Chinese Rules

Tim Clissold's Mr. China, released almost a decade ago, is one of the great books on China's rise as an economic power. An in-the-trenches account of the business boom that he was in the belly of during his more than twenty years there, Mr. China was an international bestseller translated into twelve languages and was one of the Economist's books of the year in 2004. The growth of China hasn't slowed much since then, and Clissold is now back with a new book, Chinese Rules: Mao's Dog, Deng's Cat, and Five Timeless Lessons from the Front Lines in China to update the situation.

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I often looked out from the hill as the first rays of sunlight
struck the corner watchtowers on the Forbidden City below.
In the 1980s it was easy to imagine that Beijing
had hardly changed since imperial times. ...
But if you were to go back to that hill and look out over
the great city today, you would find a very different sight.

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There are five "Chinese Rules" described in the book.

1. How Can We Go So Far as to Change the Regulations of the Celestial Empire at the Request of One Man?
2. The Long-Divided Shall Unite; the Long-United Shall Divide.
3. The Art of War Is of Vital Importance for the State and Should on No Account Be Neglected
4. Chinese Rule: Cross the River by Feeling for the Stones
5. Know Yourself and Know the Other and You'll Survive a Hundred Battles

To get you started, we asked for an excerpt from publisher, and they were kind enough to oblige. It is an just a small example of the wonderful strytelling that envelopes the very real, substantial real-world lessons in the book. The following excerpt comes from Chapter 2: A Tree May Grow to a Thousand Feet, but the Leaves Still Return to Their Roots. If you would like some more the book is on sale today, so pick up a copy online or head to your local bookstore after heading to the polls today.

I first arrived in Asia in the eighties after I was posted to Hong Kong from London. I'd never been there before, and from the moment I stepped from the plane and through the wall of dense, wet heat, I knew I was in a different world. Giant Chinese characters shone in neon lights from the tops of ten-story buildings. Wherever I looked, there were people hammering in tiny factories, unloading from boats, bargaining in alleyways. Office workers sat crammed into dumpling restaurants between stacks of bamboo steamers. The streets reeked of dried seafood and Chinese medicine and the air was filled with the honking of taxis and clattering of trams. I had no idea that such a concentration of human life could exist in such a state of perpetual motion. The intensity of life in Hong Kong was something completely new to me. Almost immediately, I felt drawn to China.

The following year, I quit Hong Kong and found a place at a university in Beijing to learn Mandarin. It was the year after the tanks had rumbled onto Tiananmen Square and there were almost no other foreigners around. At first the students there sought me out to practice their English, ignoring the bizarre rules about "spiritual pollution" that were meant to keep us apart. But their English was so good that I felt awkward speaking Mandarin with them, and so I started spending more time away from the university, in places where people knew nothing of foreigners. After a while, I could manage simple conversations and slowly grew to recognize the Chinese characters on the shop signs and the notices around me. I found my way more easily through the tangled network of old hutong alleyways that spread around the old imperial buildings at the center of the city. I often went back to Coal Hill to find the calligraphy man practicing his characters with his water brush on the dusty paving stones. He would write out characters on the stones at his feet while I tried to catch the meaning of the flowing brushstrokes before they began to fade and disappear.

My student days were short-lived and I soon joined an investment firm run by a Wall Street veteran who was building the first large foreign direct investment business in China. Over the period of a few years, he'd raised $400 million and pumped it into twenty factories across China, ending up with nearly twenty-five thousand employees.

The speed of China's development in those years was difficult to take in; around the Yangtse and Pearl River deltas, shiny new cities rose up out of marshlands in just a few months. Little fishing villages became gigantic container ports, hydroelectric dams choked mighty rivers, and four-lane superhighways were blasted through rock faces. For more than a decade, China existed in a state of supreme upheaval. The government fought to maintain order as it embarked on a program of massive reform, removing the props of the command economy while billions in foreign investment poured into the coastal provinces. As China awoke from a century of slumber, deep within the interior 150 million workers rose up out of the country villages like a tidal wave and swirled toward the coast.

Many of the factories we had invested in were in remote regions of China, where central authority was weaker. "The mountains are high and the emperor is far away," goes the old provincial saying about the distant authorities in Beijing. The country is too big to be controlled from a single center, and unless events catch the attention of Beijing, local interests can often take over. We became embroiled in unequal disputes in far-flung places. Land was transferred out of our joint ventures to prop up loans for other local businesses. Bank transfers and capital investments were made without approval, cash was stuffed into safes in back offices with no records, and contracts were routinely ignored. For a long time, it looked as though we might lose the investment.

It took years to sort out the mess, and during that time, I traveled to almost every province in China. We had strikes and lockouts, sieges and court cases, and had been pursued across the country by officials with writs and freezing orders. But gradually, over a period of several years, the relationships with our Chinese partners smoothed out and the businesses started making money. We got better control of the assets and sales started to grow on the back of the China boom. Most of the investment was saved, together with the jobs of the twenty-five thousand workers, but after nearly seven years in the combat zone of Chinese investment, I was exhausted.

I needed some time-out to think.

Excerpted from Chinese Rules by Tim Clissold.
Reprinted courtesy of Harper, an imprint of HarperCollins Publishers.
Copyright 2014 by Tim Clissold.
All rights reserved.

ABOUT THE AUTHOR
Tim Clissold has lived and worked in China for more than twenty years and has traveled to most parts of the country. After graduating with degrees in physics and theoretical physics from Cambridge University, and working in London, Australia, and Hong Kong, he developed a fascination with China. He spent two years studying Mandarin in Beijing before cofounding a private equity group that invested more than $400 million there. He has since spent time at Goldman Sachs recovering distressed assets and, more recently, started a business that invests in projects that reduce greenhouse gas emissions in China through the UN's Clean Development Mechanism. Mr. China was his first book. It has been translated into twelve languages and was an Economist magazine Book of the Year.