Archive for the Cultural Observations. Category

It’s a Culture Thing.

Posted in Business Culture in China, Cultural Observations. with tags , , , , on December 16, 2013 by Ben Brown

One of my colleagues awhile back noted that the biggest factor differentiating China and North America is immigration. My Chinese friends will often tell me they live in a multicultural society due to all the minority groups that live scattered across the country.

While there are sometimes large cultural differences between minority groups in China, I disagree that this puts my Chinese friends in a similar situation to the US or Canada, where over 90% of the people hail from ancestry tracing back to other parts of the world.

In order to have sanity in the US, we need to work hard on a daily basis to eliminate cultural favoritism in our laws and our society. American culture is in itself an oxymoron of sorts. Almost all of our culture and heritage hail from other parts of the world. New York Style pizza vs. Chicago Deep Dish? These both originate from Italy if you go back far enough. And going back doesn’t take long. Just three centuries ago there wasn’t much in America once you got a few hundred miles west of the Atlantic.

China has spent 5000 years developing an intricate, complex culture filled with minute details that everyone is expected to know. It’s much less forgiving than the US, where for the most part the culture is an amalgamation of every other country. Our general culture in business and politics is focused for the most part on eliminating cultural norms. When we negotiate, we do it on the table with paper and pen. Hash out the terms, do a SWOT analysis, discuss synergies and potential issues. Talk about a price for services rendered, have a bunch of lawyers look at the agreement terms and draw up a contract. We’re blunt and impersonal.

In China it’s much more important to understand the cultural complexities that surround you. The culture is such that I can lose face in a business meeting by simply failing to respond appropriately to a comment. A perfect example happened in Toronto a few months back. I was with my boss at a meeting between him and the head of a Chinese bank branch in Toronto. As we were heading down to the lobby in the elevator, I complemented the branch manager on having a very nice office. He immediately replied that the walls were too bare, the office too cold and undecorated. I told him it was unnecessary to have lots of decor in an office that had such a great view of downtown Toronto from every window. Everybody laughed and complemented me on my grasp of the culture and language. But had I said nothing, I would have left the bank branch manager with a sour taste in his mouth because I complemented him on his office, then he downplayed the complement by stating one of the office’s major weaknesses. Had I not responded with a reason for my initial complement that countered his self-criticism, my boss or somebody else would have either had to step in with something nice to say or they would have to apologize for the foreigner who didn’t understand.

This type of back-and-forth etiquette does not exist in the North American work place, unless you happen to be doing business with a Chinese owner who still adheres to those norms. You can get through these cultural differences and get things done, but it’s much harder to develop trust.

I’ve been studying this culture for two decades and spent around four years completely immersed in it, rarely speaking anything but Chinese. I am still learning. I will be for the rest of my life. But it’s a fun, interesting, sometimes horribly embarrassing challenge that I constantly learn from. And I am not just learning about Chinese culture. I’m learning about myself. I’m learning how to look at problems from multiple perspectives. I’m learning to understand what the real challenges are in a business transaction rather than what my own cultural background tells me.


The Power Struggle and Patriotism.

Posted in Business Culture in China, Cultural Observations., Doing Business with tags , , , , , on December 13, 2013 by Ben Brown

There is a constant theme that runs through acquisitions and joint venture projects, both successful and failed.

Mutual distrust / disrespect.

Beyond cultural differences, this can put a serious twist into your plans for a new business.

Many, many times, I’ve heard people say “We’re all interested in making a profit. Nothing else beyond that should matter. The bottom line is the bottom line. They are just as interested in making a profit as we are!”

This is all true, but it is inaccurate and too broad.

Everyone wants to make a profit, but how to go about doing that is often the challenge.

I’ve seen it over and over again with western acquisitions of Chinese companies, Chinese acquisitions of western companies, and joint venture agreements.

I don’t respect your opinion, and you don’t respect mine.

Both sides feel they know the best way of doing things, and both sides feel the other side is throwing a wrench directly into their plans. Both sides feel the other side doesn’t understand “how things are done here / in the world / at my company / in our corporate culture.

