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DIALOGUE: Standing Out and Making It. Interview with Shaun Rein
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Standing Out and Making It

Interview with Shaun Rein

By Mike Cormack

照片 004 副本       雷小山(Shaun Rein )是中国市场研究集团(CMR)创始人、董事总经理。CMR是一家针对中国市场的世界领先的市场研究、战略管理咨询公司。拥有麦吉尔大学荣誉学士学位、哈佛大学中国经济硕士学位的他曾为财富500强企业及领先的中国企业、私人股本公司、中小企业以及对冲基金等提供战略管理与咨询。它的两本著作《廉价中国的终结:可能扰乱世界的经济和文化趋势》(The End of Cheap China- Economic and Cultural Trends that Will Disrupt the World)以及《山寨中国的终结:亚洲创造力、创新力和个人主义的崛起》(The End of Copycat China – The Rise of Creativity, Innovation and Individualism in Asia)被《出版人周刊》评为2012年前十名的商业书籍,更受到《金融时报》的好评。

      这位目前任圣保罗的亚洲研究学会(School Asia Council)成员的中国市场专家经常在《华尔街日报》、《财富》杂志、《金融时报》等媒体上发表文章,为《纽约时报》撰写专栏,并经常在大媒体的财经类栏目中发表评论,也常为大中小各种规模的企业进行主题演讲。

      在采访中,健谈的他从学习时代谈到工作创业。雷小山的父亲是犹太人出身,母亲是中国人,他在上中学时去到了寄宿制学校圣保罗,同学都认为他的父亲一定是一个投资银行家什么的;在加拿大麦吉尔大学时他为学生社团拉到了不少赞助,显示出不凡的商业头脑。在天津创业失败后,他加入了一家亚洲创业管理的风投公司,而后转做天使投资。在咨询需求的契机下,他创办了CMR并成功运作着CMR和CMR Capital。在咨询管理方面,雷小山力求卓越。

       当他的著作《廉价中国的终结:可能扰乱世界的经济和文化趋势》发表后,饱受外界批评。很多人说中国就是一个便宜产品的生产地,但是事实证明雷小山是对的。五年后,上海地区的工资每年都在上浮,中国劳动力已经不再便宜。要想进入中国市场,已经不能只看简单的制造业产品,而要做高端消费品才能有竞争优势。雷小山表示,不少公司正在向西迁移,将工厂移到一些劳动力相对便宜的省份。关于他自己在2014年出版的新书:《山寨中国的终结:亚洲创造力、创新力和个人主义的崛起》,雷小山认为,中国如今将开启创新之路,因为它不得不如此,而过去之所以没这么做,也仅仅是因为还不需要。他称,中国企业没有创造力,并非因为中国是共产党领导、个人自由有限的国家。他表示,像学者普诺斯•莫杜库塔斯(Panos Mourdoukoutas) 2012年在《福布斯》(Forbes)上的主张一样,认为中国无法创新只是因为一些人眼中的“尊孔”,也是不对的。对雷小山来说,如此说法从历史的角度来看是错误的,因为哪怕在孔子影响最盛之时,这个国家也出现了伟大的创新,比如“火药、多级火箭和指南针”。

      雷小山表示,目前的中国市场竞争已经更加激烈,过去雀巢和联合利华在中国占据50-70%的市场,然而现在他们的市场份额被无数崛起的民族企业挤占得所剩无几。外企想要在中国发展,需要转向高端产业。

IMG 5252 Shaun Rein is best known as the author of ‘The End of Cheap China’ and ‘The End of Copycat China’, two prescient books examining the most recent trends in Chinese economy. He’s also the founder and MD of China Market Research Group, a high-end consultancy firm. With these distinguished feathers in his cap, he’s a man plugged into the risks and rewards of the Chinese business sector. He spoke to Business Tianjin about his starting out in business, his experiences in the city and what it takes to fend off Deloitte and McKinsey.

hl dialogue2You seem to have had an entrepreneurial bent from early days with Reino Productions. What got you started?

Actually I’m the first businessman in my family for many generations. I come from four or five generations of dancers. But my father always taught me to do what I love – he didn’t care about money, it was always about passion. I was at McGill University in Canada when I started Reino productions. I became the social director of McGill Chinese Students Association and organized parties and as I was making so much money for the student group I said, “Why don’t I do this as a part-time job?” I pulled in about $400,000 in profit when I was 19, so that was when I got the bug for starting companies.
 

