How to make it big in China

Rob Young started out selling "gimmicks" from Hong Kong and moss out the back of a truck in Taiwan, but is now involved in a big Spanish-style development in Shanghai. Picture / Kenny Rodger

Rob Young was a photocopier salesman - and quite a good one, he says - when he left New Zealand 18 years ago to see a more exciting world. An Auckland Grammar boy with a commerce degree, Young was a very green 22 when he landed in Hong Kong. He quickly found that the Mandarin he had spent six months learning was no use, as everyone spoke Cantonese.

Lesson 1: Do your homework.

Exporting "gimmicky little things" to New Zealand with little capital meant he ran out of money after six months. Mum and dad paid for him to fly home to Epsom.

Lesson 2: Cash flow is critical.

A few photocopier sales later, Young returned to Hong Kong.

He started working under the umbrella of an English woman's company, using her premises, company licence and bank account.

That was fine for seven months until she vanished with US$20,000 ($28,500) he had accumulated.

Lesson 3: Don't trust people.

So he came home again, suffered the teasing ("it was quite humiliating") and sold a few more photocopiers to finance a move to Taiwan.

Acting on a tip, he started importing sphagnum moss from New Zealand to serve the lucrative Taiwan-Japan orchid trade. "It was done in a very cowboy-ey sort of way. I'd hire a truck, put the moss on the back, drive up into the mountains looking for orchid farmers, and just sell from the back of the truck."

It was good business until the big boys moved in. "The margins went down and that was pretty much it for me."

But Young had a few fingers in other pies - duvets and skin-care products - and he ended up spending seven years in Taiwan. Much of his social life was spent in the bars where ex-pats gathered.

And that's where the affable Young got the idea that made his fortune and put him on the entrepreneurial map.

High-rise Shanghai, home to 17 million people and over the last 15 years the face of a more liberal China, was attracting floods of western companies and non-Chinese staffers in the early 1990s.

But, Young heard, there was nowhere for them to socialise outside the international hotels.

So he went to Shanghai and, after a few trials, opened one of the city's first Western-style pubs. Shanghai Sally's was nothing special in decor, it looked "a working man's pub, serving fish and chips", but it was an instant success - a "big relief".

He sold it to embark on "something that would stand up to the competition", Shanghai's first Irish bar. O'Malley's, opened in an old mansion in 1996, featured imported Irish decor and staff and, a rare thing indeed in Shanghai, a lawn. O'Malley's quickly became highly profitable.

From the day it opened, Young, who was often behind the bar, had offers to sell. After five years of 16 hours a day, seven days a week - including launching another Irish pub, the Dublin Exchange, in 1998 - he needed a break.

Young had made enough to retire, but didn't loaf for long. Now he is a partner with old friend Yang Li Tian, a "humble, modest" Shanghai property developer, in an eye-popping US$100 million project in the city.

Viscaya is a private club aimed at wealthy ex-pat families, an exclusive hangout named after a region of northern Spain. The elegant, 170,000sq/m complex is, says Young, "a six-star holiday resort without the hotel part". It houses themed bars, a ballroom currently hosting an art and sculpture exhibition, a spa, outdoor pools, three restaurants, tennis courts and a gym.

The complex is overlooked by 80 upmarket Spanish-style apartments, with another 100 due to be finished by the end of 2006. For the club alone there are 90 staff and the total complement in a few months will be 150.

The workmanship appears top-quality. Spanish sounds float in the air; there is wireless internet, something not yet widespread in China. Kids aren't forgotten - there's a teenagers-only room with couches, TVs and PlayStations. There is also a creche for youngsters.

It is a project, says Young, the day-to-day on-site manager, that would not have been feasible until the ex-pat population reached the necessary critical mass about two years ago.

He could have carried out the project without his partner, but it would have been far more difficult without his local knowledge.

Viscaya is an example of what can be achieved if you learn to do business Chinese-style, says Young: and that's imperative. In fact, says Young, who now speaks fluent Mandarin, it took two years to open his first pub because he was a bit of a slow learner.

Money got so tight he lived on-site, sleeping on a concrete floor with the labourers, all of them sharing with rats. Here's another lesson: "If the fire bureau says we are not allowed to have wood panelling more than a metre high on the walls, that doesn't mean we are not allowed to have wood panelling over a metre high on the walls.

"It actually means we have not yet established a relationship where we are all comfortable with each other sufficiently so we can get approval from the fire bureau.

