Today is our birthday. Yup, 15 years ago today, November 19, 1992, Dezan Shira & Associates began life as a Hong Kong limited liability company and opened its doors in Hong Kong and Shenzhen to begin providing consulting services to foreign investors wanting to get into China. To celebrate this – 15 years is a long time in China – this week we’ll post some articles about what it was like in China back then, because a lot of water has gone under the bridge!
To put the date into perspective, Deng Xiaoping was the leader of China, George H.W. Bush the U.S. president, while Chris Patten had just arrived in Hong Kong as Governor. U.S. trade with China at the time was US$33.15 billion while the RMB traded at 5.436 to the U.S. dollar. Foreigners in China were not allowed to use RMB. Foreign Exchange Certificates were the currency for all visitors, and China’s “Friendship Stores” carried the only available luxury goods – Johnnie Walker Red Label, and Marlboro cigarettes. Shanghai was closed by 9pm, and a fax machine arriving at Beijing’s Jianguo Hotel business centre was a major communications event. All international flights to Shanghai arrived at Hongqiao, and the only snacks on offer at Beijing’s airport consisted of dried noodles, made edible by using boiling hot water from a Russian silver plated samovar at the end of the only terminal. Bicycles ruled the road, and donkeys and carts were often seen trotting along the road to the Beijing airport.
Since starting up, a lot has happened. Dezan Shira began in my spare bedroom in Shenzhen, and business was slim, so I had to double up as a DJ at a local nightclub and also presented “Five Minutes English” on Shenzhen TV just to make ends meet. The firm’s first client was a trademark for a pub. Now, we have nine China offices, three in India, own this magazine and have over 1,600 multinational clients in the PRC. Some of them have now, having started off as representative offices with us, subsequently been acquired for huge sums of money and / or have become well known brands in China in their own right.
However from 1992 to now, we’ve had to deal with the Asian Financial Crisis, SARS, litigation over our IP, riots across China, developing a client base on our own, and learning how to run a business and to fund our own receivables. Back then there was no internet, people didn’t use email and fax machines were the fastest method of transmitting documents.
So, we’ve come a long way. Circa 2007, and we have a client base that includes names such as Tiffany’s, Prada, Gucci, Christofle, LVMH in luxury goods; Fiat, Daimler-Chrysler, Peugeot and Volvo in auto; and a whole host of clients in the manufacturing sector. It’s been – in the main – a pretty good ride, and like all the best roller coasters, both thrilling and scary along the way.
But, today is our birthday, and we’d like to take the opportunity to thank all those who made it happen. That’s our staff, past and present, our wonderful clients, our various and many, many friends along the way, plus our competitors, who spurred us on when we needed to be kicked a bit. You’ve all helped us learn, develop and grow.
So from me, and all at Dezan Shira & Associates: THANK YOU!!! It’s been a blast.
The following extracts are from the brand new book “The Story Of A China Practice” which has just been published and details the history of Dezan Shira & Associates. It is available from firstname.lastname@example.org for US$20 plus p&p.
(excerpt from chapter two, circa 1994)
Guangzhou and the British Consulate meanwhile had recently had an interesting time of it in the city. The then British Commercial Consul, Ashley Prime, had been a contact of mine and I’d seen him a few times in Guangzhou to drum up business when I was there. Plus with the bi-annual Canton Trade Fair, trips to the Provincial Capital were becoming more frequent as Dezan Shira expanded the locations it would handle. Fairly close to the consul on one visit, I happened across a huge new HMV music store. They had also just opened in Hong Kong, and having one as well in Guangzhou was a godsend – up to the minute foreign CD’s had been previously unobtainable in mainland China. Wandering in, all the staff wore their new yet familiar black and purple HMV uniforms quite proudly, and the famous logo of Patch the dog, with his ear to the gramophone were displayed both on a massive neon sign outside the store and throughout the interior. CD’s were all nicely racked, and I purchased a couple. The official receipt came to RMB125 and was marked “HMV Guangzhou”. Thrilled, the next day I called Ashley at the British Consul. “Great to see HMV have just opened in Guangzhou,” I said. “Yup” came the reply, “in fact I’ve just faxed their HQ in London with congratulations from the Consulate and asked if they could drop by next time they’re here for a photo session.”
That “next time” was in 48 hours, but there would be no photo session. Upon receiving Ashley’s congratulatory fax, the message ended up with HMV’s export sales, and then legal department. A quick fax was returned to Ashley. “What new store in Guangzhou?” The entire store had been a fake, and HMV flew a plane load of lawyers from London the next day to go sort it out.
The Hainan Tax Bureau
(excerpt from chapter four, circa 1997)
One of the first matters we had to deal with in Hainan involved Santa Fe (now Devon Energy) , and I retell the tale as it demonstrates the attitude, fear and potential liabilities in China foreign businesses can be up against. It was Carole, their legal administrator, who called me on this occasion. “Chris – you’d better get yourself and your new girl Emily down here quickly – we have a serious problem”. I didn’t like the sound of that, and worried it was something we had done. But still, an hour later, Emily and I were sat down in Carole’s office. She looked stern, and very worried. I was anxious.
“We could be in for losses of several million dollars and it’s mine and our heads on the line” she began. My heart skipped a bit and I dreaded what was coming. “We have a big problem with the Hainan tax bureau and we need to get to the bottom of it” That was OK. Hainan was not part of our retained duties and I began to breathe a little easier.
