EP 11. Decades of Navigating China's Evolving Business Landscape with Andrew Cainey

In this episode, I had the honor to host Andrew Cainey, the founding director of the U.K. National Committee on China, a Senior Associate Fellow at the Royal United Services Institute and an expert on China's economic development and business environment. Andrew’s distinguished career spans over two decades of advising businesses and governments in China, Korea, and Japan. He has authored "Xiconomics: What China’s Dual Circulation Strategy Means for Global Business," providing deep insights into China's economic policies under Xi Jinping. The conversation delves into Andrew’s experiences in China, the evolution of the Chinese business community, and the impact of current global dynamics on foreign businesses operating in the region.

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Content Highlights:

* Andrew Cainey's Background: Introduction to Andrew Cainey, a renowned expert on China's economic development, his career in consulting across Asia, and his role as the author of "Xiconomics: What China’s Dual Circulation Strategy Means for Global Business."

* First Encounters with China: Andrew shares his initial experience visiting China in 1981, offering insights into how his early exposure shaped his understanding and interest in China's economic landscape.

* Evolution of Chinese Business: Exploration of the changes in China's business environment over the past decades, including the rise of the private sector and the transformation of state-owned enterprises.

* Foreign Business Dynamics in China: Discussion on the shifting dynamics of foreign businesses operating in China, including challenges and strategies for success amid political and economic shifts.

* Impact of Global Geopolitics and COVID-19: Analysis of how recent global events, particularly the COVID-19 pandemic, have impacted foreign business sentiment and operations in China.

* Market Opportunities in China: Andrew emphasizes the ongoing economic opportunities in China, despite the slowdown and challenges, underscoring the importance of the Chinese market for global businesses.

* Understanding 'Xiconomics': A deep dive into Xi Jinping's economic policies and their implications for foreign businesses, as detailed in Andrew’s book "Xiconomics."

* Working with Chinese Government Officials: Insights into the complexities and strategies for effectively engaging with Chinese government officials in a business context.

* Practical Advice for Foreign Businesses: Andrew offers practical advice for foreign companies looking to enter or expand their operations in China, highlighting the need for on-the-ground understanding and adaptability.

* Cultural and Business Insights: Reflections on the pragmatism of Chinese businesses and government, and the importance of balancing local practices with global business standards.

Full transcript

[00:01:11] Mu: Can you share a bit about your very established career? How do you get your China related career started and some of the highlights?

[00:01:19] Andrew: My China involvement has been very punctuated and become more consistent over the past 10 or 15 years . I first went to China way back in 1981, when I was in the UK in the sixth form, I was 17 years old and a group of us, students, won a competition funded by a British bank to go around China. And so in, back in 81, I went around China. We went to friendship stores and we used foreign exchange certificates because we didn't have access to the local Chinese currency. There are lots of stories about a very different China, and staying in the, the Peking hotel in Beijing at the time, reuters, Telexes hanging out the news within the foreigner floor of the hotel. And that's where I read about Prime Minister Margaret Thatcher's latest reshuffle of her ministers as I'd been cut off from Western news for a couple of weeks going around China. So that was 81. And then I had a more conventional, more European based career in consulting.

I had a lot of interest in Japan as Japan grew in its economy. A common theme in my life has been my interest in different cultures and languages and all that in the economic context. And so I spent a lot of the eighties very interested in Japan. I had a career or started my career with Boston Consulting Group. As I made partner in the mid late nineties. I decided again to move out to Asia and I joined the Seoul office as BCG was building up in Korea at the time and actually arrived in Seoul just before the Asian financial crisis. Didn't actually cause it myself, but it was a very fortuitous arrival, which got me into a lot of bank restructuring work in Korea.

And through that, I re -engaged with China. So, between 81 and 99, I didn't go to China. And then early in 1999, one of the largest Chinese financial institutions was looking for some consulting help on risk management, on reorganization, all within China. And they found my Korean experience to be very relevant, maybe more relevant than something coming out of America or, or the UK.

And I had a wonderful eight months or so commuting into China working with a Chinese team, advising the the governor of this leading state financial institution in what was really a landmark case for Western consulting companies working in China. And I did a bit more and then you know, I moved back to the UK and paradoxically in the UK I got more interested in China and had a bit of time to go to China with some good Chinese friends who said, why don't you move here?

And figured out that a problem would be that I didn't speak Chinese, but I, I like languages. So I said, why don't you go and study some Chinese? So in 05, I moved with my wife to China and I studied Chinese in Beijing, ended up heading the Booz Allen consulting business in China.

And then around 10 plus years ago, my interest broadened out. Inevitably as part of success in business in China is understanding the broader context and how does China really function? How is it different? How is it the same to the countries that I knew better?

