Emerging China

Re: Who has a better business climate?

More than a decade ago I was involved with a one of the few non-partnership (totally foreign-owned) companies that was growing a division in Beijing. One day the company got a knock at the door and a gentleman presented himself with a letter from the city government stating he was authorized to collect fees from foreign-owned enterprises. He said he needed $50K or so as our share of a half-million dollar bill to complete work on the road bordering our business and an onramp to the new (outer ring) highway. We asked for a meeting with his bosses in the bureaucracy and after discussions with them and two other companies along the same street in the same position as us, we paid. And paid again the year after for more improvements. All of which exceeded the expectations they had set initially about what was to be done (i.e. more than expected in less than the estimated time & disruption. To say nothing of how hard they worked on the roads after midnight. As an engineer, I followed some of the work pretty closely given it was an exhilarating mix of “arm-strong” and modern technology – where the product (in this case an cantilevered overpass w/ high-tech reinforced concrete, with discipline and care required in the pouring and curing) was as good or better than anything I’ve seen in the U.S.)

What was interesting was how apologetic he (the tax collector) was. He’d had some U.S. education and understood U.S. county and city property tax customs. He admitted that they were only taxing foreign entities but that they had a plan and political support to also begin taxing the partnership companies, and then the china-only companies. And that they were embarrassed that they lacked rigorous budgets and ability to project taxes for five years (to allow businesses to plan). He said he would not be proud of his work until they could do this.

In his office I found books by Friedman (and Rand!). As well as in his cohort’s office on the floor above.

This same international company regularly has local U.S. municipalities hold its business and building permits hostage for supposedly related improvements (but in locations that clearly have no relationship). And the county and city bureaucracies are shameless in their demands, no humility, no embarrassment, no apologies.

Not a good sign.

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