"Their ideas about quality and value are immature", explains Leo Kershteyn, an electrical engineer turned product manager, when asked about Chinese suppliers. Nevertheless, the commercial opportunities in China are "incredible". From his office in Troy, New York, the Russian-born engineer makes a bold prediction. Within 10 years, cars from China's Chery Automobile Co. will be all over America's roads.
Who is Leo Kershteyn?
Leo Kershteyn was born in St. Petersburg, Russia when that city was known as Leningrad and Russia was still part of the Soviet Union. As a boy, he left Russia for the United States, which took him through Austria and Italy as part of the emigration process. After settling in Atlanta, Kershteyn enrolled at Georgia Tech, where he earned a bachelor's degree in electrical engineering. Today, he is working on his Master's in Business Administration (MBA) at the State University of New York (SUNY) at Albany.
Kershteyn's journey from Europe to the United States was the first of many travels. His professional experience includes stints in program management with Susteen Software, a maker of data synchronization applications; and LSI Logic, a leading semiconductor manufacturer. At both companies, Kershteyn managed accounts, met with original equipment manufacturers (OEMs), and worked with cross-functional teams. He also traveled across Asia, visiting all three of China's commercial centers: Hong Kong, Shanghai, and Beijing.
A Tale of Two Chinas
During the Cold War, proponents of "two Chinas" argued that the People's Republic of China (PRC) and the Republic of China (ROC) were separate, independent states. Today, differences within "Red China" itself may be as important as the long-standing dispute between the communist mainland and the island of Taiwan. For observers like Leo Kershteyn, understanding the disparity between China's "pseudo-capitalist" commercial centers and communist-run factories is paramount.
Although businesses in Hong Kong, Shanghai and Beijing regularly interact with foreign companies, most Chinese manufacturers operate under communist rule. Consequently, Kershteyn explains, "the supply chain is not as committed to the corporate environment". Bribery, an enduring feature of the Russian economic system, is a fact in life in China. The right product and the right connections are useful, but payoffs to communist officials are more valuable. "The business culture is laden with bribery", explains Kershteyn, and corruption "goes all the way to the top."
Crime and Punishment
Unfortunately, bribery is just one of the challenges that companies face when they do business with China. Because that ancient nation is still an immature "commercial culture", Chinese suppliers are anxious to "say yes" without regard to consequences. As an example, Kershteyn told the story of a Chinese drug manufacturer with a new product that wasn't ready for testing. Instead of seeking a reprieve from "the Chinese version of the FDA", the manufacturer removed the labeling from a comparable American drug company (Abbott) and submitted the sample. It took years for the Chinese government to address the situation.
So why does Leo Kershteyn believe that the commercial opportunities in China are so "incredible"? And what advice does he have for companies that want to do business with Chinese suppliers? Click here for Part 2 of this interview.
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Re: Doing Business with China - Part 1
