The following is an excerpt from Yue-Sai Kan’s book The Most Famous Woman in China.
In dedicating almost all my adult life to work in China, I am frequently reminded how far my mothership has come—and how far it has to go.
When Xi Jinping came to power in 2012, he announced that unless corruption were eradicated, the Communist Party would lose its credibility and be in danger of being overthrown. I was elated to see the subsequent crackdown on malfeasance that unfolded, starting in 2013. Today, doing business in China is far easier for those currently in favor than it used to be—more transparent and less unethical. If, however, by some accident, one crosses the often-difficult-to-discern lines drawn by the ever-shifting rules and regulations set by the Party and falls out of favor, then business in China can be as tricky as ever.
A special department deals exclusively with government issues at many foreign companies in China, including L’Oréal, to which I sold my cosmetics company in 2004. Without the passion and business brilliance of Lan Zhenzhen, the Vice President of L’Oréal China, I doubt very much if L’Oréal could be as successful as it is.
Furthermore, I have served on the board of IMAX China since 2015, alongside executives such as Chen Jiande, who truly understand China and have all of the right government connections to help the company navigate the bureaucracy—were vital in propelling the company in the complex process to go public in Hong Kong in October 2015.
For Yue-Sai Cosmetics, I was most grateful to have Sam, Sherry, and several other key figures who were savvy enough to guide and guard me every step of the way, so I didn’t make big mistakes. Persistent and loyal people are at a premium in China. Without them, slicing through the beadledom can be confusing, frustrating, and ultimately soul-crushing.
Doing business in China
To do business in China, it’s vital to learn the language or at least master the basics. Knowing even a little Mandarin will unlock many aspects of the culture that will aid you in your dealings. While I was born in China, I only spoke Cantonese when I was young, not China’s official language, Mandarin. I was initially unable to communicate directly with Chinese decision-makers, and everything spoken had to be translated both ways. A lot of communication is body language, and while I got many of the nuances that way, I desperately needed to learn to speak the best Mandarin I could. For example, I discovered that the Chinese find it hard to say “No” outright.
It took me several years to become fully fluent in Mandarin, and dedicating time and resources to this mission proved to be the most valuable gift I could ever have given myself.
Foreign business aspirants must learn the culture and adjust. Any outsider striving to work in the Chinese market should have a local by their side, someone who can clue them into the particulars of Chinese culture, ranging from the unfamiliar to the shocking. In Chinese communications, there is almost always a subtext. The brilliant Hank Greenberg of the U.S. insurance giant AIG was fortunate to have Rick Niu, his interpreter in language, culture, and political nuances, as his sidekick.
Ultimately, China is a very complicated country with a complex history and ruled very much by the nature of relationships. Foreigners purporting to do business are prone to make mistakes; thus, having a trusted local by your side—I call them gurus or rabbis—is priceless. For me, my assistants in China are vital. They can pick up the cues and nuances in conversations, and as an added bonus, officials or people in places of authority will often divulge things to the locals they won’t to an outsider. However, these basic principles apply in any country. In any foreign land, you must conduct business locally. Globalization is localization. Do everything you can to learn about and adjust to new surroundings. You will never know what is happening around you unless you do, and you’ll never succeed in the business realm.
Next up, get connected. Every foreigner who works in China learns at least one Chinese word: guanxi. Guanxi means relationships. Personal relationships are far more critical in China than in the West. For example, one never makes “cold calls” in China. In most cases, it’s who you know that helps to resolve problems or establish your position. In this regard, foreigners are in a poor position when breaking into doing business in China. The Chinese turn to their parents, uncles, cousins, or former schoolmates to help when in doubt or trouble. This cultural concept is why <a href="https://fortune.com/education/business/best-mba-programs/">MBA programs</a> are so popular in China today—it’s not the studies that are so important as the guanxi one can cultivate when attending these prestigious schools. You need to spend a great deal of time and effort developing interpersonal relationships in China, understanding that there will be a quid pro quo. You scratch my back, and I’ll scratch yours.
How hard it was
Those who complain about the difficulty of doing business in China today don’t know how hard it was when I started doing business there in the early 1990s. I was a household name, but I still encountered many problems. The business environment was just being established, and officials threw an array of mandates into the melting pot with no resources to succeed. Government legislation mandated that companies fund all kinds of employee insurance policies, from endowment, medical and maternity to employment injury to unemployment. While often noble, the expectations make it incredibly hard for businesses to grow and thrive.
Further, there were no logistics companies; banks offered few services, and laws and regulations needed to be more mature, particularly not business laws. We found ourselves negotiating with the government all the time. We were making retail products, but there were no chain stores. In the United States, if I sold to Saks Fifth Avenue and did well, my products would instantly have been in 45 beautiful stores whose business rules were the same nationwide. In China, Yue-Sai Cosmetics products were on sale in 800 stores nationwide, but we had to haggle and mediate with them individually. Each had its own archaic rules and regulations.
Traveling around China was also onerous. Planes were old, trains were worse, hotels were dirty and old, and the food was horrific. People stole with abandon and infringed my trademarks all the time. At one time, sanitary napkins and medicinal wines were on the market, hawked in my name. China at that time had very few experienced and English-speaking business or technical managers. I had to bring in many Americans to kick-start the industry and train the local staff. A lawyer, let alone a good one, was non-existent.
Advantages today for foreign companies in China
I admire anyone who succeeded in doing business in China, especially in those budding days when superhuman patience was required, along with tremendous resourcefulness, hard work, and fearlessness. Those who started back then, in the 1980s, and stuck it out were rewarded. The government wanted to open up, and despite all the words of warning laid out here, things have gotten better year after year over the last 20 years.
Today, it is easier to hire bilingual, experienced staff, and the initial protocols are much smoother. It now takes only nine days to set up a company. In 2019, the government implemented several reforms to make it easier to do business in China, such as lowering the Value Added Tax for some companies and implementing the country’s first Foreign Investment Law to clarify the governance of business capital from outside China.
According to the World Bank’s 2023 “Ease of Doing Business” ranking comparing 190 economies worldwide, China rose to number 31, a massive improvement from 91 in 2006. This by no means says that it’s now easy to do business in China, but things are improving.
Still, for Western company executives used to relative transparency and the power of business journalism to explain what’s really going on in their industry, undertaking business in China can be supremely frustrating. One of the most challenging components to fathom in Chinese business is a general inability to determine why certain things are done the way they are. It’s hard to adjust one’s business strategy without that discovery ability. I sit on the board of IMAX China. The brilliant IMAX Corporation CEO Richard Gelfond repeatedly stresses that he can’t understand why China’s censors bar certain movies from entry. For example, in 2022, the latest Spider-Man movie, a box-office smash hit everywhere else in the world, was not allowed to screen in China. Nobody was able to tell Gelfond why.
I sometimes reflect on the ceaseless stream of stumbling blocks and wonder how I maintained my patience and perseverance. But when you have a sincere and unwavering goal, you wade through the murky waters and push against the current for dear life. And that was all I knew to do. Although perhaps in a much less visible way, millions upon millions of Chinese from my generation and before swam against an overwhelming time, intent on seeing what lay on the other side, too. And they found it: an existence teeming with lights, cameras, and prosperity. The China I remember in the 1980s is not even a skeleton of what exists today. Physically, there is no comparison as the cities are each filled with neon illumination, six-lane highways, and endless towering hotels—each more majestic than the next.
Excerpted from The Most Famous Woman in China by Yue-Sai Kan (Copyright 2024 by Yue-Sai Kan) with written permission from Di Angelo Publications. All rights reserved.
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