Watershed - Why the decision to live in China after graduating in International Relations?

Marcelo Sette Mosaner - There were several reasons. I can cite three basic reasons. Firstly, I had become very interested in the etymology of the Chinese language, the history of the ideogram and the logic behind them. That strengthened very much when I lived in the USA in 2001 whereby I could acquire some publications which were not available in Brazil. In second place, the international scenario was changing and I believed that China would take a prominent place in this new scenario, as is in fact happening. Understanding better this reality, knowing the language and culture I went on to compose a group of skills that are necessary for the very development of our country and for this reason I not only learned Chinese but also encourage my colleagues and Brazilian friends to go deeper into the matter. In third place, I imagined the chance to create a great competitive differential that would allow me to realize the dream of travelling and actually having contact with other cultures and at the same time bring professional fulfillment.

WS - How was the process of learning Mandarin here in Brazil and afterwards in Beijing?

MM - I started studying Mandarin on my own in 2002 focused on the written part since I knew it would be no use trying to learn the oral part alone. Soon I felt the need for teacher support. At the time, the difficulty started with trying to find study center for the language in the country. I started searching on the internet then I called the chambers of commerce (there were only two at the time) and all I got was the referral of a private lady teacher but who was outside the city of Campinas, and therefore was no good for me, as I was studying at PUC University in São Paulo. Some time after, I obtained by referral by a friend of Chinese descent a teacher from Taiwan who gave lessons in the cellar of his house in the southern part of São Paulo. The lessons had no method, he just used a series of eight books used for infant alphabetization in Taiwan, focusing on sounds, teaching the traditional ideogram and the phonetic ZhuYin which is used in Taiwan until today but not in continental China. I stayed at this school for six months until discovering the Taoist Center, of Professor Tony Tsai, who has a very good method in the phonetic part. I studied there for two years having one lesson per week and studying almost daily, 30 min to 1 hour a day. I ended up enrolling in other Chinese language courses as I sought to deepen my vocabulary and learn more about the culture. In this regard, I enrolled in the Chinese Social Center in São Paulo, in Liberdade, where I studied on Saturdays. A little before enrolling at Peking University (PKU) I hired a private lady teacher to help me reach a good level in the admission exam. In China, I started the language and culture course of Peking University in 2005 and had enormous difficulty at the beginning. The idea of this course is a complete immersion in Mandarin and for that reason both 100% of the lessons as well as all contact with the university was in Mandarin. English only with classmates in some intervals in course which were six hours a day plus long daily homework. There were oral presentations almost every day and tests every month. At first everything was difficult in the listening part. After that it became more instinctive, less rational and the mental process changes, the student starts to see the whole first instead of adding the parts. When I did four months at the University I thought that even mastering other languages I would not be capable of learning Mandarin, having a great  feeling of inferiority in relation to the other students (mainly of Chinese, American, Korean e European descendence, but no Latin American). At this time I contracted a private teacher and arranged lessons for two or three times a week. We met to drink tea in a snack bar inside the campus and went over the lessons. She gave me tests and taught me about Chinese culture. At the end of the course I felt I had learned a lot of vocabulary and mastered the technique, but I was lacking much practice, the words did not come out of my mouth as I would like to with fluency. At this stage of the game I opted for stopping studies and go and earn a living in Shanghai. Within three months, I felt an enormous improvement in my level of Chinese. In Shanghai, even if people do not speak Mandarin in the streets I practiced quite a lot in the Office since I shared the work bay with a young man from Peking and also I forced myself to watch television in Chinese, bought books and continued to scribble in my didactic books from the PKU. From there on its evolution was natural noting down vocabulary at each new visit to companies, suppliers, tourism trips that I made on public holidays, finally always trying to understanding a little more about this language. Today I communicate with quite a bit of calmness and security on all topics, apart from reading and writing in Mandarin.

WS - To what extent is it fundamental to master the language to do good business in China?

MM - China is going through a transition process and more and more young people are learning to speak English. Exporting companies generally contract a young person to help with foreign sales but many of these “spokespeople” have a low level of technical knowledge of the deal and cannot do much in the company. The businessman has to weigh up to what point it is interesting to depend on this “spokesperson” who defends the interests of his contractor and not the client in order to communicate with his supplier. Obviously, it is possible for a businessman or an executive with reasonable professional experience and an intermediate English level to buy consumer goods or machinery and have success in his business. It so happens that a person who speaks English Chinese in his company or working together with a qualified interpreter or purchasing office in China, much facilitates his relationship with his supplier avoiding unnecessary conflicts and improving communication. This analysis is valid for deals of low value articulated by companies from the private sector in which there is already an enormous structure to receive foreign buyers. To articulate buying, selling and investment  deals in China, Chinese counts a lot and if you do not speak Chinese you will always depend on someone who does. Exporting to the Chinese market is already much more difficult and mastering the Chinese language and culture are large differentials (except for some commodities which the Chinese fight over to purchase since world offer does not meet their demand.)

