Thor's China Diary

A Business Proposal

@21 January 2000
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 The e-mail was to the point, even if the punctuation & spelling were a little strange. "how are you? my English name is W, i am one of your students in Wuhan maping and survey Univercity two year ago. maybe you don't know me,it doesn't mater. i think your teaching approach is good. i want to coorperate with you. we can open a small company which specialize in oral English in Wuhan. tell me your telephone number, please. i want to talk with you." The English given name - the kind that Chinese teachers keep lists of for luck-dip christening - and the e-mail address gave no clues about its owner. I hunted through my old student lists for a hint. No dice there either.

Like W, I too had noticed a business opening. Heaven knows, with one or two hundred million Chinese folk learning English (the estimates vary wildly), there had to be a market. There was a market. But putting on an entrepreneur's cap, the more I had looked at it, the less attractive it had seemed. So I sat down and composed a reply to my mysterious admirer with some care.

Hello W,

Thank you for thinking about me as a business partner. Over the last two years I have given a good deal of thought to the possibility of opening a language school in Wuhan. The demand is certainly here, and I think that it is likely to grow. However, for a number of practical reasons I decided that committing to such an enterprise would not be a wise move from my point of view.

1. The politics of doing business in China, especially in Hubei, are simply not favourable to small foreign investors. National & local laws are a mess of contradictions, and their application is erratic at best. In any commercial dispute, an outsider with few local language skills and no guanxi is almost certain to lose out. Short of marrying a local business partner, or having the legal team of a multi-national corporation behind one, it just doesn't make much sense for a non-Chinese national to enter into any joint-venture operation here.

2. Governmental administration is hopelessly corrupt.

3. The conditions of entry and residence for foreigners in China are hedged with all kinds of restrictions on activities, places of living, employment, and so on. Large universities can find a way through this because they are "part of the system", but unsupported individuals, even if they can obtain the necessary visas, live a very uncertain life. Business investment under such conditions is just not worth the risk unless the rewards are extraordinary. If the rewards are extraordinary, corrupt officials will inevitably muscle in for their bribes.

4. Teaching is a skills-intensive business: no teachers, no business! Yes, I can teach and teach well, but any viable operation needs a team of teachers. Getting native English speakers to Wuhan is a difficult exercise. Getting native speakers who are also skilled teachers is extremely difficult. Such people normally want strong legal contracts, good wages, guarantees of employment, accommodation, air fares, health insurance, visa assistance, and so on. Those foreigners who are already in Wuhan working for universities are, on the whole, not trained teachers, and their contracts forbid them to take outside employment. Even if they can be persuaded to take occasional classes, they cannot sign proper contracts with a private employer, and hence the private language school cannot guarantee an international teacher to their customers.

5. As you may know, there are already one or two private English language schools in Wuhan. There have been complaints about them on the Internet amongst ESL teachers. They are said to be bad employers.

All this sounds very negative, doesn't it! Wuhan is a big city. Sooner or later large international teaching companies will see the market here and exploit it. They will come with international management experience, overseas staff recruitment contacts, and a lot of money in the bank to start the local operation. Under such conditions they should be able to succeed over time. As for you and I, well it is probably better to look for another way to make a dollar...

Cheers, Thor

Well, it sounded like a rational collection of arguments to me, but none of it made much sense to W. Shortly he rang up and insisted that we ought to meet. Well, what was to lose?

He knocked on the door just as I was about to serve myself dinner. Sigh. Well, hunger sharpens the mind. As soon as I saw the fellow I recognized him, a tall, rangy young man in a leather jacket, with pale skin and rimless spectacles, from last year's evening classes. He was, I recalled, one of the few willing to initiate discussions, ready to debate ideas. That was promising.

We started out on the big topics. This wasn't a case of investing in China, I suggested. As far as I could figure, there was no such place as China. There was a city called Wuhan, nestled uneasily inside a ramshackle state called Hubei, which was bobbing on the end of a fishing line from an imperial capital called Beijing. If I picked up the bait, I could get barbed in Wuhan, mugged in Hubei, or whipped up and heaved over the side by Beijing. I waved a set of regulations from the Public Security Bureau under his nose. They weren't particularly user-friendly when it came to foreigners consorting with would-be local businessmen.

W naturally came to his business proposition with a rather different mind set. No Chinese, he explained patiently, started a business by actually registering with the government. That was insane. The bureaucratic animal in its native habitat had no interest in fostering small business, and not the smallest understanding of how one survived on a precarious cash flow. What they wanted was a mountain of paperwork that would take forever, probably all kinds of personal favours, and the god-given right to tax your start-up capital at about 17%. In other words, they wielded a machine that was superbly adapted to killing off any enterprise at birth. What every nascent capitalist here knew was that you kept a low profile, got the business rolling, and a few years down the track, if it actually seemed worthwhile going for the big advertising splash, you'd negotiate some kind of legitimacy with a carefully cultivated minion in the bureaucratic machine. As for worrying about booklets of PSB regulations, hell, you couldn't breath legally if you took any notice of that stuff.

He had a point on that last one. The, um, government, or whatever you called those guys in Beijing, were reported (Hong Kong newspaper) to be pushing through a plan cut off the wind pipes of Qi Gong groups, that is, folks who liked to do breathing exercises. Why anyone would want to breathe any more than they had to in a Chinese city was a mystery to me, but the throttle-the-life-out-of-'em approach did not sound like a smart invitation to foreign expertise and investment (and as far as I can determine, has also secured the extensive contempt of ordinary Chinese men and women). W and his friends needed to make a buck any way they could, weaving their path through the lunatic landscape of Chinese officialdom. I wished them luck. Their best protection was anonymity amid the suffocating masses of 1.3 billion other ethnic Chinese. Me, I stood out like a neon sign. I couldn't wipe my nose without inviting scrutiny and comment. Anyway, I could make more dollars opening a toffee-apple stall on a Sydney beach. Why suffer martyrdom here?

On the subject of money, what was this enterprise likely to be worth anyway? We did some quick back-of-an-envelope calculations. It became clear that W was not thinking on a grand scale. His entry plan was to moonlight with a small class of ten to twelve adult students in a private apartment or borrowed room. They would expect to pay around ten yuan an hour each ... Mm. Well, if there was ever any temptation to become a running-dog capitalist in Wuhan, it fled my soul at about this point. Any number of the fifty or so tertiary institutions around Wuhan will pay me Y50 an hour for as many hours as I want to teach. Even local Chinese teachers of English moonlight (for lesser sums). This kind of extracurricular activity carries very little risk; an entirely different proposition from stepping off into the abyss with an outsider. So it would be daft for someone like me to take on all the risks of private enterprise for less than about Y100 an hour, and even that is chicken shit in real money. If he split along those lines, my new friend W would be nowhere himself.. Nah, forget it.

Slowly, sadly, W accepted the realities. We drifted off to talk about his real job in a government department, which wasn't a real job because there was nothing for most of the real people there to do. Whatever the department had been designed to do, its financial resources, initiatives and mission were absolutely stultified by the need to provide board and keep for huge numbers of un-needed personnel... No wonder he wanted to put a foot into the wide and wicked world outside.

"A Business Proposal" copyrighted to Thor May 2000; all rights reserved

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