John E. Coulter
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Parable of the Pavers
by John E. Coulter
After participating in several hundred business meetings in China over the last 25 years, I have stumbled across a model that business negotiators can use to better evaluate investment risks and opportunities in China. The model is based on sidewalk paving on China's streets.
Laying pavement is not rocket science, and the Chinese civilization was doing it before many other civilizations had even considered the idea. But, in China's current construction boom, accentuated in Beijing, one cannot go far without noticing the wide range of quality and care with which pavements have been laid down--from exquisite design and implementation to what seems like criminal negligence.
Consider, through observation on foot, what can possibly go wrong with routine pavement project.
Using the laying of a pavement as a model for business activity, investors should ask several questions of a potential investment: Will the outcome be a superior pavement that can last for centuries, like some Chinese pavements? Or will it start shifting and shattering within weeks of completion and create an obstacle course in a year? These questions need to be tweaked only slightly for an investor sitting at the negotiating table: The investor should ask how it will get what was promised in a deal. One approach is to write an airtight contract and then closely monitor the partner's progress, applying pressure each time the specifications are not met. The second approach is to try to understand the Chinese partner's situation, experience, and constraints and ride into the venture beside it. In my experience, the second strategy is more likely to succeed.
Every country has its bureaucratic obstacles and weak links between government agencies and other groups. Unfortunately, the PRC government seems especially compartmentalized and insular and offers little reward for government employees who take initiative. A sidewalk project may appear simple, but multiple government agencies must work together to address vehicular and pedestrian traffic and electricity, telephone, gas, and water lines. Officials from various government departments do not always see eye to eye, however. Difficulties in coordinating various government departments, moreover, can pale in comparison to the frustrations of coordinating all the players involved onsite. It can be extremely difficult for one project manager, civil engineer, or foreman to pull the contractors, subcontractors, materials suppliers, and laborers into a unified team.
Of course, there are strong managers who have overcome the difficulties and delivered immaculate paving results. But there are plenty of disasters, some only weeks old, for example, in my neighborhood--a developed suburb of Beijing. Often, poorly compressed sand foundations are quickly destroyed by the weight of a 10-ton truck. In other cases, workers leave spaces in the pavement for trees but then plant trees with vigorous root systems in shallow holes. Soon the pavement turns into a rocky landscape, and rain water eventually sinks or swells the foundations. Finally, pavements are often changed to add new driveways and light poles. Some changes are done with sensitivity while others look like the work of vandals.
I would urge visitors to China to get out of the hotel, the meeting room, the banquet hall, and escorted site visits and consider, through observation on foot, what can possibly go wrong with a routine pavement project. If the possible pitfalls of a relatively simple paving project are so obvious, imagine how tricky a large, complex project could become. It is possible for a lucky investor to meet the right partner, attend meetings, sign up, pay up, and reap a return. But I would advocate paranoid anticipation of difficulties in engineering a smooth project. Working with Chinese partners shoulder-to-shoulder, day-to-day, fathoming the issues they face, and supporting them with an open mind--while retaining the ability to exert pressure for the common cause at higher levels--can be critical to cementing your success.
John E. Coulter (atbeijing2008@yahoo.com) is a collaborative researcher on the environment at Tsinghua University in Beijing.
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