WS - How did the idea of opening your own company arise and what were the biggest difficulties?
 
MM - At the beginning I had a partner who is a company consultant in the area of human capital and organizational development. We thought about uniting each one’s competencies and making a coaching and training company for companies with business or interest in learning about China. There was no demand and we did not have the necessary baggage for such not in 2004 or in 2005 and for this the company did not go forward. We knew that China presented great opportunities but we did not know where to start nor which track to follow. We had written a business plan in 2004 thinking about the idea of giving presentations and training but there was no continuity. When I was in Peking, apart from studying, I had a home office and dedicated the few hours which were left over (generally at night Brazil time) to prospect for business. Everyone was talking about exports of iron minerals and sugar but a leaned that this was business for giants. I tried other export deals but they did not work out, the business sector wanted a commercial representative who earned sales commission without investing anything in marketing. That was the great difficulty, realizing that it was no good standing on the consultant’s pedestal or in the heroe`s role of helping Brazilian companies export, it was necessary sell something that the market really needed. Over time I noticed that there were many people wanting to buy many things from China, but they did not know how. Every time that some acquaintance who had already slipped up, mainly with quality problems or even fraud, like getting an empty container or full of stones. I was there, I could be the “eyes, hands and arms” of our customers in China and this became our motto. Another great difficulty was starting the company from zero because I had no help from anyone and at the time had no partner. I lived in a large flat with a home office in the center of Shanghai. To make my site I had to learn HTML and do a sufficiently crude version for my brother to take pity and decide to help me. Afterwards we improved the site until I contracted a Professional and in mid 2007 were already in the fifth edition. Initially, financial resources were very limited. The first time I visited a supplier to inspect the quality of the materials produced I took a train for 12 hours to a town in the interior of China, where people raised their eyebrows and pointed on seeing a westerner. Another big difficulty was not finding customers since there are always people interested in importing from China, but actually finding good customers who effectively control a consumer market in their countries of origin and know foreign trade and the Chinese market enough to know the importance of services rendered by companies like Golden Bridge. At the same time, it was no good being large companies with offices in Asia, since one of the main services of  Golden was to act as a    “Buying Office” outsources which split its operating expenses over several firms and only charged for results not burdening its clients with fixed costs.

WS - What services does it offer and what is the customer profile?
 
MM - In short, Golden Bridge works with two main objectives: total acquisition cost reduction and greater safety in the supply chain. Our clients are importers – manufacturers and distributers – offering complete solutions in international purchases focused on China, which means that the client can count on Golden to identify material which can be bought economically in China and other LCC markets, identify solid industrial plants capable of taking care of the demand of our clients, control the productive process, appraise the quality, stock the merchandize and plan the flow of dispatches according to the client, as well as being the representative of the client in China, solving periodic breakdowns and problems in the supply chain. Golden also provides complete logistic services whereby we do the import for the client and deliver the load to his address at the lowest acquisition cost in the market.

WS - How to map out the best suppliers in a country as large and complex as China?

MM - We cannot see China as just one country. I always compare the cultural diversity of China with Europe, since both are almost the same size – about 10 mi km2, being that China has 22 provinces and Europe 46 countries. Cultural diversity just like an industrial matrix is not distributed uniformly in the middle of this enormous country. As we know, production is organized into specialized or super-specialized industrial complexes mainly localized in the first bands of the seaboard states despite some sectors migrating to lower cost zones in the interior of the country. It is necessary to understand the workings of these production centers, know their area of specialization by commodity of each one of them, their capital structure, tax breaks in which they fit which vary zone by special export zone and always quote in more than one production center to check if one has the best production costs. Another variable is to define exactly what is being looked for since there are low cost suppliers but with a high quality problem rate or even variation in the quality of different lots. In some cases Brazilian importers opt for low quality goods since the markets in Brazil do not accept higher prices and is already used to this level of quality so the price quality equation is no standard and must be studied case by case.

WS - Secrets on appraising Chinese suppliers as to product quality delivery capability and seriousness in respecting contracts.

MM - There are no great secrets except for adapting best management practices and in this case purchase management to the local reality. Although quality and delivery capability are directly related to the supplier installed capacity, there are important details like capital structure, if the company is family owned or the government is a shareholder, what is the level of employee training and if the company has security in the receipt of raw materials. The safest way to get to suppliers is by referral of customers and other suppliers who know the local market. As the credit protection system in China is not as developed as in Brazil, many times a balance sheet analysis is not enough to judge the financial solidity of a supplier. We are used to asking for international customer contacts and supplier references for checking. The interpersonal relationship is also very important and because of this, it is fundamental to establish a trusting relationship with the owner of the supplier company which in most cases only occurs in Mandarin.

WS - Secrets for managing a team of  Chinese employees as a foreigner.

