塞翁失马, The old man loses his horse

What’s a contract? A legal act that creates obligations? Certainly! What’s the use of a contract in China? We often hear that contracts are not respected in China. Personally, in twenty years, I haven’t encountered this kind of situation. Am I lucky? On the other hand, the contract does not lock you in China; it can evolve according to the situation.

An excellent contract

Let’s start with a real-life example. In 2010, to the delight of a French company, a Chinese luxury group signed a 10-year exclusive distribution contract for the Chinese territory. The agreement has just been renewed. In the first two years, the business had flourished, Chinese sales generated 30% of the French company’s turnover, and the network was developing at breakneck speed in China.

The situation is changing

But at the end of 2012 saw the start of an alleged campaign against corruption and the luxury and high-end sectors suffered. Within a few months, sales slowed down, turnover per store dropped, and profits approached zero. The group, which was preparing its IPO, was very attentive to profitability. For two years, the Frenchman had enjoyed a comfortable income, given the size of the orders and the high prices he had charged (we learned much later…).

The contract changes?

The Chinese side, very lucid about the Frenchman’s profits, wanted to review the terms of the contract – royalties and prices. The speech was simple: “We are partners. When the market is easy, we all win together, but everyone has to make an effort when the difficulties come. »
Among my various roles, I was the messenger; I was the Chinese part as well. The leader of the South of France, whom we will call David, immediately brought out the scarecrow of the broken contract. I had to use arguments, and David quickly understood where his interest lay. It was better to give up a small percentage and keep the goose with the golden eggs, even though fewer eggs, especially as the European market was suffering. To convince, I had taken two elements from my Chinese “training”.

The 得失 déshī (get-lose)

What would the Frenchman have gotten from 得 by staying on his positions?
Maintaining his comfortable margins.
What would he have lost 失? The growth in turnover. With low profitability, the Chinese would have bought less from the Frenchman and would have found cheaper alternative sources of supply as allowed by the contract. In the end, the group would have been able to stop distribution. The loss of the best customer, who continued to account for a third of revenues, was possible. David was fully aware of how lucky he was to have such a right partner who paid for everything with a credit letter. Finding such a client is not easy in China.
David quickly realized where the balance of gains/losses in the event of a breach of contract tipped. I also had to explain how we have to adapt to changing circumstances. And what may seem beneficial is not necessarily helpful.

成语 chengyu proverb 塞翁失马 sàiwēngshīmǎ which corresponds to “A loss may turn out to be a gain; a blessing in disguise”. Literally, the old man of the border loses his horse.

Chengyu proverb chinois卧薪尝胆, Lying on straw, tasting gall bladder.

A well-known story, which gave rise to a Chinese proverb, illustrates very well the awareness of change in Chinese psychology.
An old farmer lived near the border, so he was nicknamed the old man of the border. The horse was an essential element in the life of the farmers. One day he lost a horse. His neighbours came to console him. The old man replied, “Who knows if it’s good or bad? ” Later, the horse came back with a wild horse. His neighbors congratulated him on having a second horse. He replied, “Who knows if it’s good or bad? “His son loved that horse, and one day, while galloping, he fell off the horse and broke his leg. The neighbors came back and the old man answered again, “Who knows if it’s good or bad? “A few weeks later, as war broke out, all the young men were enlisted except for the son on one leg. The neighbors returned and the old man, calm as ever, answered again: “Who knows if it is good or bad? “A few weeks later, as war broke out, all the young men were enlisted except for the son on one leg. Many died, the son remained alive.
The story gave rise to a chengyu/proverb 塞翁失马 sàiwēngshīmǎ which corresponds to “Something bad is good”. Literally, the old man on the border loses his horse.

It’s always easy to get out of great generalities by saying that the contract is more binding in a western country. It should not be forgotten that the deterioration of the market can turn a good customer into a bad customer and this is a law that can be extended to many countries. At the same time, change is an unavoidable point in China; sometimes, it can be 180° if the situation requires it. It’s occasionally confusing, but you have to know it and be ready for anything!

Articles on Chinese characteristics here

22 July 2020

Thinking (in general, and about China in particular)

Article written by Stephane Baillie Gee, Complexity management Consultant 

In all its dimensions (surface area, population, economy, history, aso.), China is “enoooooormous.” How do you chew such a big chunk? The simple answer would be: “one bite at a time.” Except it’s not that obvious. Here are some reasons why.