The biggest challenge, I think, right from the beginning of any merger, cooperative agreement, acquisition or even manufacturing contract, is to sort this out as clearly as possible. It is of utmost importance to get communication lines as open and blunt as humanly possible so that all parties can be clear on where they stand. In international environments, buy-in becomes even more important. Finding ways to develop mutual respect, an understanding of all the complexities the other side sees that you don’t, and a level of trust in your counterpart that they have something to contribute to this whole plan is vital, and regularly ignored.

Before you enter China, or go into a manufacturing agreement, or get in any other way involved in global business, do yourself a favor and learn as much as you can about that country’s business culture. Talk to not just me, but to a few people. Talk to anyone who is willing to give you their opinions. And like medical advice, get two opinions. At least. I’ve had people tell me it is impossible to open a business in China without bribing, gifts, and hazy books. I’ve had people tell me they’ve done just fine here cleanly. And I’ve heard every story in between.

But before you even get that far, make sure you can get your partner to agree with you, respect you, and trust you. And while you’re doing it, take a little time to realize you need to do the exact same thing. A perfect example would be this:

As Americans, most of us are very opinionated about the subject of politics. We are also very passionate about our country and the freedoms it affords us. We love the USA. Sometimes our version of love is constant, scathing criticism, but it is still a form of love. Possibly the deepest form of love.

We come to a country like China, with a completely different political alignment, and many of us naturally assume the businessmen and women we’re here to work with are oppressed and suffering under the thumb of their overbearing government, OR that they’re a part of that government and just looking for another handout.

In 99% of all cases, this is not true. This is a stereotype created in part by the news (liberal and conservative alike). It’s not a conspiracy. It’s just that news reports in the US will focus on what we as Americans consider valuable.

China’s value systems are different from our own. Every time somebody goes nuts in the US and guns down people, I hear about it from confused but patriotic taxi drivers. It took me a number of years (and international incidents between our two countries) before it finally dawned on me that most of the Chinese people I deal with on a daily basis love their government. Look where their grandparents were 4 decades ago. Now look where this country is now. Complaining about the social construct and government structure in China to someone who now owns their own home and car and has a good job will sound ludicrous to most of them. Sure, some of them would like more freedoms, but so would most of my American friends. And so would I. That doesn’t mean we’re not patriotic.

I am a passionate, blue-blooded (whatever that means) American. I love my country. I am somewhat conservative fiscally but very liberal socially. I love middle-of-the-road politics where we all reach across the isle and get along. I am bound to have some sort of divisive opinion no matter which social clan I find myself interacting with. But I love my country.

Start your conversations with a Chinese businessperson assuming the same is true for them and it’ll come across in your conversations and your actions. They will notice it. They will respect the gesture, and they will in most cases reciprocate.

The Meeting Dynamic.

Posted in Business Culture in China, Cultural Observations., Doing Business with tags , , , , , , , on December 13, 2013 by Ben Brown

There is an interesting phenomenon in Chinese business meetings that always ruffles the feathers of my background in operations management, specifically as it relates to efficiency.

China has more of one thing than anywhere else in the world: People. It has always been a large country.

China likes to show off its people. Over the years I’ve been party to many meetings in China.

In the West, a high-level business meeting between two parties will include, generally, people who need to be there. Maybe there will be one person who is there to learn, but everyone else has some sort of role.

Chinese meetings are different. There will often be five, six or more people representing each company at a meeting where really, only three or at most four people will do any talking. Some of the others at the meeting may be there to advise the leaders afterwards. Generally though, there are a lot of people there who are really just ‘filler’. Sometimes I’ve gotten to be there as an adviser. Occasionally I’ve been one of the guys doing the talking. Most of the time, I take notes nobody will ever ask me about and discreetly look up the occasional Chinese word or phrase I didn’t understand. It’s a good opportunity to write down tasks I might need to take care of by the end of the day.

It’s important to show a lot of people at these meetings to either display that you are powerful, or to show respect to a government organization that might be unhappy to be greeted with only two or three people representing the business.

It’s just another example of how many cultural differences there are between doing business here and conducting the same transaction in the west.

In North America specifically, we strive to eliminate cultural aspects of doing business and make everything about the agreement on the table. People can say any crazy thing they want in a meeting, as long as it ends with a clearly-stated contract that delineates every last item of business loophole free.

