Having conducted your due diligence, negotiated your investments, and agreed to get hitched, you now need to work out the management protocol.

This subject is the topic of much debate, with conflicting points of view. Conducting business also is largely time consuming, emotional and stressful. This is only enhanced in a multi-cultural environment. There will be times both parties feel they are correct. Have you identified the potential areas of differing opinions and decided privately amongst your own foreign colleagues which to tolerate and which not to? It may be wise to draw up a blueprint of potential areas of disagreement and work out in which your China partner is more likely to have the expertise, and in which you are. It is common sense.

Many companies leave the entire operations up to the Chinese partner to run. This is a crucial mistake. A new business needs all the support it can get. You need to invest in a foreign manager to keep an eye on things, especially during the early stages. Correct systems, accounting, and quality control issues all need to be taken care of. You have standards; ensure these are implemented and operational in your JV. The ideal solution is an expat manager ? if not for the long-term, then certainly for the initial development stages. However, the general manager is responsible for the operations of the business. It is wise to make this one of your personnel.

Chinese management

For the longer term, it is better for JVs to have strong Chinese management in place. The reason for this is the difference in basic fundamentals of economic understanding between Chinese and expatriate managers. As Jack Perkowski, chairman of Asimco, one of China’s most successful companies, told me earlier in the year, Chinese managers have a better appreciation of Chinese costs. Consider the US$100 and RMB100 bill.

They have many similarities. They are the highest denomination in their respective countries. Both have pictures of national leaders on them. Yet in America, US$100 is not considered a lot of money. However, in China, RMB100 is considered a lot of money, despite the exchange rate showing it to be worth just US$14. Chinese managers therefore have a far greater understanding of the fundamental dynamics of how much RMB100 is worth than an expatriate manager and this is a key attribute when conducting financial transactions in buying and selling supplies, products and services in China.
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