And so I got a much broader interest in China's economic development model its political economy. And so the past 10, 12 years now, I do a range of things, still advising companies but also working on helping to understand what's happening in China and looking at how governments around the world are responding to that, in both what they see as opportunities and challenges from China's increasing importance.

[00:04:44] Mu: That's very intriguing experience that you have. You have spent decades working on China related careers and business. What do you see the evolution of the China's business community and the way Chinese do business? What are the changes and what are the things that didn't change?

[00:05:04] Andrew: I started coming into China, it was 20 odd years ago, and at that stage, you had the multinationals coming in, often saying, "well, we bring leading practices and we want to do things, and we then have to navigate What, at the time, were primarily state owned enterprises of different kinds, central or local and very, very different cultures."

And I remember stories from some of the early bank cooperation partnerships and the differences there. Whereas what we've seen in China is clearly the emergence, firstly, of a very capable private sector. And secondly a number of state owned enterprises, they're also very effective and, and competitive and ambitious.

One thing which struck me is going back now is working with one of the big British banks, back in 2005, they were saying, look, we're really, really good at database marketing. We have these great capabilities in credit card segmentation. So we can bring those around the world. We can bring them to China. And. The issue at the time was actually, no, that's not where China is. Literally, the penetration of credit cards was low and growing, but also the data was simply not available. And so while the British bank was saying, we can bring our world class data and analytics capabilities to China, what the Chinese partner was saying was, actually, we'd like to set up a call center, please. How do you set up call centers? You guys have call centers. And so this difference between what The foreign company thinks is the value and what the local partner really, was different in that way. And now, of course, it may well go the other way around that actually the Chinese companies are ahead in some of the data analytics and certainly access to the scale of the data.

So we're also seeing this, 15, 20 years ago, a Western company would come in, look for a joint venture partner. They might be thinking about how could they end up buying that joint venture partner at some time. I was involved with another case even already 10 years ago. Where the real consideration was the Chinese partner saying, "no, no, we don't want a 50 -50 JV. We want to stay as the majority owner with the foreign partner, because then we can be a more truly local company from a regulatory perspective. But we also have global ambitions and we want to be able to buy the foreign company." so it's not the foreign company coming and saying, I'm going to buy out the Chinese partner. It's the potential for it to go the other way.

[00:07:20] Mu: hmm. In some sense, Chinese business are pretty practical and pragmatic in their dealing with foreign firms.

Recent years, especially after COVID, we saw that the foreign business are showing a low sentiment in doing business in China. besides some main narratives, political uncertainty, decoupling, overall global geopolitics do you see other reasons that explain this low sentiment and is it matching the reality that you're seeing?

[00:07:46] Andrew: There are a whole bunch of issues you've touched on some of them there. And it's also important to talk about, you know, sentiment of whom? Which people in the company? Either people in China, the people in headquarters, and I think a big overlay or context on this was COVID and the inability to travel in and out of China, which means a lot of the face to face discussions and really feeling what's happening have got in the way.

We have quite different political and media environments between China and particularly the US but also European countries as well that lead to quite divergent views on issues and get away from some of the practical facts on the ground, as it were. And I think that is. One of the things there is clearly a very practical thing that the economy has been a lot weaker in China.

So if one just looks at that as "oh, the growth rates are down, then that's a question". And there are a set of issues, China has a lot of particularities, a lot of challenges around, you know, the real estate sector, debt financing and all the rest. At the same time, one can also go and look at, say, the British economy or the American economy and say, those have challenges too. That's more, a bit more like business, almost business as usual. But you know, it's another economy that has its good points. It has its weak points and you need to learn to deal with it. And so I think some of it is that political uncertainty or this lack of clarity of a feeling that it's not sure, what the priority is and how welcome foreign businesses in China is.

I'm talking maybe more up to about a year ago. I think some of this has changed now. But there were a lot of comments being made, even 18 months ago, will China ever reopen? Will foreign travel ever be permitted into China again?

And from quite serious analysts in the West, and of course that's completely reopened, and You've got a lot of visa free travel now. So some of those things got put off to one side. And then I think mixed in with all of these, it is sort of just individual business success.

Some companies have been doing well, now they've got some problems, they need to do something. And some companies have never really done well in China. And once that happens, if you're one of the companies that's not doing very well in China, you will use China's context as part of the excuse. I mean, you see it in the UK, you know, a retailer has bad sales numbers and they say, well, it's because we had a rainy summer and nobody went shopping. And then you say, yes, but your competitor grew three times faster than you did. Right? So there's a mix of things in there. One of the points back to the previous point you touched on about, you know, what stayed the same, what's different certainly for as long as I know, you know, China's been in the private sector, very fast moving places.