In China, I get many compliments on how much I’ve learned about Chinese culture and how well I handle situations. Still, I make about two cultural mistakes during a good week. I’m usually given a bit of leeway because I’m a foreigner, which I appreciate greatly. This culture is very complex. I’ve seen locals that make more mistakes than I do. Sea Turtles returning from ten or more years abroad bring a refreshing sense of openness to a lot of meetings, but many also find themselves stumbling to re-balance after being gone for so long. There are simply a lot of rules to remember.

Awhile back, at a previous company, I had the privilege of attending a meeting between a Chinese company and an American company. They had formed a joint venture. The Americans were visiting Chongqing. One of them noted to me that when the Chinese had come to the US, they brought six people over. The Americans on this trip consisted of the Managing Director and the project manager.

The Chinese side had 10 people.

But the real difference was the power dynamic. On the Chinese side, the guy that did 99% of the talking was the leader. Everyone else sat quietly for the most part. The organization on a whole was obviously very top-down. On the US side, there were lots of side-bar discussions going on between the two lonely guys sitting there and they would interrupt each other as they tried to clarify points to the Chinese counterparts.

This reflects a difference not just in presentation but in cultural approach, collective vs. individual decision-making processes, and separation of authority. I’m an American. Personally, I prefer the collective approach to doing business. I like to be able to make my input in meetings. I like to speak up without being asked to. It takes a great deal of restraint for me to remain silent as complicated discussions take place. In fact, I’ve made it a habit since arriving in China to make sure I’ve saved up enough free cash from any new job so that I can afford six months of unemployment before I start saying much in meetings. This usually also forces me to get established somewhere so that my comments don’t come off as abrasive. It also takes a lot of effort to not be overbearing. As Americans, one of our favorite pastimes in a business environment is to tell people what we think. Especially if we completely disagree with an approach being taken by leadership. In China, it’s not possible to raise your voice and express opinions without being first asked to do so. It’s even more inappropriate to say something contradictory to the leadership.

The irony, of course, is that western businessmen coming to China to conduct business may think everything is going just fine at first. This is because it’s also generally not considered appropriate to tell anyone that they’re stepping on cultural toes.

A few years ago when I was living in the States, I regularly heard businessmen coming back from some of their first trips to China say “I don’t know why everyone talks about the culture being so different over there. I went over and had no problems. Business is business. Just get the deal done and you’ll be fine.”

When I would bump into them again a year later, the story would be different. It would be a lot of “My Chinese counterpart is destroying our business because he’s not listening to me, he’s not doing what I told him to do, blah blah…” If I’m feeling like having an argument, I tell the person that maybe, just maybe, they should learn to communicate a little better from a culturally-competent perspective so that they can actually move forward instead of simply barking orders and complaining that everything is being done improperly. Most of the time, though, I wait for the other shoe to drop. I ask them how their last trip to China was aside from the meeting. Their responses are usually negative. They complain about a lot of things being different. Basically, they’re starting to notice that the culture is totally different from their own, and they’re trying to change things.

That’s absolutely impossible.

The only thing that can be changed is you. Changing the way you deliver the message can make the message itself more digestible to the guy sitting across form you with nine silent subordinates. When I’m in China, I have the benefit of seeing the differences between the culture I’m in and the culture I came from. I’ve lived here long enough to have my eyes opened a bit. It’s my responsibility to see those differences and adapt my approach to everything so that it fits into my counterpart’s cultural comfort zone.

Developing Business Relationships. And Bribing in China.

Posted in Business Culture in China, Cultural Observations. with tags , , , , , on December 8, 2013 by Ben Brown

ben hot pot

Every self-respecting follower of Chinese culture and business has to, at some point, post an article on networking, or “guanxi”.

Ironically, there isn’t a word in Chinese for “Networking” that I’ve been able to find thus far.

Building guanxi means creating close personal relationships with business partners so that you may work together on a higher level of mutually-beneficial trust.

In the US, when we want to do a business deal, we find the best candidates available, approach them with our plan, sit down for a few meetings to discuss terms, hammer out a contract and sign it. Then we begin working together.

This system of doing things exists in China as well, but only as a last-ditch option. Usually, you want to develop a relationship with somebody before they will listen to you. This is because, in Chinese culture and business, strong bonds are formed in the most inner circle of friends. Outside of that circle, there are 1.3 billion “other” people that you cannot trust.

