With a potential billion customers at stake, it sometimes feels these days as if there are almost as many 'how-to' business books about China. We review one of the best.

The instinct is for Chinese HR managers to give jobs to their friends

James McGregor, former China bureau chief for the Wall Street Journal and the author of "One Billion Customers: Lessons from the Front Lines of Doing Business in China" (a Wall Street Journal book published by Free Press and Simon and Schuster) began his career in China in 1990, at the same time my diplomatic family was posted there.

This was a unique time in Chinese history to be living in Beijing. In that early post-Tiananmen era, China had pariah status and retreated from the global stage for a couple of years, only to emerge in 1992 to begin its rise to the economic juggernaut it is today.

McGregor lived in China during its transformation. He's watched it all unfold, reported on it, and even moved from living in a rundown foreign compound, where journalists and diplomats alike were kept isolated from ordinary Chinese people, into the fancy western joint venture housing estates that expatriates now inhabit.

McGregor's lofty overview as a Mandarin-speaking economic journalist would be reason enough to read his opinions about the business climate in China. But in 1994, he switched gears and became a businessman himself, notably heading Dow Jones operations in Beijing and heading up the American Chamber of Commerce there as well. Today, he runs a business development firm for Westerners trying to succeed in the fast-growing China market. In others words, his China bona fides are impeccable.

 More important is that McGregor knows how to tell a story well. "One Billion Customers" is a collection of instructive personal stories of both successes and failures. He recounts in a highly readable narrative the experiences of companies large and small, many of them 'Wall Street royalty' who tried to do business with the 'Chinese Communist aristocracy' in matches one would think were made in heaven but went straight to hell. McGregor enlightens his readers—with much affectionate humour about the Chinese society he understands well—on the reasons sure-fire strategies derailed and the lessons which can and should be learned by newcomers to the scene.

 Just in case readers can't figure those lessons out for themselves, each chapter concludes with a section cheekily entitled "The Little Red Book of Business" which offers a synopsis of his major points. Many of them will surprise readers used to writers who tiptoe around Chinese cultural sensitivities. McGregor is a straight-shooter which makes his offering that much more useful to businesses putting millions of dollars on the line.

And at a time when staffing concerns and the attraction and retention of local talent has taken on great significance for multinational companies doing business in China, McGregor's stories hold lessons for HR.

"The position of HR chief in China is much more powerful than in the West because those who are hired often feel personally indebted," writes McGregor. 

In conversation with McGregor about his new book, he offered other critical lessons for HR in China:

• Keep control of the HR function:  "Your person in HR should be loyal to the company, not to their friends," he says, cautioning that the instinct is for Chinese HR managers to give jobs to their friends.

• Do spot checks on résumés: "This will ensure the best people are hired, not just friends of the HR person," says McGregor.

• Use multiple computer systems:  Ensuring that information is transparent is important because people use information as power. McGregor advises that companies have as many computer systems as possible to protect the transparency of the hiring and other business practices.

Finally, says McGregor, be clear on the concept of guanxi, as it is often misunderstood.

"Guanxi, the oft-cited Chinese word for relationships or connections, is overrated, temporary, non-transferable, and resides in the hands of the individual who has it," he believes. "Never, ever put your business in the position where you are dependent on one individual for access to government officials."

"Relationships don't make or break a business," he cautions. "Be sure to use them to protect your business, not build it."

For more information visit www.onebillioncustomers.com

January 2006

Robin Pascoe is the author of four books on global living and can be found at her on line community www.expatexpert.com

Subject: Doing business in China, HR management in China