The bell curve

Many things on our planet follow a “normal” distribution that’s also called the bell curve. Let’s not talk about China, a tricky subject if ever there was one, but about the size of human beings. On average, it’s about 1.65 meters. Now, imagine yourself in a conversation where you are relaying this information. How long do you think it will be before someone tells you (sometimes in an accusatory, triumphant or disdainful tone) that you did not mention basketball players? In a pleasant disposition, you add them to your description. But how long do you think it will be before someone brings up the topic of Snow White’s friends? You see the problem.

General and particular

Talking about China is the same thing. You say a generality, and you’re going to get a rebuke from the neighbor, whose son–who happens to be a sinologist–lives in a district of Guangzhou where it’s not as you say. We must learn how to navigate between the general and the particular. Remember that the individual occurrence may be counter to the general, but that doesn’t change anything. I have had this kind of conversation with Chinese colleagues on many occasions. I would ask them how they do things in China, and the answer invariably was: “You know, there are one point four billion of us, so it depends.” It’s very frustrating for a westerner used to be expecting certitudes.
As you get used to it, you realize that, yes, it depends, “and” (not “but”) still, there is a trend. That gives an idea of the culture. One definition of culture that I like is “that’s how we do things here.” But it’s also a story about Russian dolls: the people from Xintiandi in Puxi (left bank of Shanghai) are not the same as the people from Jinqiao in Pudong (right bank). So now we have to choose, we want the pedigree of all Chinese people or a generality which, by definition, will not be able to describe all its exceptions (and does not even try)? Let us not waste our time trying to fit the particular in the general and vice-versa.

chinese population distribution

Generalization and stereotype

Also, it is essential to understand the difference between generalization and stereotype. The first one is the application of a “rule” for practical purposes and speed. But, and this is a big “but,” with flexibility and adaptability. More than a rule, it is a rule of thumb. I see an Asian guy in a Chinese restaurant, so he’s Chinese: fast, practical. But then he speaks Korean, so he must be Korean: flexible and adaptable.
Stereotypes are the “quasi-ideological” application of the same rule. You know, in life, there are two types of people… Etc. Addiction to categories prevents us from navigating delightfully between micro and macro, general and particular, everything and its opposite.
There are other traps. You may consider the addiction to knowing better than others. That craving may be imaginable with Bordeaux wines (I say this because I don’t know anything about it). Still, I don’t believe that is possible when China is the topic.
To reach the goal of knowing better than the others, it is often sufficient to show that they have no knowledge on the topic, i.e., “making them look stupid will make me look good.” The toolbox is vast, including all the logical fallacies like: “How dare you quoting so-and-so, he was an alcoholic!” Uh… yes! Or, “Everyone knows that…!” Er… no. I’ll leave it up to you to do your research on the subject.

Robinson Crusoe’s syndrome

Finally, there is an ailment specific to foreigners in China. It had been described to me as a variant of Robinson Crusoe’s syndrome: “I am lost in China; there can only be one of ‘me’ in China.” If you have wandered a bit around the Middle Kingdom, you may have come across a “laowai” who was looking at you sideways for no other reason. Because of you, he was no longer alone in China. Don’t worry, the moment you went back home, he again became “the only one” to be able to talk about China.

As I said at the beginning, China is “”enooooooooormous””, so rather than wanting to be absolutely right, let’s remember that story where an elephant is brought to a village where no one had ever seen one. At nightfall, some of them slipped into its enclosure. The morning conversation: “it’s a pipe that goes up to the sky,” said the one who had touched the trunk. “No, it’s a huge column,” said the one who had found one of the legs. “Poor you, it’s a sail,” said the one who had been near its ear.” I hope that got you thinking about China (and about thinking in general).

Double Chinese-Western incomprehension

Chinese medicine is an exciting field, it had motivated my decision to learn Chinese, but the whirlwind of life took me away. I came across Eric Marié’s enlightening videos, and one of them evokes the misunderstandings between two worlds, China and the Western world.

The professor explains the 17th-century reaction of Chinese doctors to Western anatomical charts and representations of the human body, as well as Western perceptions of Chinese achievements.

chinese anatomy human body chinese acupuncture

Western reactions

The Chinese illustrations come from a treatise on acupuncture and moxibustion -針灸大成- published in 1601. The first plate shows the system of organs and bowels, and the second shows the distribution of the meridian system in the human body. Westerners thought that the Chinese knew absolutely nothing about anatomy, that the distribution of organs was unrealistic and inconsistent, that they were very bad at figurative drawing. On the second image, they saw an orangutan instead and fond the proportions used ridiculous with lines and dots that did not correspond to anything.

human skeleton human body anatomy human skeleton human body anatomy

Chinese reactions

The western anatomical plates came from a famous physician’s work to the French kings, Ambroise Paré, from the end of the 16th century. The Chinese saw a skeleton in a garden and a lively skinned man and did not understand how a man without skin, without flesh, could be alive and working. They found these patterns absurd and concluded that Westerners knew nothing about the human body and medicine.
Both sides abandoned the representations of the other.