“They are telling us we owe them US$250,000 a month for drilling rights and I can’t seem to get the bloody transfers through” she yelled. “The money is there and the Chinese bureaucracy won’t permit it. I’ve tried everything and we just can’t seem to make the transfer. Now the Hainan authorities are threatening us with late payment penalties of five times the amount due and we are now three months late. My boss is tearing his hair out and if we have to send that bill to Houston – we are dead. Help!”
Carole then flopped into a chair, exhausted. Three times US$250,000 was three quarter of a million dollars, multiplied by five, plus the original amount….no wonder Carole looked pale. They were staring at a potential bill to ask Houston for of four and a half million dollars. I told her we’d deal with it immediately and have staff look into it at Santa Fe’s premises the next day. Emily and I discussed it on the way back to the office, neither of us had a clue where the problem could be, although I asked her to check the payment procedures with the Hainan tax bureau, which she did.
Emily and other Dezan Shira staff were there for a week going through all of Santa Fe’s processes and paperwork, and calling various tax bureaus to check and double check procedures to make payment. Yet everything seemed in order. All at Santa Fe’s end had indeed been present and correct. Yet somewhere we were missing something that was holding the transaction up. It was only when we started asking their bank for details, and the consequent charade of being passed around in circles amongst non-committal staff that we smelt a problem. With Emily’s pleasant nature to the fore, she eventually pinned it down to the junior clerk at the bank responsible for actually wiring the payment. The clerk had been scared by the sheer amount of money, and wasn’t prepared to risk transferring it just in case she made a mistake. There were the three instructions, all to the Hainan tax bureau, for US$250,000 each, present and correct, all sitting in her in-tray, and she had been too frightened to process them. Her salary had been only RM$2,000 a month, and at that time I began to understand the true complexities of business administration in China. It also did not go unnoticed that it was the foreign party who would, according to their JV contract terms, have been responsible for payment of any fines in China, regardless of where the actual problem lay.
Dezan Shira I felt had come through a big test, with a major client, and had been shown up to the challenge of providing some serious level professional tax consulting. With three China offices, a developing reputation, an increasing client base and revenues, I felt the firm had truly stood up and was now well on it’s way. Continual growth and development beckoned, and Hong Kong was about to be returned to China. All looked well for the immediate future. I was sadly mistaken. The Asian Financial Crisis was about to hit…
An unfortunate occurrence at Pudong International Airport
(excerpt from chapter 5, circa 2000)
One Friday evening, while sitting in the Long Bar at Shanghai’s Portman Ritz-Carlton Hotel, then the preferred hangout for Shanghai’s expats, I received a phone call. Having previously unwittingly agreed to be a “standby” with the British Consul in case of an emergency involving a British national, I got a somewhat oblique call from one of the consular staff, something to do with a British man being arrested at Pudong international airport, and various consular staff being tied up with a diplomatic visit – could I go and assist?
Friday evening. 7:30pm – not the best time to be roused from what should have been a good night out and get a taxi for 90 minutes to rescue some halfwit. Grumpily, I said my goodbyes, got into a taxi, and headed off for the airport. Upon arriving and introducing myself to the customs officials as I had been asked, I was escorted by a grim faced official to the basement of the main concourse “bad man” the officer kept saying, “very bad man.” I wondered what on earth had happened or exactly what sort of British monster awaited me.
Being shown into the cells, I was introduced to the unlikely looking figure of an elderly, balding professor type character in tweed jacket and cords. He looked terrified. “Thank God you’ve come along,” he gasped, “it’s all been a terrible mistake…”
He certainly looked an unlikely figure for a felon. “So what the hell have you done?” I asked.
It turned out that Professor Smith was an eminent surgeon, specializing in urology and had arrived to give a lecture the next day to a group of Shanghainese doctors. The theme was the lovely “Diseases of the male urinary system.” Smith went on “Back home I also have a small side business, making plastic medical body parts to display to students. You know the sort of thing you can take them apart and see what’s inside.”
I nodded. “Well I have 50 doctors coming tomorrow to my lecture, and I hand carried on the plane a box of 50 life size models of the male penis” he went on. “When I arrived here, I took the box with me when I disembarked from the plane, collected my check-in luggage, and put the box of willies on the top of my suitcase. Then I went through customs. However I was stopped by a female customs officer who wanted to know what was in the box. I was embarrassed, and tried to say “No don’t open as I thought it would be better for a male officer to see. But she got angry with me, hit the box, it fell off, the top opened and all my plastic penis models fell out all over the airport floor. I’ve been arrested – I think – for smuggling indecent materials into China. But I’m a member of the Royal College of Surgeons!” he completed, with some indignation.
It was hard for me to keep a straight face, and I’m pretty sure I burst out laughing.
So it was that I negotiated with the Customs officials, who after all, quickly saw that the penises were indeed medical props, and began to relent, but not before the good professor signed a “confession” and wrote an apology for “upsetting the dignity of a female customs officer” and pay a fine of RMB500 (which I paid for him) for bringing into the country “undeclared samples” (there is always a way into – and out of – trouble in China, and it almost always involves money). Penises retrieved, I took the professor back into Shanghai, brought him a whisky back at the Long Bar, and gradually he calmed down and began to see the funny side.
I’ve no idea how his conference went – but for sure I am positive he has been dining out for that story ever since he got back to the UK.
Other excerpts from the book “The Story Of A China Practice” will be serialized every day this week.
The series can be found here.
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