It's a paradox that some things don't really move quickly at all. Some of the policy changes and that, but actually day to day business is very short cycle, fast responsive, and multinationals have often struggled to match the pace of that.

[00:10:39] Mu: So some of the narrative that multinationals use is just an excuse and some of them are real.

[00:10:45] Andrew: Some of it is very real. And, you know, some of it is very real because they now have strong competitors. Some of it is very real because of government policy or uncertainty. And some of it is a narrative that says, Gosh, you know, this is really tough, how can I leave gracefully?

[00:10:59] Mu: So let's take a step back. I'm going to ask you a broad question. Do you think there's still money or business opportunity to be captured in China.

[00:11:09] Andrew: , the short answer to that is very much yes. There's a, there's a phrase going around some of the consulting firms have said publicly, " the next China is China is still China", and if you do the analysis of a China that's growing at three or four percent a year is still adding more demand than an India that's growing at eight percent a year, and so the numbers around, you know, the sheer scale of the Chinese economy mean that There's money to be made.

So there's a market, right? Is there money to be made by anyone? Can business earn a profit? Even one, two years ago, some people, not many, but a few people were questioning that. There were some memes going around in China, you know, do we need private sector anymore?

And, you know, the China, the big entrepreneurs is done and all the rest. And that, you know, was never really credible to me at the time, but people were, were talking about it. And the short answer, I think it's clear, there is money to be made, you know, companies can earn a profit in China and then the question becomes, well, can foreign companies earn a profit in China assuming they do things competitively?

And the answer to that is basically, yes, but obviously it depends upon different sectors and you know, no Chinese arms manufacturer is going to make a big business in the U. S. military market and, and equally a U. S. defense contractor is not going to make money in China. And the definition of those industries has broadened out these days with technology and digital, you know, there are some areas where foreign companies won't make money in China, won't be able to even compete. And there are others where they will make money and they're sort of doubling down and trying, trying to drive the business. And I'm thinking particularly of consumer, I'm thinking of healthcare. You probably saw the AstraZeneca acquisition recently of a cancer company in China.

[00:12:52] Mu: The main narrative that we're seeing, that, you know China economy is slowing down, it's harder to get do business in China, not everyone can make money in China. It seems that all these narratives come out in late 2022 and then 2023, but all the broader narrative and broader factors were in play decades ago.

Xi got to the top leadership in 2012 and then implemented a series of policies and talk about his thoughts. You wrote a book about "Xiconomics" and I'm sure you read his readings since years ago. And Trump were elected in 2017. So that triggered some deterioration of U. S. China relationship. But all these were started years ago. You are someone that's keeping close tab on China foreign business expert and economic expert. And then there's this mainstream media that come to recognition later on. But to you, have you changed your evaluation and overall framework about running business in China?

[00:13:51] Andrew: So, so firstly, I think you described it very well, that there is a fundamental core here, which has not changed. That has got very little to do with government policy. Obviously, policies and regulations always matter, but that's not sort of the core issue. In those sectors, which are open or where there were, you know, and including say automotive where there wasn't a recently the 50 50 JV requirement and so on.

So those, those sectors and consumer and, and, and, and farmer and all the rest, and even some capital equipment, what basically matters is do you have, as a company, is do you have a competitive offering in the Chinese marketplace? And to do that, you need to do something different. You need to do it better than others.

You need to be nimble and responsive and quick. And over time, Chinese competitors have become more and more capable. But people talk about that now. Yeah, but that was true 10, 15 years ago. We were, you know, we're seeing increasingly capable Chinese competitors. And that's been there all along and I guess what's changed, what is the next wave of that coming through with, say, the EV companies and the battery companies, that people are waking up a bit more. And then there's been, it's always been important to understand the political context, the role of the party, the ambitions of provincial governments, the ambiguous nature of some regulations and so on. In China, and that's always been there. One comment I saw was, you know, a lot of this stuff was being there, it's just people talk about it a bit more now.

And it was always important to sort of, you know, get a network of supporters in a, in a provincial location to, you know, that you're contributing to the economy, you're contributing to people. I think what has changed is the greater profile put on those things with Xi Jinping. And as you say, going back to Trump, you know, the talk in the book, you know, China or Xi Jinping has talked, talks a lot about self reliance and reducing choke points and dependence.

Firstly, that's not. Completely new, you know, you can go back to Mao and self reliance, and secondly, it's actually the path to development of most countries is that you develop your own capabilities. It's what the Koreans did, it's what the British did, it's what the Americans did, the Japanese.

There's nothing sort of unique about that. But it's also been shown to be very justified and reinforced after the measures on Huawei and ZTE saying, well, you know, we better be ready to, we don't want choke points and dependents, right? And now we have more export controls coming from the U. S. From the Chinese perspective, that makes, you know, a lot of sense to do that.