Double incomprehension

The Chinese didn’t make an anatomical chart but made an explanatory diagram. In the absence of a real dialogue, this double misunderstanding has persisted, and there is still a part of Western medicine that does not recognize the interest of Chinese medicine.

In all fields

This episode is one example of misunderstanding between the two worlds, and no area is spared, even at the political level. I have spoken several times on a Western arrogance subject that quickly thinks it knows what China is like. This lack of humility sometimes leads to glaring failures. At the political level, the United States has long believed in certain Chinese docility, see the article on the lost bet. A White House adviser acknowledged that the policy towards China was the biggest fiasco since the 1930s. Are these misunderstandings not due to human nature? When the ego gets involved, the same misunderstandings exist between two people from the same family, two friends, two colleagues, two neighbours, and many others.

Article on the speech of the White House Counselor

Video of Eric Marié

13 July 2020

What happened to the gold in Wuhan?

The Kingold Company, 金凰珠宝, of Wuhan, listed on the Nasdaq, is in turmoil. It had pledged 83 tons of gold as part of a loan from financial institutions, but nothing went as planned, and the gold disappeared or may never have existed!

A great actor in gold jewelry

Kingold was born in 2002, and on August 18, 2010 (two 8s in that date, August is the 8th month!), the group entered the Nasdaq. The company is one of China’s largest manufacturers of gold jewelry. Its sales in 2018 were $2.446 billion, and net income was $49.5 million. For the year 2019, only data for the first nine months are available. Is this normal? They show, over this period, a drop in sales with only 1.443 billion.

The loan

To meet cash requirements, the company took out a 160 billion yuan ($22 billion) loan in 2019 from a pool of nine financial institutions. The information released is not yet very accurate and differs. The Chinese media report that after the difficulties of the second half of 2019 and the health crisis, several institutions wanted to ensure the quality of the gold and… Surprise! The first tests on May 22 revealed that the ingots did not contain the precious metal. According to various testimonies, this practice of the owner of the group is not unknown in Wuhan, which explains why most of the lenders are not from the region, such as the trust company of Dongguan.
The lenders had taken out a double insurance policy with gold as collateral and an insurance subscription. But, according to initial reports, the insurance could not cover this kind of disappointment.

gold in china

More grey areas

Journalist Wang Jian comments on little information that falls within the judiciary’s purview, but the size of the case is sobering. He points out that China’s national gold reserve is 1,985 tonnes, and annual production is 380 tonnes. Eighty-three tonnes represents more than 4.5 billion dollars. This is no small matter.
The so-called gold was kept in banks. Insurers, financial institutions, banks did not carry out controls… Who took responsibility for going into such an operation? The company with the cooperation of insurance employees? Wang Jian notes that this kind of activity is representative of the state of corruption in banking and financial circles and is reminiscent of specific sectors’ bubble state. Kingold initially set out to buy out a state-owned company in 2002 using a loan and financed itself with unreal gold. A deal that is not going to restore the image of Chinese companies listed in the United States. The share (code KGJI), which had already lost more than 50% since October 2019, yesterday dropped 23.77% on the Nasdaq to finish at $0.85. The share is now traded on the Nasdaq.

To follow, other revelations will undoubtedly bring more precision. The Wuhan government has formed a special team to find out all the ramifications of the case.

Articles on finance here and economics here.

Sources consulted:

Wang Jian, 中国爆出300亿假黄金惊天大案/王剑每日观察

假黄金换百亿融资 武汉金凰什么来头?

30 June 2020

Man 人 + man 人 + man 人 = ?

人 man is one of the first characters you learn; it is simple with its two strokes and reminds you of a person with both legs or a man in profile.

man Chinese  人

In the simplified version, the two characters repeated to form one, 从, gives a mnemonic to remember this new word that means to follow. Indeed, a man follows another man: 从. ( This character has other meanings too).

Follow Chinese

When you have three times this character in the same character 众*, it’s a lot, and the composition gives the sense of the crowd.

crowd in cinese

With tree 木 (already seen in this article), the logic helps because two trees 林 give a wood or a grove, and three trees mean a forest 森. A forest is bigger and usually includes more wood!

This logic does not work every time. The mouth 口 (which we have already examined here), when repeated twice 吕 is a surname repeated three times 品, the character means the article or enjoy. You can meet people who are called 吕品. So they are made up of five mouths. I know a 吕品 in Changchun, he doesn’t talk more or drink more than the average!