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My real goal then was to become a diplomat, so I went to Harvard for graduate studies on Chinese economy. But then I fell in love with a Chinese woman from Beijing and that ended my career in diplomacy. There was no way I would get clearance. So I ended up in business really by accident and embarked on entrepreneurship really for two reasons. Firstly, it was because I like the challenge of building something different. Secondly, I got rejected by virtually every company I applied to. So, literally, I went into entrepreneurship because I had to – I’ve always been kind of a misfit.
 

I’m half-Jewish on my father’s side, and I’m Chinese on my mother’s side so I’m definitely not from a gilded background. I’m from a poor background and have had to fight tooth and nail for everything. I went to St Paul’s which is one of the leading boarding schools in the US; it’s where John Kerry went. But the school environment definitely didn’t accept me, being a Jewish-Chinese guy. I think I’ve succeeded because I’ve fought so hard every single step of the way and tried harder than everyone else. I start work at 5 am every day and it’s precisely because these people looked down upon me. Now that I’ve done okay, they’re starting to ask me for jobs. But a lot of people think my father must have been an investment banker or something like that.

hl dialogueWhy did you choose Tianjin as the location when you founded ‘Little Mountain’? How did that play out?

McGill had a program with Nankai University so I moved to Tianjin to study the language in 1997 when there were around 100 foreigners in the city (except Koreans and Japanese). It was an untapped market. I spoke to wealthy people in Beijing and they said, “Don’t go to Tianjin to invest, it’s too backward, it’s got too many state-owned enterprises that control everything.” So I figured that since everybody is telling not to do something, I should probably go ahead and do it. We taught English to 5-14 year-olds and everybody I would bring in as a teacher went to Harvard or taught at Harvard. The problem was I couldn’t get anybody from Harvard to come to Tianjin, so it was a disaster, but from that failure I learned how to do business.
 

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You then worked for the educational software firm WebCT – what was your role?

After ‘Little Mountain’ failed, I ended up joining a venture capital firm called Inter Asia Venture Management. I was looking for education IT investments when I saw WebCT and I wanted to invest in it. But they said, “We don’t need your money but why don’t you run China-Taiwan-South Korea for us?” So I ran three markets for WebCT. That was a great experience because I learned how to negotiate with Chinese universities, with the Ministry of Education and how to set up distribution partnerships. I did that for a year and then we sold it. I was thinking about going back to venture capital but I probably wasn’t good enough to get into one of the two or three firms which I was really interested in at the time. So I decided to open up China Market Research (CMR) to do angel investing.
 

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But then Apple called me and said, “We need a strategy for China”, and the same year the luxury player Lane Crawford also called. So I decided to hire a few guys and do research. Basically the idea was that angel investment can take ten years or longer for any return, so the cash flow comes from consulting. Then in 2007 we got a call from Dupont and they said “We’re looking for a five-year growth strategy and we’ll have you compete against Bain Consulting and Deloitte.” I went in and said, “Guys, I know nothing about chemicals. If you’re going to work with me, you’re going to have to train me about what titanium dioxide is because I’ve never heard of it. But I know how to do research in China and I know how to develop a marketing and sales strategy for China specifically, which you obviously have no idea how to do because you’re the best in chemicals.”
 

So they chose me. When they asked what I would charge I said, “Whatever Deloitte’s is, triple it”, and they said okay. That’s when I realized I had a real company. So then I split CMR into two – CMR Consulting, which I run, and CMR Capital, which my wife runs and where we make a lot of money through investments.
 

CJ4 9482Can you describe CMR – the number of employees, its culture? What are the biggest challenges in running it?

We position ourselves at the highest end of the spectrum. We say to clients, “If you come to China, if you want a big management consultant firm, go to McKinsey – they’re great. They’re like a Mercedes – you can’t go wrong. But if you want a Rolls-Royce, come to CMR, because we’re frankly better.” In order to get away with that, I have to hire the smartest people and it’s very difficult. Today we got rejected by a girl. She went to Tsinghua and Cornell and she really wanted to work for us but her parents said she had to get a Shanghai hukou. The thing is, we have small registered capital and couldn’t get one for her anymore. Two years ago we could have but the Shanghai government changed the laws last year. What keeps me awake at night is whether I’ll have enough talented team members. I’m not worried about getting clients: we have a position of excellence, so smart companies will find us. But at the end of the day it’s down to the in-house talent.
 

