Danwei to danwei: Get lost!
17th January 2008
As founder and editor of Danwei.org, Jeremy Goldkorn is to English-language
Lesson one: Avoid the joint venture It’s never easy working with someone else, especially in a joint venture. Mr. Goldkorn noted the cultural differences in play there. State-owned companies, or the many ones with similar cultures to them, easily clash with
That may be ok at the staff level, where leaders can help employees iron differences out, but partners at odds can spell disaster. In other words, the Danwei founder suggests avoiding the danwei, or Chinese work unit, at all costs. Lesson two: Court the WFOE Wholly Foreign Owned Enterprises (or WFOEs) are in Mr. Goldkorn’s mind the best foreign setups—when possible. In that case, there’s no answering to a Chinese partner. 
Not every industry, such as Mr. Goldkorn’s, can easily benefit from such investment vehicles. But if you get a WFOE opportunity, make it love at first sight. “I don’t see anything wrong with a WFOE,” Mr. Goldkorn said.
Lesson three: Find the workaround Get creative with your partnerships. Maybe you don’t need a company partner. Maybe you just need a good contract and can rely on another company to provide you with a needed service. “I have worked usually with contract relationships with Chinese companies,” Mr. Goldkorn said. Just make sure you own what you need to critically own. Mr. Goldkorn recalled one instance in which a foreign founder of a magazine was ousted by a Chinese partner.
Although the businessman started the magazine, he didn’t actually own it. He owned a consulting company, his wife owned an advertising company, and they were in contractual relationships with a Chinese company, which owned the magazine license, Mr. Goldkorn noted. That was a critical piece of property, however, and not having it eventually ended the businessman’s career with the magazine, according to Mr. Goldkorn.
Despite the horror stories, “In most industries you have to have workarounds to deal with inconvenient legislation, not just in the sensitive ones,” Mr. Goldkorn said.
AmCham Member Matt Young, editor & publisher, bizCult.com
This is the fourth post in a series discussing the upcoming China’s SME Challenge event
January 19th, 2008 at 11:02 pm
China SMEs — Own If You Want To Own
In the song, “Positive Vibrations,” Bob Marley sang, “Live if you want to live.” On AmchamDaily’s blog, Jeremy Goldkorn says if you want to own something in China, you have to make sure you own it. Marley and Goldkorn both speak great truths. AmCh…
January 21st, 2008 at 9:37 am
It’s interesting to see that Jeremy is discouraging the JV. In the early days they were the only option, and then there were so many horror stories of foreigners investors losing the shirts off their back, like the collection of these mishaps in ‘Mr. China.’ However, my understanding was that in the last couple of years, with a more mature Chinese business community, there were more reliable opportunities.
Is it still really that dangerous to look into JV’s, or is it now a feasible option? It seems like always going the WOFE route could be fairly limiting.
January 21st, 2008 at 11:30 pm
[…] Danwei to danwei: Get lost! Known best for his efforts at Danwei, Jeremy Goldkorn has shared some of his nuggets of knowledge on the AMCHAM daily website. Having experience partner discussions 4 separate times over the last 2 years, I share many of Jeremy’s thoughts. however, I think a few more need to be added. Like, if you are going to partner with someone or another entity, make sure you are clear about roles, responsibilities, capabilities, and expectations…. more often than not, where I have seen partnerships go bad it is because something got lost in one of those four areas. […]
September 29th, 2008 at 11:05 pm
Nice piece of work. The JV is usually regarded as an idealistic way of getting a piece of the Chinese market by Western-based managers who have no clue of the realities here. Unless the targeted industry is a regulated one, which requires a JV for market entry, a joint venture should be avoided at any cost in China.