The Asian Wall Street Journal, June 18, 2004

Mr. China

China gives foreign businessmen a run for their money


By PAUL MOONEY in Beijing

Beijing -- IN THE MID-1990s, foreign businessmen flocked to China in pursuit of riches. At the time, some of these enthusiastic newcomers never would have dreamed that within a few years they would lose millions of dollars in their failed joint ventures.

Tim Clissold's "Mr. China, A Wall Street banker, an Englishman and an ex-Red Guard . . . and $418,000,000 disappearing, day by day" (Constable & Robinson, 288 pages, $16.50) entertainingly tells the story of two such foreigners in China. The adventure begins when Mr. Clissold, a young Briton with a year of Mandarin Chinese under his belt, meets in Hong Kong an exuberant Wall Street banker named Pat. Pat had spent some time traveling around Asia to get the lay of the land and had come to the following conclusion: There was an enormous need for capital in the region, but no one to provide it.

The book describes the heady days of the 1990s, when Pat used his Wall Street connections and immense optimism about the China market to convince investors, most of whom had never set foot in China, to part with $150 million in just a matter of weeks -- an amount that soon ballooned to more than $415 million.

Pat hired Mr. Clissold to help him find suitable places in China to invest their funds, and the two took off on a tour of some 100 dreary factories around China. But the hard part was finding promising partners to take their money. Mr. Clissold then befriended a former Red Guard-cum-businessman called Ai Jian who started to work the phones, calling ministries around the capital.

The three men proceeded to pour $150 million into seven factories around China by the end of 1994, while back home, their U.S. partner raised an additional $250 million. Within two years, the company's employees shot up from the original three in a run-down Beijing hotel to 25,000 people working in 20 ventures around the country.

But problems soon arose, taking a serious turn for the worse when Mr. Clissold attempted to fire a rebellious manager in the city of Harbin. The manager, a formidable man named Pang, refused to budge, and the factory fell into chaos as the Americans ended up in a nasty battle for control of the facility. With the help of Mr. Pang's maneuvers, supplies were cut off, banks started calling in loans and the factory was on the verge of collapse. The local government refused to help, and the ministry in Beijing turned its back on the American investors.

"By this time, it was obvious that I had hopelessly underestimated what we were up against," Mr. Clissold writes without a hint of irony. The angry board of directors in New York couldn't understand why Mr. Pang was still in the factory. Months later, Beijing ruled in favor of the Americans, but it was too late, the business was damaged beyond repair.

Meanwhile, another Chinese partner in Zhuhai had disappeared on a trip to the U.S. A nervous Mr. Clissold examined the accounts and noticed that several million dollars had also evanesced through a fraudulent "letter of credit." When Mr. Clissold told the bank president that the bank had obviously approved the credit letter without going through the standard procedure, the banker became angry and a few hours later the bank froze the remaining funds in the company's account.

With the company bleeding losses at $20 million a year, Pat and Mr. Clissold were called on the carpet back in New York to explain themselves. After that, an exhausted Mr. Clissold took off for a ski vacation in France and ended up in the hospital with a massive heart attack. Frightened for his health, he decided to quit, but soon changed his mind. For better or worse, he was hooked on China.

So he returned, this time only to discover that another manager had set up a competing factory, despite a contract forbidding it. Once again, they tried to fire the manager. The old manager raced back and gutted the factory of equipment and staff. Electricity was shut off, bringing production to a screeching halt. The new manager was temporarily kidnapped, but managed to escape, and police cars that came to rescue him were overturned. The People's Liberation Army had to be brought in to quiet things down.

The two businessmen encountered so many perils in China that readers will undoubtedly wonder if they would have been better off staying at home. Yet Tim Clissold, on whose experiences "Mr. China" is based, continues to do business in Beijing. He keeps in contact with his former Chinese adversaries, even going out for the occasional lunch or accepting a box of moon cakes. He waves away past bad blood, saying those who wronged him in business were "people fighting for a better life."

"Mr. China" tells the story of the foreign investors of the 1990s who barged into China with boundless confidence, but left their usual business savvy back home. "Foreigners are irrational about China," Mr. Clissold tells me. "It's just such a fantastic story, you want to believe it." Then he adds, "People want to believe it so much, they do things they wouldn't do anywhere else."

And despite hearing countless tales of foreigners who have lost big bucks in China over the past decade, businessmen still arrive en masse to seek out opportunities on the mainland.

Still, some things have changed since the 1990s. Perhaps after hearing horror stories similar to the ones lived through by Mr. Clissold and Pat, many of today's seasoned businessmen have abandoned the idea of starting up joint ventures in China -- and insist on wholly foreign-owned projects.

Mr. Clissold remains extraordinarily upbeat for someone who has experienced everything from a massive heart attack to kidnapping by his own employees. Sitting with him in a five-star hotel in Beijing, I ask him if he's not a bit disillusioned. "Disillusioned is the wrong word," Mr. Clissold says without hesitation. "I think I've learned a lot."