But that does change the dynamic for foreign business. You need to think, how do you fit in that? And I think the other thing, what the other has changed, I talk about is before foreign companies used to look at China and say, what's my risk in China? China's uncertain, things are changing. What's my risk there?

Now that China risk may be something happening in the US or maybe in Europe that Yeah, Xi Jinping and his leadership may be saying, please come to my country and invest. Instead, the U. S. government is saying, don't you dare go and invest in China. If you do, there's going to be some trouble. Or you've got shareholders who are saying, why are you doing business in China or whatever?

And so it's this interaction between geopolitics and the on the ground opportunity. I think that is different. And I think. There was a coming together and I, I would put it before 2022. 2023, I think goes it's, it is 20 20, 20 21. The, the, the sort of coincidence of two things, and I may be, I'll add a third, you know, the one thing is the covid is covid and so the end or, or at the end, very limited face-to-face travel.

into China which reduces the face to face information flows and sensing things, makes communication more difficult. At the same time as the regulatory moves on Alibaba and the other tech platform companies and the private sector education, which we can talk about some negatives about that, we can talk about some positives about that from a regulatory perspective.

But it was a shock which affected share prices, financial returns, created uncertainty about what are they really trying to do, how far will this go. And so you have this mix together of what looks like more uncertainty at a time when you can't go there and sort of see for yourself so much, and when not getting such clear answers.

And, and so in part, it's looking at this from the outside and saying, I'm not going to make big investment decisions in China unless I really have to, at a time when I can't travel to China and everything seems uncertain. And now, post COVID, reopened, the economy is still much slower growth. and people's confidence have been shaken, both consumers and Chinese private sector entrepreneurs.

And they're saying, well, you know, how's this looking up? And so I think that has changed. So it's really those three things. It's the underlying core of being competitive, which has always been there. It's the geopolitical context and moods, which move into things. And this, you know, in China, the articulation of security on a level with development.

And then what does that mean is more of a question. What does that mean? And then finally, the question of lack of information at a time that new policy changes because of COVID.

[00:19:05] Mu: Navigating the landscape, the policy landscape, is definitely a perceived challenge. But you, from your career, you had a chance to be, like, work with government official, actually very elite government official, from very early on

Do you? How do you find it? What's the level of difficulties to work with them now versus before?

[00:19:26] Andrew: So I, just to be, to be clear on that sort of question about can foreign companies make money in China? I think the answer there is absolutely yes. You know, not in every industry and not for every company, but there are already, and there will continue to be many companies making money in China. And it's interesting also when the American chamber of commerce you know, puts out a report, which has a lot of challenges with operating in China.

It's still typically reports that, you know, profits are pretty good. The China operations are as profitable or more profitable than the average of operations in other countries around the world. In terms of dealing with, you know, getting access to and the discussion with government officials, I think there are A couple of angles here.

I mean, firstly, the, the level of sophistication intelligence in a sense, just the smartness coupled with what you said about the practical pragmatism of senior government officials on the whole, I think is very high in China. I think what has changed.

One is for a while, the very senior leadership was less open to direct business discussions. And some of that is understandable as a country gets bigger and more sort of self reliant internally, maybe it doesn't need to do that. But that has changed clearly in the past. Year or so since last summer. That welcome is, is clearly there again. And we see Davos coming up as well. You know, similar, similar issues there about the Chinese prominence. And I think then at sort of the like senior provincial level, what we see is officials grappling with a range of problems around their own tax revenues for their funding and trying to, you know, balance this sort of security development. imperative with an approach that the provincial level still very much saying we want business. We want you to come in. We want to grow. They're very focused on that, but they're, it's become a bit more complicated because of this sort of balancing with security. Above all, I mean, I was struck, is a question of I think the messaging now and the genuine discussions in meetings is very good about, you know, we, we, we do want foreign business to come. We want to understand some issues, and do something about it. The challenge always is then implementing that into the day to day and avoiding sort of contradictory actions. And so I've had a bunch of companies say, you know, they go and have the meeting at a senior level. They're very clear they want the investment to come in, but then there's some one lower down in some part of China who's putting all sorts of obstacles in the way or asking for security checks because that's where they're coming from.

That's what they see as They need to do to, to cover up the line. And there was in the past week professor Yao Yang from Beida (Peking University). He had a wonderful phrase which he said the moment there's lots of positive lots of grand ambitions in China but not so much focus on implementation.

And that's a bit of the problem. I think the message is becoming very clearly from senior Chinese leadership. Reform and opening continues. There've been some regulatory changes that support that. There've been a lot of global CEOs coming in, big investments, but day to day life on the ground can still be quite cumbersome and getting, getting the message down is clear.