MM - It is difficult because the Chinese working habits are very different from ours and I would dare to say that there is certain corporativism on the part of the Chinese, by way disdaining the foreign “boss”. The difficulty because of youth also counts quite a lot and initially I felt that I was seen as an enemy and not as a bridge to the final customer in a consuming country as was in fact the case. Day to day I had  difficulty in understanding the jokes and noticed that some employees used the Shanghai dialect to talk among themselves in the open working surroundings which is note considered to be polite in several companies. The problem is that this dialect is unintelligible even for Chinese outside of Shanghai.  Also I did not think that the trading`s directors properly motivated the employees which quite complicated my job of going after the response of consultations made to local suppliers to summarize and send to Brazil. The atmosphere was really hostile. I do not know exactly what is the “secret” but the relational got quite a bit easier when we took the relationship outside of the workplace, I started to go to happy hours and dine with the office personnel and that greatly facilitated mutual understanding and convinced them that I was there to help and not get in the way.

WS - How do you see the movement of Brazilian companies and government in relation to China?

MM - The movement of the Brazilian government is essentially reactive, which is a great disadvantage in the area of trade promotion. For the Itamaraty the embassy of Beijing is still an embassy of secondary importance and has about one fifth the number of employees of the American embassy for example.  Another country nearer to our reality like Chile has a trade representation supported by its government much more consistent and stronger than the Brazilian trade promotion effort which has been restricted to isolated efforts from the private initiative by way of trade associations. The activities of Brazilian companies in China, in the way of producing in China, and/or selling to China and being present there with a branch is still restricted to a group of less than two dozen companies which are the same Brazilian multinationals which had their period of internationalization in the years 2000. I believe that all are listed in the stock market and many have productive activities in several countries, not just China. The risk of this low presence of Brazilian companies in the Chinese market and staying out of the biggest consumer market in the world which means loss of market share to their American, European, Australian and Chilean competitors for example.

WS - Is Brazil strategic to China, despite occupying still a secondary position in trade relations with that Asian country?
 
MM - China developed and is developing a series of bi-lateral approaches with various countries in development by way of guaranteeing access to natural resources and one of them is Brazil. Brazil is “strategic” from the supplier of raw materials viewpoint, mainly iron, manganese and bauxite minerals, as well as oranges, coffee and other commodities from the agribusiness sector. There are also growing Chinese investments in the country, so much so, that in these areas, technology/telecom and consumer goods.

WS - India competes for the same global energy resources, has historical questions to resolve over its frontiers and allied itself to the USA to serve as a counterweight to the growing power of the Chinese in Asia. How should China face these problems?

MM - China has a number of pending items in various points of its frontiers but these deal with questions like “internal conflicts” and it abominates intervention by non-related parties in these themes like the conflict with Taiwan, Tibet and the South Pacific Islands, in litigation with Vietnam. I believe that the relationship with India should follow the same pattern of foreign policy of China with the rest of the world:  bilateral rapprochement followed by a tightening of economic relations. I believe that US intervention in the region in the case of an eventual frontier crisis would not be well regarded by China, which would cause many problems in this aspect exactly because the raison d’être of Chinese diplomacy is non-intervention in internal affairs, in its own concept of internal policy that is, China is no longer the backyard of any power, be it the USA, Japan or England and will not tolerate American intervention in frontier matters. Another important fact is that the economic bonds between the two countries are strengthening. I have not followed the statistics but in discussions with my suppliers in China, I always hear the complaint about the enormous present competition to supply to Indian customers because in certain sectors there are already hundreds of  Chinese suppliers for the same product exporting to the same places in India, that is, the interdependence is already large and increasing.

WS - Does China really want a multipolar world or does it just use this line to soften its impetus for a bipolar world divided between it and the USA?

MM - I do not believe that its foreign policy is going in this direction (bipolar) exactly because there is Japan which still answers for 40% of Asia’s GNP, and the EU which has a GNP of 12 trillion Euros. Russia’s strength in the military and energy fields should not be underestimated. The real impetus of China is retaking its position of leadership obtained many centuries ago and lost during the Ming dynasty, which coincide with the Renaissance and Industrial Revolution in Europe. We cannot confuse the rise of China with the rise of the USA at the beginning of the XX century, marked by the Truman Doctrine and by the Big Stick Policy, since the ideology is quite different. China, differently from the USA, has no historical interventionist component in its foreign policy. In this way, China has shown itself to be multilateral way of seeking an arsenal of alliances on the world chessboard than “unilateral”. Today China has a symbiotic relationship with the USA, it has strong trade partnerships with Western European countries, it established links with Africa and Latin America, apart from the Middle East, and stimulated growth in counties of Southeast Asia by the strengthening of the ASEAN. Still in Asia, it has very strong relationships with its neighbors Japan and Australia.


Interview by Marcos Guedes Pereira