What happened? Why return?

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Our “family vehicle” while in China – the local city bus.

Well, it’s been a while since I’ve written (that’s putting it mildly!).  Here’s why:

To recap: my wife, Gienah, and I went to Yunnan Province, China in August of 2014 to spend 2 years studying Mandarin language and Chinese culture full-time.  That part of the plan went well and our 2 years ended in June this past summer.

The next part of the plan was to buy, start or join a small business in China’s Yunnan Province with plans of being there for the next 10-15 years (or more).  Ideally, that business would have a strong clean transportation element.  That’s where we encountered some headwinds (putting it mildly, again!).

I’ve been trying to decide how to explain the challenges to people who are not familiar with the economic, regulatory and market conditions in Yunnan Province, China.

The shortest version is:  Our plans failed.

There, I said it.

Was it a lack of faith?  A lack of confidence?  Lack of vision?  Lack of determination?  Lack of skill?  Lack of effort?  I’ve asked these questions over and over and there is probably some truth to each of these shortcomings and more.

There is a longer version of the story, but I’m pretty sure no one wants to hear that.  There is a really short version, but it lacks the nuance and contextual grasp of conditions on-the-ground, in-the-street.  So, one option is to just pass, not even try to explain.  In a way, that’s the option I’ve chosen during the past 6 months since we returned to the States.  But, that seems pretty lame to me, so just in case anyone is interested in our experience, read on!

First, the cost structure of doing business in Yunnan has been increasing dramatically over the past 5 years.  For example, many local (Chinese) business owners regularly close their doors because their rent has unexpectedly increased by 2x…or more.  Labor rates have also seen upward pressure and as a result, for a number of industries, exporting products from China has become less and less competitive vs. Thailand, Vietnam, Indonesia and Malaysia.

Second, the local (micro) competitive environment among small businesses is extreme.  It is not uncommon to see a number of competitors (sometimes as many as 6 or more) open new businesses on the same street after a new business has achieved visible signs of success.  In some cases, these competitors are virtually next door and on the same side of the street!  Of course, if you’re the last person to open a store and struggle to differentiate your value proposition, the first thing you do is lower your price which often destroys the market for everyone, including the first mover.  These dynamics are common in the small (to medium) business space, but less common where the first mover has a clear technological advantage (as was the case in my previous work experience in China with clean transportation).  The bad news was that as a small (very small!) business investor, we were unlikely to enjoy even a fraction of the technological advantage I had experienced in the corporate world.

Third, the local regulatory environment and “business customs” were more difficult than anticipated, even for Chinese nationals.  I simply could not “get my head around” attempting to operate a small business as a Westerner with limited language skills and knowledge of local customs.  A quick example might help explain:  One of my local (Chinese) friends obtained the management contract for 3 hotels around the local lake.  This lake is a major tourist destination for Chinese and international travelers.  Less than one year later, he was preparing to sell/exit these contracts and relocate to Chiang Mai, Thailand.  Why?  According to him, the local authorities and sub-suppliers were impossible to do business with.  That was a daunting thing to hear, since he had over 28 years of tourism experience in Yunnan Province and as a native, he knew the local language and culture far better than I ever would.  There are many more stories like this one, but I must also say that we know several Westerners who have been doing business in Yunnan Province successfully for 5, 10 and even 20 years.  In some cases, they have recently closed their doors, or are struggling to figure out a sustainable strategy for keeping their doors open.  Others appear to be doing just fine.  I have a tremendous respect for these savvy entrepreneurs.  You know who you are…keep it up!  This experience has also produced in me a tremendous respect for those who immigrate to the US and start new businesses from scratch, often with very limited financial resources, limited local language skills and little knowledge of the local culture or regulatory requirements.

Fourth, it was really difficult to separate “fashion” from true “policy priorities” when it came to clean energy and clean transportation in our area.  Just before we arrived in Yunnan, the local government had taken on a visionary initiative to install wind/solar powered lighting around the lake – almost 100 miles of continuous street lights.  After less than a year or two, it was not uncommon to see 50%, 70% or even 90% of the small wind turbines on top of these light poles no longer functioning.  And, I never could figure out where the batteries were located for storing the solar or wind energy to power the lights after dark (or when the wind was not blowing).  Yet, the lights continued to operate.  Were they simply connected to the grid and the wind/solar elements were just window-dressing?  Or, was each solar panel and wind generator tied to the grid to provide distributed power generation?  (Not likely).

Perhaps I could (should) have been part of the solution to help local officials turn these aging and non-functioning assets into much more productive elements of a clean-energy system.  On the other hand, the fact that they were visibly dysfunctional yet not receiving any maintenance or repair attention may have been an indicator that these were installed to achieve a goal that was not purely related to clean energy.  In addition to this example, I was daily reminded of the razor thin margins that local transportation companies faced and the direct impact these economics had on the level of technology in their fleet.  Our primary “family vehicle” (the local city bus) was so old and poorly maintained that it was hard to imagine clean technologies would be introduced in the near-term.  Like many things in China: so many questions…not so many answers.

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Yes, these are actual photos of the bus we often caught into town.

Finally, after 2 years of language study, my wife and I did pass the HSK Level 3 language fluency exam (thank you Li Laoshi, Zhou Laoshi and Ellen!).  Passing the HSK 3 was a real win for me since I struggled with the language much more than my wife.  Nevertheless, for me personally, HSK 3 hardly felt like sufficient language fluency for me to be competent doing business with financial investments in a responsible way.

That’s the short(er) version.  Somehow it sounds a little better to me than the shortest version!

In the spirit of full disclosure, I should also say there were opportunities to do general management work in the major cities, including the possibility of work as a “New Energy” executive with some of the domestic vehicle OEMs.  But, the one part of our vision that never changed was a strong desire to live in Yunnan Province.  After 2 years on-the-ground in China, that part of the vision was only reinforced.  Our desire to live in one of China’s major cities and forge a completely new life with new friends, new communities, new utilities, new water supply companies, new markets, new transportation systems, etc. paled in comparison to our desire to be in Yunnan.  Furthermore, we did not go to China with the support network many expats experience, and if we were to stay, we would have wanted to remain in the local community where we had built close friendships and felt connected to the local community and culture.

All that to say we have returned to the States.  It broke our hearts to leave many special friends in Yunnan, and we continue to miss them and so many things about the local community and culture.  After spending several months in Colorado studying to take the HSK 3 exam, we migrated south to Texas where we are now much closer to family on both sides.  For those of you who have lived outside the US, you will appreciate the reality that “returning” culture-shock can be just as difficult as the “going” culture-shock.  We are living witnesses to that reality.  We are also living witnesses to the beauty and unique cultural elements that make the US, Colorado and Texas great places to live and visit!

Despite the disappointment of not seeing our plans come to fruition as we had envisioned, we are so thankful to God for our time in China.  It was truly one of the most enriching experiences of our lives.  Now, we’re excited to see what He has planned for us next.

If you’re interested, please watch for an upcoming post entitled:  “What’s Next?”

Copyright © Kevin Beaty, YUNEV and “Feet on the Ground…”, 2017.  All rights reserved.