[00:22:42] Mu: WeChat payments, Alipay, being opened to,

to low, uh,

[00:22:45] Andrew: and that's a good example of the sort of positive thing of saying, you know, there's a very you know, it's big, China became more localized, partly because of the lockdown, again, there weren't so many foreigners around, and I experienced this in Korea as well, I spent time in South Korea, it felt more localized after COVID and then saying, yeah, you're right you know, we ought to be able to take international credit and debit cards on WeChat and Alipay, and now you can.

But there are, you know, probably a hundred things like that, that, that can be worked on. The visa free access to certain countries is a, another good move. I was talking to someone the other day about how Saudi Arabia has really streamlined all its visa processes and immigration. It's just completely changed the, the look and feel and spirit.

Whereas you know, 10 years ago, going to Saudi Arabia was a complicated process. I remember having to get the visa and being very complicated. Now, very straightforward.

[00:23:38] Mu: In your position, what would be your advice to Chinese government at different level for attracting foreign business in this country?

[00:23:45] Andrew: I think a few things. One is this, we started touching on it, but really Put yourself as the Chinese leadership, the government officials responsible in the role of the foreign company. So we, right now we've been talking a lot about understanding the Chinese context.

Well, the Chinese need to understand the Western context. What is the American context? What is the British context? I was struck years ago in Singapore, doing some work with Singapore government, and one of the senior officials said," are there any laws we should change? We want, we want to have more foreign companies doing business in Singapore.

And we want to understand how we should change our education system. Are there laws that are a problem? What should we do?" Now, that doesn't mean they're going to change them. It doesn't mean they're just going to do something because, you know, Google says do it, so they do it. But it's an understanding of what really matters and then you decide what you want to do.

And then, as I touched on implement some stuff. So I wrote something about a year ago about this question foreign companies have is, so how much risk is there really in China? You see the newspapers, raids on companies and people being arrested, and you also see Government officials saying, we want foreign business in China.

How do I make sense of that as a foreigner? It's, it's hard to understand. Well, the way to do it is to go in and have this conversation and then to respond. So when they say, hey, my people have problems spending money because we can't get on WeChat. Well, we fix that. And so that responsiveness is the way to build credibility.

And I think the final point, the final message is increasingly this is about private sector business of all kinds, chinese and foreign. So everyone's comfortable that the state owned enterprises have a good prospect in China. I think foreign businesses look just as much at how big Chinese private businesses are being regulated and dealt with as they think about their own prospects in China.

As, so it's not just a purely foreign thing as saying, well, is there a Back to the question, can we make money in China? Can anyone make money in China? Increasingly, that's been a very, very clear yes. But that is something that some of the more actually extreme or distant people were questioning about 18 months or so ago.

[00:26:01] Mu: From a perspective, I have perception that foreign business used to enjoy super nation super citizens premium treatment.

[00:26:09] Andrew: Yes, yes.

[00:26:10] Mu: Do you see that disappearing and actually foreign business? Were, were caught by surprise by this normalization

[00:26:16] Andrew: Yeah, I'm not sure they were caught by surprise. I write a bit about this in my book, Xiconomics. I say the foreign companies often talk about they want a level playing field in China. I sort of say, well, historically, I'm not sure it's ever been level, and do you really want it to be level?

And what I mean by that is, your point, in the past, foreign companies had a whole series of benefits in certain areas that Chinese companies didn't have. Equally, in some areas, they were not allowed to take part. And so they were at a disadvantage. So in some areas they had a super advantage, in some areas they were behind.

So, and, and, and, the discussion's always been what can, quite rightly, what can a foreign company bring to China? How does that contribute to China's own development, right? And that's moved away, and I think people accept that that's inevitable. And I don't think that's a big, big shock. Well, in all this, when I'm talking about it, I'm talking really about companies that are doing pretty well in China that understand China.

I mean, there are other companies who probably sit there still and say, you know, I've got this great product. It sells very well in the US. Why isn't it selling here if you want me? You know, there probably are some of those, but I think realistic, successful multinationals know that it's going away and it's a level playing field.

And I say it a bit tongue in cheek is what, if you want to succeed in the local context, then, you know, be like a Chinese company. And that does mean having party committees in your, in your organization, working with the party. It does mean understanding how local governments work and making sure that.

Relying there you're going to be maybe contacted in the same way as local companies are for additional payments and that so in some sense, are you a local company? And yet also and this is true the other way as well. This is true for you know, Huawei in Europe or something You're never going to be a completely local company.

And so what you are as a multinational, you need to be bringing something a bit different, which you can do because of your scale, because of your technology leadership or whatever. You always need to be bringing something a bit different to the marketplace.

