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Breaking China: One entrepreneur's decade of change
And how to get by in China's business world...

By Dan Ilett

Published: Tuesday 04 July 2006

During his travels around China, silicon.com's Dan Ilett caught up with a number of entrepreneurs, many from overseas. This is the first in a series of Q&As with such business pioneers.

China was a very different place in 1994, when Micah Truman arrived. The fresh-faced American graduate of Japanese made his way to Shanxi province to work in a peasant village, where he learned to speak Chinese.

Twelve years on, Truman is CEO of marketing company Madeforchina.com, where he and his partner lead a team of 55 people which focuses on targeted online advertising. Their campaigns range from touting multinationals such as Ford, IBM and Sony, to promoting singer Lenny Kravitz, to co-operating with the police to revise and improve online security regulations.

silicon.com: How did you get from peasant village to CEO?
Truman: In 1994, I was awarded a scholarship from my university to live in a peasant village called Taigu, in a region quite near to Mongolia in Northern China. I worked there for a year when I was 23 and then got a job in a printing company in Beijing.

In 1995, many Westerners in Beijing couldn't talk to the Chinese and it was the same the other way around, so I worked as a kind of intermediary between the two cultures.

If you want to learn to speak Mandarin it is possible but it takes a great deal of effort to use tones correctly. To speak like an educated person is really hard - the language is so rich. When they educate you here, from the time you are a small child you're learning poetry from hundreds of years ago. My little kid at a birthday party will stand up and recite Tang dynasty poetry. That's the equivalent of a Western child reciting The Canterbury Tales, aged three and a bit.

Anyway, then I got a job working in a garment company. But the business was tough - it's retail - so it was good to get a call from Byron Constable, who's now my business partner.

I was the logistics guy. I could get anything manufactured and shipped. My business partner is a designer and marketer by trade, so we set up a shop in 1997 that designed marketing materials for the Chinese market. And then advertising in China went nuts. We grew to 35 people organically and things have just gone from there.

In 1998, we moved into online marketing and have grown to a profitable company of 55 people, with offices in Beijing and Shanghai. It's been almost 10 years now and I feel really lucky. You get foreigners here who complain. They are angry and bitter. But you're a guest here - go home if you don't like it. If you want to stay then do it properly and be grateful - realise this is a really amazing opportunity and take advantage of it.

What do you see happening in China in the next five to 10 years?
The China we moved to 10-plus years ago doesn't exist. The previous generation, survivors of the cultural revolution, are watching their children obsess over the NBA [US basketball] and the internet, and relate to the world in a way that their parents can barely comprehend. Ten years ago you had two flavours of people here - foreign and Chinese. Now you have a mix.

The Chinese speak English, foreigners speak Chinese. Suddenly you're seeing an incredible jumble of people that is much more versatile and brutally entrepreneurial.

With a brief hiatus from 1949 to the late 1970s, China has been a major - often dominant - player in global commerce. There's a new wave of Chinese people who are extremely resourceful, well-educated and very smart. This will drive the Chinese economy in the upcoming few decades. It is this new crop of Chinese entrepreneurs that will redefine China's position in the global economy.

When I first moved to China in the mid-1990s I could get a job based on my abilities to do business in a Western manner. You couldn't do that now. You've got Chinese people who now can not only speak fluent English and Mandarin and understand Western corporate culture but also can work locally in a way that's very hard to compete with for those not familiar with China. This young group of people will take business by storm, not just in China but on a truly global scale. It's quite profound.

What are the biggest problems for companies that want to break into China?
You're going to have to have a truly multicultural team, as well as a legal structure that allows your company to control your Chinese operations. What I mean is that signing away rights in a joint venture (JV) to people who you cannot necessarily control is very dangerous. So it all comes down to putting together a team who can do that for you. If you give your JV partner 51 per cent of your company, you're asking for trouble.

And remember - many in the West like to think of the Chinese government as an entity that can do whatever it wants but this simply is not the case. Essentially, the Chinese government is responsible for driving the Chinese economy and their tenure rests on their ability to deliver on this. The bargain is a straightforward one - 'You let us lead and we will deliver you the middle class revolution.'

The economic miracle in China simply can't happen without international finance, industry, and Western best practices. Therefore what needs to happen is that Western companies need to show why the business they are engaged in is of benefit to China.

What difficulties have you encountered?
The Chinese media business is extremely problematic. The sector is so tightly regulated that building a large-scale business in China is extremely difficult, especially for foreign players.

We're a company that works with some of the largest brands in the world. To do this in China we focus on areas that serve to benefit the Chinese economy. We don't cross over into the political, which in China can have fairly broad implications.

As an example of areas that are off limits in China, we often get requests for online gambling campaigns. Gambling in China is as forbidden as porn. It's allowed when you're home and playing Mahjong, say, but the government takes a very firm position when it comes to organised gambling. Think about it - in America, organised gambling is not a pretty thing either.

Are intellectual property rights (IPR) stopping companies from setting up here?
IPR is the defining issue of the next five years - the US and Western governments easily get sidetracked when discussing IPR with China, to their detriment. The West's ability to protect its IPR in China is the foundation upon which businesses can be successfully grown on the mainland.

Until IPR protection gains widespread acceptance here in China, it will be the single largest barrier to Western corporate growth on the mainland.

There are things that can be done though. Some companies have incredible IPR management and have done phenomenally well. What these guys do is they give a teaser by saying 'you want my technology? Here's the blueprint but that technology is outdated in 12 weeks'.

It's like the fable of the sultan who always kills his wives after a year of marriage. But after one year this one bride starts to tell him a story every night. Each night, she quits halfway through her tale and her husband spares her for yet another day, waiting for the new instalment.

'Breaking China' will be back next week with an expat Canadian who is revolutionising Chinese language learning through podcasting.