How would your staff describe you, in your opinion?

Different! I like to have fun, I like looking at things differently and I guess the mistake people make is that they think I’m from the establishment. But I’m actually as far away from the establishment as can be. However, I start work at 5 am every day. I work extremely hard, I’m driven by fear of failure, I’m petrified of going broke, I’m petrified of CMR not doing well, I’m petrified of my books not making it.
 

hl dialogue4You’re probably best known as the author of ‘The End of Cheap China’. What are the effects of the end of cheap labour pool and how do you think we’re seeing them being played out?

When it came out I was heavily criticized. People said that China was a cheap place and would always be, and I’ve been proven 100% right. Five years later salaries are still going up 10-15% a year, it’s only about 20% cheaper to manufacture in China than in the United States. People need to understand that China is no longer cheap for labour and that’s not going to change. Secondly, rents are soaring. So the only time you want to manufacture in China right now is if you’re trying to sell into the Chinese market or if you’re going into high-end value-added manufacturing, because it’s still cheaper to do high-end consumer electronics here than in the United States.
 

There are some things companies are doing to handle this. They’re moving west, into Sichuan or Chongqing. They’re expanding operations in the United States. And they’re working on worker efficiency and automation. Automation grew about 58% last year, there’s a lot of investment in robots and China is really leading the way in manufacturing innovation.
 

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Your second book ‘The End of Copycat China’ was published in 2014. Your thesis was that Chinese companies did not innovate technologically because they didn’t have to but now they’re doing so. We’ve seen a huge wave of M&As – is that in pursuit of technology?

It’s hard for lots of Chinese companies to develop technology internally so they either buy technology from overseas or they buy the companies. Germany actually exports more to China than China exports to Germany. There is some technology innovation that’s taking place organically with companies like Alibaba and Tencent. But there’s definitely innovation in China. There has to be, because if companies don’t focus on innovation, they’re not going to be able to earn profits. Even SOEs understand this. A couple of weeks ago, I gave a keynote as the State-owned Assets Supervision and Administration Commission (SASAC). They brought me in to give a keynote to 200 leading cadres from SOEs to talk about how innovation is changing China and how they have to reform and recruit the right talent in order to keep innovating. Even the SOEs understand this.
 

The question is does the senior government get it? And because of the way SOEs are set up, where they are very risk-averse, how do you create the right incentives for SOEs and their executives to focus on innovation? If you are in an SOE, if you innovate but you lose a lot of money, you’re not going to get promoted. And if you lose your job you’ll probably never get a good job in an SOE. So they have to change the culture. And that’s what SASAC understands and why they brought me in to talk to the cadres. The private sector really gets it. They’re making tons of money and they understand that the SOEs are dinosaurs. If Bank of China was halfway decent, there’s no way anyone would have made AliPay.
 

CJ4 9499What do you think of the current business environment for foreign companies in China? Lots of Chambers of Commerce have said that it is getting more and more difficult. Or is it a more level playing field?

It’s a mix. It is a much more difficult playing field for Western businesses but it’s not because of protectionism - there has always been protectionism. But a few things are happening. One is that the government doesn’t need western companies as much, so they have implemented tax equalization. Fifteen years ago, American and British companies didn’t need to pay tax for a number of years while Chinese companies did. Secondly, you’re seeing that Chinese companies are better run than they were before. They’re well capitalized, ambitious and fast-moving.
 

Are foreign companies in general approaching Chinese consumers in the right way? So many seem to be based on luxury and premium end of the market - is this based on the Western mystique and can this last?

It can’t last and that’s because Chinese firms are positioning themselves above their Western counterparts. Nestlé and Unilever used to control 50-70% of the Chinese market in 2000, now they’re like 3% because Mengniu and other high-end Chinese dairy companies have yoghurts and ice-creams that are 30-100% more expensive than anything from the west. But you can’t compete with Chinese companies on price - they can always undercut you - so Western companies have to go at the premium sector or they need to make acquisitions. What they can’t do is downgrade their brands, which Johnson & Johnson and P&G have done too much. If you look at P&G with their Pampers diaper line, they sell an inferior product in China. We’ve done tests where they leak more than the Hong Kong versions because they use cheaper quality materials and you can’t do that.
 

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