[00:28:18] Mu: There's a few advice you can give, right to the Chinese government. Do you think your advice can get across nowadays versus decades ago?

[00:28:26] Andrew: I think in some sense, there's been a lot of work, about how the rest of the world is in some sense, less important to the Chinese economy. It's part of dual circulation with greater domestic economy. So in some level, the role of the foreign companies is not as critical as it was.

And therefore, the message can get across, it doesn't mean it's going to change things. I think there is a receptivity to get the message across. The challenge is always is, is the implementation lower down the organization? Now I think what again we have is, over time, more capable government officials. More capable competitors, more capable other options, Chinese options. You know, you can't just show up and say, I've got this wonder thing. Nobody else has it. There's likely a Chinese company that has something similar. So I think the message can get across. I think the question is what do you do about it?

And how effectively it changes.

[00:29:18] Mu: It's all about prioritization, right? Like you said, they

[00:29:20] Andrew: Yeah, exactly.

[00:29:21] Mu: A lot of local issues to deal with,

[00:29:24] Andrew: That's right. And, you know, it's a more complicated economy, right? I mean, it's a much, going back, this is 20, 30 years ago. It's not like, gosh, I'm the first foreign investor to come to this city of one million people and build a factory and you get welcomed. It's now, you know, there are 10 multinationals there and 50 Chinese companies and the city's now five million or one million and, and whatever, you know, so.

[00:29:45] Mu: Having that context also help make sense of a lot of things, right? 30 years ago, if you're bringing 1 million dollars to, in China, that's a big deal. But now it's like a small change for, for many of the cities or provinces.

[00:29:56] Andrew: And that's, that's one of big things again in sort of communication and understanding that is tough is the, you know, the experience of a Chinese person, be they, what are the 30 years old, 40 years old, 50, 60 years old, what has the change in their life been like in terms of wealth, in terms of connectivity to the world?

And so on, compared to an American or a British person, you know, American British person had 2 3 percent growth, China's had 8 10 percent growth a year it's a very different life experience, right?

[00:30:28] Mu: I'm 36, 37 now. It's crazy. Like it grew up in poverty. And then looking into Hong Kong, I was looking into Hong Kong. I was like, okay, this is fancy. And that's my teenagers. And then I got to, you know, go, went to Singapore for high school. That's like, I feel like that's 20 years ahead of China back then.

And then when the U. S., there's like, okay, now China, U. S. gap is like 10 years or five years. And now it's like China is leading Hong Kong and Singapore in many things, the reference scale just changed a lot. Yeah.

[00:31:00] Andrew: That's very hard to communicate. In the Western phrase, the lived experience, the experience people have is very hard to communicate. And also then just to think about the, the large numbers of people, the whole population, right? So there's somebody, you know, middle income person in Hunan province or a middle income person in Wyoming. Their knowledge of one another is very, very limited. And what sort of experiences they've had and how they therefore look at things. And more practically, if you're a business leader, right, you've been running a sort of business unit in Texas for the 10 years, running a business unit in Tianjin you've very, very different market circumstances.

[00:31:41] Mu: So you mentioned that too, like you, in your book, you say that, you know, in the West, typically people are focusing on the richest 200, 300 million, you know, population in China, but not the rest of China. Yeah. For you, how, how, what do you do to help you get comprehension of the rest of China?

[00:32:01] Andrew: I mean in terms of me, I'm not sure I have that much comprehension of it. I did work in micro lending, I remember in Sichuan Province years ago, and it's actually an interesting story linked to this question of words and understanding.

I worked for one of the big global banks about 10, 15 years ago on rural banking, and this was a great opportunity because Foreign banks were allowed to have 100 percent ownership of those rural banks.

And we were saying, what does rural banking mean? They had a license of rural banking. This rural area, rural countryside, as you know there's a Shanghai Rural Bank as well that this area where we were working had a population of two million. One million people lived in a city, one million people in the countryside.

There was some rural activity, you know, they grew mushrooms and they exported mushrooms but they also had an aerospace company. And so this idea of rural, at some levels, is still a city of a million people, which is the size of the second largest city in the UK. And then did have some real countryside as well.

And as you know, in Chongqing or something like that, there's a Beijing in this farmland and all the rest within the city boundaries. Basically all you can do to understand it is travel around a lot. And I guess be appropriately humble about what you don't know. I mean, I think the answer is not really to try and understand everything.