If you prefer more complicated characters, 赢 will please you, see here.

The traditional form of 众 is written like this 眾. Using the primitive spellings, we can see an eye or, according to other versions, a sun. Note that the simplified version exists since very remote times, 众est since the Shang dynasty (1570 – 1045 BC), a family name.

23 June 2020

Fictional sales, it hurts!

The legal arsenal has made considerable progress in China over the past 20 years. The tax authorities have also improved their ability to collect taxes. Digitization has even accelerated the process.  Owners of online shops on the Jindong or TMall sites have bitterly noticed this.

Tax adjustment

Many bosses have received a letter from the local tax authorities asking them for an additional settlement based on the sales figures registered with these platforms.  An article on the website 中国基金报 reports that the Beijing government have already notified the adjustment to 2000 companies, which have to pay unpaid VAT and profit taxes.

Fictitious sales

fictional sales in China 刷单

These entrepreneurs find themselves trapped by their technique to stimulate sales of a product. Tactics “borderline” to promote an item or brand proliferate. For example, as early as 2017, in the face of fierce competition on the Internet, some were using fictitious sales (刷单) to get their products to move up the sales rankings, become best-sellers (爆款) and gain notoriety. For a false transaction, a purchase, a sale, a transaction, and a delivery are registered. In theory, this sale has to be declared, but as the controls were not strict, the entrepreneurs could continue their practice without any worries, even if the platforms forbid such fun. In department stores, brands also use a similar technique to keep their location in a department store when in their contract there is a minimum sale. At the end of the term, in case of low sales, the brand will be able to “make sales” to reach the required threshold.  The Internet store owners have to pay their tax liability based on the recorded sales – fictitious or real! That hurts!

The fact that government revenues for the first five months of the year are down 14.9% may be related to the zeal of some local governments. We find the money where we can! In any case, the road to consolidation is open, even if it is a long one.

Article on public revenue.

21 June 2020

Eye 目 + to die 亡 = ?

In the series on the eye 目 mù, what can the formed character of the eye 目 and 亡 wáng ( meaning to flee, to lose, to die) mean? Simply blind.
The blind is indeed the one who has “lost” his eyes, or rather his sight. 亡 is above the eye 目 : 盲 máng.
We can notice that 亡 wáng also serves to provide a phonetic indication because the compound character has a sound close to máng.

Chinese character blind mang盲

Related articles: The characters with eye 目
The Chinese language

13 June 2020

The welcome in China

We can be quite amazed at how welcoming Chinese people are when receiving foreigners, be it business partners or friendly acquaintances. We like to repeat that the Chinese are good hosts (中国人好客!) and this is not just a cliché. I was working with a French company in the South of France and on their first visit to theirChinese partner in Wuhan, the owner said to me: “We’ll have to make sure our welcome in France will be up to Chinese standards!”. The Chinese had prepared a welcoming arrival worthy of a president, from the airport all the way to the hotel. The businessman had spent three royal days! An art in its own right! I never delved into the origins of such habits, I settled for the rather simple explanation from a teacher, who linked this attitude to Confucianism and the famous exclamation in the Analects : “有朋自远方来,不亦乐乎? Isn’t it a joy to receive a friend who comes from afar??” This is certainly part of the explanation.  

This is certainly part of the explanation. I am sharing below the story of a friend who had a beautiful experience on a train. Quite an amazing story! 

accueil chine

Damien’s story:

3 days, 3 years!

July-August 1992, I have to spend a month in China for research on a thesis about an unlikely subject, the immigration of Russian Orthodox in China.
On the 3rd day in Beijing, I was supposed to take a train to Xinjiang and find my way back to Europe, but on that 3rd day, I met my wife. So I didn’t stay 3 days in Beijing, but 3 years.

Beijing-Wuhan: Food, drink, a hairdresser!

I was a student and I had a student budget, so I had to find a job. My visa had already been granted a few short extensions and in October, I had to go to Hong Kong to get a new visa and, at the same time, hope to find a French company that wanted to open an office in Beijing.
I couldn’t afford the plane, so I decided to go by train. It was impossible to buy a direct ticket from Beijing to Hong Kong/Guangzhou. The train station employee told me: “First buy a one-way ticket to Wuhan and once you arrive there, you have 30 minutes to buy the Wuhan-Canton ticket. Then from Canton, you can take a train to Shenzhen”.
The first Beijing-Wuhan part of the trip goes well in 2nd class (with “hard beds”) where everyone offers me food and drink. The hairdresser on the bed below mine would have liked to have a foreign boyfriend. A “capitalist” explained to me that he had just bought his first car in Wuhan and that I was invited to the house; “Now foreigners can be received in Chinese homes, it’s opening up!”

