Jack Perkowski is a man who knows China’s interior.

As founder and chairman of ASIMCO Technologies, he is near infamous for his “nine-month, 40-city tour of 100 factories, the same black-scorpion, duck-tongue-eating odyssey in 1993 that rolled through the mountains of inner China, where communist leader Mao Zedong hid manufacturing plants in the 1950s to deter bombings from the United States, the Soviet Union and Taiwan,” as the Pittsburgh Post-Gazette puts so well.

So when Mr. Perkowski writes about China’s inner cities – and advantages of locating business operations there – we listen.

In an article out this month in AmCham-China’s China Brief, Mr. Perkowski makes an excellent case for “investing in the dragon’s belly.”

Among his points:

• Rural China isn’t so rural anymore. “As I began to make countless five and six-hour car trips on very poor roads to visit our newly acquired factories, I must admit that I began to question the wisdom of our location neutral strategy. It seemed there had to be an easier way to build a business in China! Hope came in the form of the hundreds of workers, picks and shovels in hand, that I saw on every trip. They were working on new highways that promised to shorten our trips.” In other words, in 15 years time, China has improved train service, thousands of kilometers of new highways, and many more airports. The bottom line: cost advantages in Tier 3 still outweigh any additional logistics problems.
• Cheaper, cheaper, cheaper. “Labor, land, construction, management, supplier and overhead costs are all significantly lower than in the larger, better established cities in the coastal areas.
• Guanxi, baby, is better. One party secretary couldn’t wait to tell me that he and his team had succeeded in obtaining a multi-million RMB tax rebate from the provincial tax authorities for our joint venture that we did not know we were even eligible for.
• Your HR nightmare is over so long as you localize the workforce. Chinese managers often prefer to work close to extended families, so if your company provides good employment nearby, he or she won’t move easily.

Despite Mr. Perkowski’s extensive experience, his advice comes from a single mortal. We have heard other China mortals say that guanxi can work against you, often on corrupt levels. And even if you intend to fill your company with the best local talent, it may be hard to get them back from Beijing or Shanghai where the good life is at. Let’s face it: Smart little emperors do what they want, and go where they want to go.

If there’s anyone who’s knowledgeable about managing the dragon, it’s Mr. Perkowski, who wrote a book by the same name. Keep writing, Mr. Perkowski. We’re listening; All of us should be if we’re not yet firmly planted on inner terra firma.

    Channel: Local Wisdom     |