It's to say, I don't understand everything. If I'm going to try and compete and do business in some of these areas, it's a very different market. You know, if you're Coca Cola, say, and you're, you really want to be everywhere in, in China how do you get into those places? And what are the companies that work there, but they're very different. I remember I did a lot of work in financial institutions in China. We'd go to by no means the countryside but the cities the million two million people tier three tier four cities and They would say, you know, we we don't need you guys and it's totally we don't need you the British You know the foreigner we don't need these consultants from Shanghai.

You don't understand You're from Shanghai. You can never understand the way we operate, you know, it's

[00:34:01] Mu: You are quite "bu jie di qi" (不接地气), call it you are not down to earth.

[00:34:05] Andrew: that's right.

[00:34:07] Mu: I think there's a lot of takeaway for foreign business they're trying to get in China, but to, to summarize, what are the one to two advice you give to foreign business now going ahead?

[00:34:17] Andrew: I think firstly you need to spend a lot of time on the ground in China sort of seeing it, feeling it, talking to lots of different people and trying to really understand this broader context trying to understand how things have changed, how they may change, and not just look at it from a distance.

It's not going to work. It's going to get caricatured too much. And you need to have this mixture of, in a sense, learn from some of the best parts of China, as it were, which is a great pragmatism. I think this sort of humility I was touching on that there's so much one doesn't know. coming in as a foreigner.

But you need to be confident. I mean, you can't go around saying, sorry, I don't know anything. Please help me. You need to be very confident and clear about what you're actually bringing yourself and very realistic about that. And then you need to go ahead and commit. You need to, either do it or don't do it, but don't just spend all your time thinking about it because things move quickly.

I remember having a client years ago that was looking at getting into the asset management market in China. And we did some work for them. And one year later we came back and a colleague, she said Oh, so what's changed in China? What's changed? And I said, Well, nothing's really changed. You know, the regulatory market hasn't changed.

It's just the economy is 10 percent bigger. The price of doing a deal has gone up 20%. But nothing's changed. It's just everything moves quickly and you're spending your time sitting there and not deciding. So if you're going to succeed, you need to decide to do it. If you think it's too difficult, don't do it, but don't get involved in some long, complex process.

And then finally, I would say you do need to be very clear about risks. And I, I would say stress test all the risks. Think about the worst things that can happen. But those things might be happening back in America or Europe as much as in China. Because of some government policy change or some scandal, some press report about your business, which gets out in, in Europe, you know, that that can be a risk just as much as something may happen in China, which it's not good.

[00:36:13] Mu: Reverse headline

[00:36:14] Andrew: Exactly. And you learn how to deal with it, and you've got to deal with the often education, you know, maybe certain investors about why you're doing it or the limits on what you're doing and whatever, because there is a real tension that, you know, China's increasingly different and local, and you've got to adapt to China.

But if you're a foreign company, you've got to adapt to China and do that to succeed in China. And you've got to comply with you know, audit, risk compliance, all the rest as laid down in US or European corporate governance codes and so on. So, you're pulled in different directions sometimes.

[00:36:46] Mu: Can you share an example just to dive deeper about pragmatism, and humanity on dealing with governments?

[00:36:54] Andrew: It's hard to give an example of humility. It's more around going and saying, this is what I can do. Being quite, it's, it's not having the b******t in a sense, right? It, it, it's going and saying, look, this is what I can do. This is what we are going to do.

We're going to bring this technology or something, or we're going to create this many jobs. And we'd like some support for that. It's not even just with the government officials, it's internally saying, look, we've got, you know, three competitors out there, or maybe it's 30 competitors in China.

And are they better than us or not? What can we do that's different?

I mean, one, One story from probably 10 years ago now or so was a business printing company that makes, makes business cards and other things like that. And they'd expanded all around the world, very successful Western company. And they said, we want to come to China. And can we, you know, does this thing work in China? And in the end, what we found was there was a Chinese company that had already taken a look at the Western company and said, we want to do this in China. And the guy literally had, you know, the, the photo of the CEO up on his wall. And in the end, the Western company invested in the Chinese company.

Rather than saying there's nobody there and nobody can do it, it's where am I, my hidden competitors? Where are the people who are doing this already? And what do I have that is really good? You know, I can't just say, Well, I've been in this for a long time in America, therefore I'm better. I need to understand what's really happening. And that's, that's the humility, the confidence.

[00:38:20] Mu: I think, yeah, I can echo with you on that, right? Because last year and the year before I had to deal with local government for negotiating, supporting policies for, my data firms. I have to read a book called "zhi shen shi nei"by an alumni of mine. What he point out is that there's KPIs for local government officials. They have a pretty good level of professionalism, and they will talk to you, say no b******t, and talk to you how much, what kind of stuff you can bring that fits into my local policies. My industry growth and my industry plan, yeah.

