Review: Mr. China

Happy Flag Day!

For Chinese finance class, we have a final presentation, and this past weekend I had the joy of reading Mr. China by Tim Clissold. In the early 1990s, American investors were giddy about getting into China, and many private equity funds started to take advantage of the rush. They couldn't buy Chinese companies outright, so they formed joint ventures (JVs) with Chinese companies.

What resulted was described in the book as the "Vietnam of American Business." The root of the problem was that the American investors wanted a return on their money, and knew nothing about China. The factory directors saw the investors in the same way they viewed the socialist central government -- "you give me the money, and I spend it on what I think is best. No interference!" You can imagine the friction that resulted, as the American capital bought a share of the JV's equity, but the directors insisted on staying in power.

Fortunately, the "fool's golden age" (I came up with that) of the JV is over, and foreign firms are now allowed to form wholly-owned foreign subsidiaries. They can bring in their own factory directors and do pretty much whatever they want.

The book has some amazing "war stories," and for the curious you can check out the outline I wrote up in six pages. It's designed as a first draft to my presentation, but it turned out interesting in its own right. Still no comparison to the entire book, but if you want to find out how badly doing business in China can turn out, it's a great read.