese-language portal. Yahoo bet part of the farm on China last month, plugging $1 billion into the search engine Alibaba.com. These days, it seems like every major American Internet business is going to China, and so I did, too. My wife and I toured the megalopolises of Beijing and Shanghai, the bustling manufacturing centers outside both cities, sampled the varied cuisine, regularly got lost and subjected ourselves to widespread ridicule for our bungling of basic Chinese words. Naturally, the two-week experience now qualifies me as an experienced Sinologist. So here are some basic, hard-earned rules for conducting business in the world's most populous country, derived from some intriguing customs we encountered along our way: Get ready to eat. Yes, formal Chinese dinners are long, lavish and a challenge to the stamina of Americans accustomed to the dine-and-dash. Every Western businessman and investor must cultivate relationships, or guanxi, with local contacts to do business in China, and these allies will likely spirit you out for festive hours-long meals. A Silicon Valley refugee who had moved to Beijing told us that state-run companies are particularly prone to throwing toast-packed banquets for their Western business partners, and though we didn't do business with any, we did get to partake in some of the longest meals of our lives. Advice: have painkillers handy to blot out any developing leg cramps during hour number four. Bonus advice: the potent Chinese grain liquor, baijiu, should not be consumed in great quantities or mixed with pijiu (beer). Please, just take my word on this.
No efficiency software. There are lots of people in China. Yep, that's a bombshell. But nothing quite prepares you for the experience of walking into a department store in the shockingly vertical city of Shanghai and getting besieged by a soccer team of uniformed employees, each earning about 10 yuan ($1.25) a day and sweetly pointing to the merchandise in front of you. (This doesn't happen at your local Sam's Club, does it?) Labor is so cheap that companies seem to employ as many people as possible. Yet many American businesses these days are focused on using technology to wring inefficiencies out of the production chain and automating human tasks. Well, the last thing Chinese companies want or need to do is downsize the cheap, 750 million-strong work force. Leave the factory-line robots and all that great auto-mation software at home.
Prepare for pollution. The majestic, wide-boulevard city of Beijing enjoyed 227 "clean-air days" last year and is aiming for 230 this year. That means you have a pretty good chance of experiencing, as we did, several days with extremely unhealthy pollution levels. You should steel yourself for the possibility that you will feel the full brunt of the city's 2.3 million cars (New York has 1.8 million), abundant construction sites, steel plants and countless residential coal-fired grills. I recommend a strict training regimen: Wrap your mouth around the exhaust pipe of your car for an hour to get the feeling of what it's like to breathe on a bad Beijing morning. To get a sense of the reduced visibility, put on your father's reading glasses and go for a jog.
Buyer beware. We encountered clothes, sporting goods, furniture, books and jewelry that carried tags with well-known brand names but that, because of their price and quality, were obviously fakes. There are even imitation restaurants--like the ubiquitous Chicken King fast-food chain, whose mascot is an Asian Colonel Sanders look-alike. Most surprising, there are fakes of illegal copies: DVDs that claim on their jackets to be high-quality bootlegs of the original movies, but are actually shaky camcorder recordings of movie screens in a Russian theater.
So guard your IP. Chinese entrepreneurs will counterfeit anything, and if your product is a hit, they'll fake it, too. Common business wisdom suggests that you outsource part of your production in China to several different factories and avoid making your entire product in one factory, whose management or employees could rip it off even under the strictest security. We heard that the Chinese government, after years of promises, was finally beginning to crack down on the fakes, especially during global events like the Shanghai International Film Festival. But it appeared to us that the counterfeiters were adapting well to this increased attention. How? They look vigilantly in both directions before offering their wares on the street. In the complex economic frontier that is 21st-century China, a bit of caution never hurts before plunging ahead.