[00:38:52] Andrew: I did some work on that a few years ago with one of the Hong Kong based think tanks and they were looking at this question and multinationals were saying, and this is across Asia, not just China what do you want, you know, do you want You know, big foreign direct investment dollars.

Do you want job creation? Do you want tax revenues? You know, tell us your metric and we can sort of design our project so we do what we want. We may get our manufacturing plant going or whatever, but also it hits your KPIs too. And just being very, very, you know, pragmatic about that. And then of course that begs the question does, you know, do you have the right KPIs and do you need to talk in Beijing about adjusting local government KPIs?

Are they going to? Change them to be more, you know, climate friendly or something, who knows. But, absolutely, how does this actually fit? And if you think about, there was a Netflix movie, I think it was, May, was it, 2015? I can't remember. Following a Chinese mayor going around the day to day life of the Chinese mayor.

And again, it's very, compared again also, I think, to some Western mayors and similar roles. Very practical, very hands on, sort of, here's a problem, how do I fix it? Here's a problem, how do I fix it? These people need to move. How do I negotiate here? How does somebody else help me there? And that is underlying a lot of what happens in China.

[00:40:06] Mu: This is being very helpful and, and rational understanding of China, but it's also rare in the Western community to have views like yours. Have you ever been called a panda hugger? How do you maintain this kind of view and promote your views?, how to get it across in the Western community? You find it hard?

[00:40:26] Andrew: When one spends time with people looking at China or in policy, and I'm saying British government or the think tank, well, not so much, because that then is also where there is a logical balanced discussion.

I've had engagement with people who look around, they say, you know, we want to understand China. We want to understand miscommunication so that we don't get into a security conflict because of miscommunication. But more broadly, yes. I mean, I thought, you know, I lived in China up until 2012 and that was in Korea, then came back to the UK. I articulate a lot in a sense, why people in China do what is happening in China, or the book on Xiconomics, talks a lot about here are some articles in Qiushi, or speeches that Xi's made, or statements made by, and, you know, there is a logic to this. And.

One can debate whether or not that's a good thing to do, whether it's what you should do in Britain or in France, but it is a logic. It's not it's not just random thinking. There's something there which is very good to read about, right? And so you have to sort of be careful at times and say, this is how it works from the Chinese perspective.

It's like the same thing about Self reliance, right? I mean, one can debate as an American, I'm not an American, but as an American, one can debate whether or not we should be putting export controls and advanced semiconductors to China. That's completely different from if I'm Chinese, and I think that might happen, what do I do?

I need to get prepared, right? And, and so I find a niche understanding both those perspectives. I was asked at one point in a meeting recently about what I would recommend about, I can't remember what the topic was, make a recommendation about policy on something.

And I said, well, you know, I, I have a personal view about what makes sense. But whether that's what's right for the British government to do, I don't know. We need to figure out all these different aspects. There's so many different angles. And if I was the Chinese government, I'd have a different view, little bit of being a management consultant and then sort of taking that to the the national policy level. But I was on a panel once with a reasonably prominent UK politician. And. I made the comment that the U. S. had been very concerned about Japan's rise in the 80s and there'd been a lot of anti Japan feeling and all the rest, so I said, you know, what I think is important to disentangle is China's Great economic growth.

It's the largest country in the world in terms of population, India a little bit, but much, much bigger than the US economy growing very strongly. That is an economic fact that is happening. And America reacted to Japan in one way. Japan wasn't a communist country. There's no communist party leading the Japanese government.

They still, the Americans were still not happy about what Japan was doing. So to disentangle the, the party situation from the size of the economy situation. And this politician said, that's the difference between you and me, Andrew. I cannot disentangle for a moment that China is led by the Chinese Communist Party and that shapes everything that they do.

I cannot separate those two issues. At that level, it's hard to sort of engage with because we could have another discussion about the role of the party and governance in China and all the rest. And that's a discussion that's very hard to have in the UK. The economy is a much easier topic.

[00:43:29] Mu: China is actually practical and not ideal, not much ideological

[00:43:32] Andrew: Yeah, absolutely. Absolutely. No, I think that's right. Completely right. And, and, and, I mean, Jörg Wuttke, I mean, you know, you put this out, but Jörg Wuttke of the European Chamber and all the rest, you know, says the issue in the past couple of years has been either the fact or the perception that China has become more ideological, and that's what's causing the problems.

But I, when I was living in China, we always used to say China is much more practical and the West is much more ideological.

That's the thing that strikes me the most is from the senior Chinese officials. I haven't gone to the very top, but it's this mixture of, you know, smart insight on the whole, you know, sort of logical, well educated, a lot of people I dealt with speaking very good English, globally educated as well but then a sort of pragmatism and a very sort of tough edge to them. So, you know, get this done, just do it, work hard, no slacking, you know,

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