"The mistake I made, and the mistake most people make when they first come to China, is interpreting things literally.

"In that particular scenario, if I say the wood is fire-proofed, or that we have fire sprinklers, you start to do tremendous damage - the minute you start arguing with an official, you're history.

"The way to handle that is simply to nod and say yes, sir, I want to abide by the laws of China. And then just get into a personal relationship.

"And that does mean a personal relationship. I knew [the fire bureau official's] wife, I knew how many kids he had, and we'd have dinner together. It's just like making a new friend. When the official felt comfortable with that, suddenly everything else just fell into place, and there was no more talk of wood panelling."

The concept is known as guanxi in China, and probably best translates as reciprocal relationships. They are "absolutely crucial".

In another situation where Young was doing something minor but technically illegal, his good relationship with an official meant he copped a $5000 fine rather than the potential $60,000 one.

But Young gets a bit cross if you suggest that these relationships lead to bribery and corruption.

There has been "dirty stuff" in China in the past, but there's "zero" in his line of business, he says, quite emphatically.

China is "pretty clean" in its interactions with small-scale Western businesses, and the Chinese Government has been busily flushing out its own corrupt officials.

But there were relationships Young wanted no part of, and he got beaten up for it. And to recall it brings a distinctly unhappy look to his face.

In his bar-owning days, groups of heavy-looking Chinese men would come in, ask staff to identify the boss and confer in a huddle.

Young knew they were Triad gang members "looking to establish a relationship" - and probably extort protection money from him. Despite numerous approaches, he refused to talk to them, feeling that being a Westerner would offer some protection.

"That was quite a big risk on my part, and that's a risk I took on the basis of believing that the police were a strong force in Shanghai," says Young. "That's not necessarily something you could say anywhere else in China."

But one night he was dragged out of O'Malleys and attacked with a pitchfork.

"I was pretty sure I was about to die, actually. But fortunately, my Chinese bar manager knew what was going on and he called the police.

"The police turned up with seconds to spare. I was pretty lucky, I feel. A few bruises and cuts, no big deal."

These days, he says, that would never happen to a Westerner. Infrastructure and security are improving in showcase Shanghai.

New Zealand will probably never see Young's entrepreneurial style close-up: Shanghai has become home. Young married Shanghai-born Christine after she came to O'Malley's to run the office; they have a 4-year-old daughter, Samantha.

Young describes himself as stubborn and a poor listener - except around Christine, who still manages his money.

He also describes himself as "'the kind of embarrassing village idiot who hangs around real sports people".

He returns to New Zealand regularly for holidays, and last year did the New Zealand Ironman in 15h 39m. (The year before he did a mad marathon over two mountain passes in Mongolia.)

Young's keen on rugby and it's not altogether surprising to hear that from his earliest days in Shanghai, he played touch with a group of Antipodeans.

He was also involved in getting together 35 shareholders to set up the only rugby club in Shanghai, in 1997.

The Shanghai Rugby Football Club has become a big deal. The Chinese national rugby team occasionally play on its paddock, and the club has hosted players bearing surnames such as Ellis, Cronfeld, Campese and Farr-Jones. Young gets a big buzz out of this.

You can take the man out of New Zealand and implant him in China, it seems, without taking the Kiwi out of the man.

ROB YOUNG'S CV

* Born: Auckland, 1963.

* Education: Auckland Grammar, University of Auckland (BCom).

* Married: To Shanghai-born Christine; 4-year-old daughter, Samantha.

Career:

* Started career selling photocopiers for Fisher & Paykel Panasonic.

* Hong Kong on-and-off for several years: self-employed, exporting to NZ.

* Taiwan seven years: main business importing sphagnum moss.

* Shanghai, China since 1994: Opened three Western pubs: Shanghai Sally's (1994), O'Malleys (1996), the Dublin Exchange (1998).

* Partner in and a director of US$100 million Viscaya residential and leisure development for ex-pats.

Rob Young's tips for doing business in China:

* Show respect to officials and develop friendships with them.

* When starting a business, do a realistic budget and timeframe. Double the budget and triple the timeframe - you'll be about right.

* Maintain relationships.

* Be adaptable.

* If you are intending to sell your business, do so as it peaks.

* Recognise that adjusting to life in Asia takes time. "You learn to live with the lack of privacy, crowds, pollution, and the hassles of doing business."

* Nothing will go right. But the sun always comes up the next day.