Wuhan-Canton with two Cantonese and a hoarse accent

The train arrives on time in Wuhan and I buy my ticket to Canton, first class this time. I find my cabin with 4 comfortable beds, which I shared with two other men.
After the courtesies, they tell me about their life, they are fruit farmers in the countryside, about 60 miles from Canton. The one with the big smile, toothless, is the most talkative. But they have an hoarse accent and I remember the saying “I fear neither heaven nor earth but only a Cantonese who speaks Mandarin, 天不怕,地不怕,只怕广东人说 普通话”. When the ticket inspector comes, I feel much more relaxed and restful with her standard mandarin accent. But they are so nice that I enjoy talking to them even if, after an hour, I feel that I have spent all my energy on understanding this terrifying accent. It’s the first time they’ve had a conversation with a stranger and they’re eager to know a little more about the outside world. I can’t remember how long the trip took; 12- 15 hours probably. Fortunately, we slept a little. Before dawn, a music wakes us up and we resume the conversation.

One card, no cash

I hope to arrive in Hong Kong as soon as possible because the person I need to see leaves his office around noon for the airport and before that I have to drop off my stuff at a French friend’s house, take a shower and “get cleaned up”. I couldn’t take enough cash and the cost of the first class ticket in Wuhan didn’t leave me many yuans. Arriving around 6:30 am, I had to wait for the opening of the Bank of China to withdraw with my French card, which compromised my appointment. I asked my new friends if there is an ATM that accepts a foreign card at the station. They don’t think and ask me what my problem is. I explain to them. The big one makes a small smile, looks in his pocket his wallet takes out big bills (500 HK$, I think). He says to me: “I have only 2000 HK$. It can help you. At first, I refuse. He insists several times with the usual, “we are friends, 我们是朋友”, “you will give them back to me when you get your new job, I’ll give you my address, my account number. ” I’m thinking, that will save me some time and I’ll be able to give it back to him in a few days. So I take the money, thank him ten thousand times and we split up on arrival.

Thank you very much.

The HK$ saved me a lot of time, I was able to redo my visa, I didn’t get the job, but everything went well afterwards.
Extraordinary experience for me, a stranger lends me the equivalent of several months of average Chinese wages at the time to help me. I told myself, it’s completely impossible in France. I don’t know if this story influenced me, but when Chinese people ask me for information in France or elsewhere, I do my utmost and I remain eternally grateful to this very sympathetic Cantonese. »
A testimony is better than a long theory to describe some Chinese cultural habits.

Several articles on the subject:
Subtlety in China
At home, you rely on your parents, outside on your friends
Sentiment, relationship and money

26 May 2020

China and its tests

30 KINDS OF TESTS
With the return to work, in schools and universities, China has had to take great precautions to ensure control of the epidemic and economic recovery. On April 22, the government decided to launch a major testing campaign. On May 8, it authorized 30 types of tests, 19 nucleic acid and 11 blood tests to meet domestic and foreign demands. 

China test coronavirus


ADAPTATION
The health authorities must constantly adapt to the evolution of the virus, such as the appearance of new phenomena: asymptomatic contagious people, cured patients who become positive again (复阳), Chinese returning to countries carrying the virus.

TYPES OF TESTS
Screening centres use three types of tests: 
1. A genetic sequencing test. It is highly reliable, but expensive, over 600 USD and the results are slow to come out.
2. A nucleic acid test, relatively reliable even though it can miss positive cases. It is the most widely used type of test, particularly because of its cost, between 10 and 30 USD.
3. Antibody blood test, rapid, allows the detection of infected and cured people. This test is more a contribution to the nucleic test. It does not determine whether the patient tested positive is contagious. It cannot replace the nucleic test.  Cost between 8 and 15 USD.

AN EXPONENTIAL DEMAND
Screening centres have been multiplied. Wuhan, for example, added 111 new centres to its 211 at the end of April. Beijing increased from 3 to 53. Hospitals have tightened discharge conditions. A CT scan and a stool test must now confirm the patient’s recovery. Customs has also increased the number of laboratories and the number of staff dedicated to controls. Many companies, such as Huawei or the developer Vanke, have their employees tested.

The demand for tests is therefore very high both in and outside China. The Caixin site estimates the foreign demand at 1.2 billion while daily production is 9.02 million tests. It will be difficult to meet this demand for massive testing in China, but at present, the extent of the difficulty cannot yet be quantified. How many tests is China missing?



Article consulted: 新冠检测挑战

7 May 2020