I know of businessmen who lived in China for 20 years and said “You can’t get involved in bribing people. Once you open that door it just gets bigger, and increasing amounts of money are expected to flow through it”. I’ve also met businessmen who lived in China for 20 years and said “You must bribe people if you’re going to do any successful business in China”.

China is a country of contradiction. Both statements above are 100% true. How is this possible?

Those in the “can’t bribe” camp were either in very very large companies that easily created guanxi through possession of a huge brand name or technology that nearly everyone in China wanted to get their hands on. Or they have and use lawyers to walk the razor’s edge of what’s acceptable according to their own country’s laws. Most of the “must bribe” camp ends up represented by smaller businesses who refrain from entering the country out of a negative view of how things operate over here. They also don’t have any guanxi. There are no people willing to help them out based on a strong sense of mutual trust.

There is also “the third possibility”. Western companies entering China form partnerships, or hire consulting firms or advisers, that smooth over issues with local entities. In some cases, these companies artfully explain to the western firm that they will take care of everything. Sometimes this involves leveraging their guanxi to get a small business through the process. Some of the things that transpire may or may not be above board by western standards. But the western company has no idea what’s going on other than the consulting firm has handled all registration efforts with the local government.

So what if you need to develop guanxi quickly?

I have a friend in China, a successful artist. He’s married to a former Olympic diver. About eight months ago his wife held a party for all of her old diving friends. This included a power couple: the husband is now an actor and former Olympic diver. His wife is a famous singer.

My friend, at one point, made a bet for a lot of money over a drinking game common in China. I’ve seen him lose this game a few times, but never for money unless he intended to. The case was the same here. He last a LOT of money. I watched him do it. But when I got home that night and thought about it, I realized the chances of a guy who spent half of his adult life training to be an Olympian probably didn’t spend much time in karaoke bars playing drinking games. It was highly unlikely that he just waltzed in to the evening with the honed skill level required to beat my friend. It was even less likely that my friend would bet that much money unless he expected to lose it.

My friend was, essentially, giving the superstar a gift that would ensure he wouldn’t be forgotten. Later, I assume the superstar referred other wealthy friends to my artist friend to buy paintings for their new office building or home.

Was this a bribe? Or was it an investment? If this happened between a company and a government official I think most westerners would call it a bribe. I think most Chinese people would call it “The way things are here”.

I’m not coming down one way or the other on the subject of bribing. I’m just trying to give my readers a clear understanding of how it works over here. This is what the terrain is like if you decide you’d like to enter this market.

But there is a point in business culture in China where guanxi and building it through bribes will come up. There are also cases where it is never needed. The picture in this blog is me with a group of my oldest friends in China. I’ve never bribed any of these guys, and they’ve never bribed me. This is my inner circle. When I decide to do business in China, I talk to these guys first. They are artists, lawyers, finance gurus and media experts. They are well-established and well-connected. All of them, at one point throughout China’s development, have had to make business deals that would definitely be marked down in the “bribe” category by western standards. I’ve known them since the 90s. We are friends, but that’s where we’ll do business as well. Because we can trust each other.

The single best tool one needs to enter the Chinese market, especially as a small business, is an understanding of the culture. If you want to sign manufacturing agreements for export or enter the domestic retail market, or do business in or with China in any way, you need to understand the culture or you need to find an employee or a business partner or adviser who does. You need to find a way to navigate the terrain without crossing any legal lines in your own country while simultaneously navigating a complicated culture where gifts are the norm between businesses. Dave Howard, owner of Howard Communications Ltd., prompted me to re-write much of this blog because he pointed out that small businesses have less leverage than large corporations due to the lack of lawyers, money and power. I agree with him on this point. My original intention, which was not conveyed, was to point out that small businesses are often afraid to enter the market due to their perception that they’ll be required to take unscrupulous or illegal action to be successful. This is not usually true.

Even large businesses, however, will be more successful if they learn about the culture before plunking themselves down in China. As someone who speaks the language and has been traveling to this country since 1994, I can attest to the complexity of doing business here and the utter importance of knowing as much as possible about how to navigate the landscape from both the western legal perspective and the Chinese cultural structure. A melding of the two is necessary to achieve success.

An update after a long absence.

Posted in Business Culture in China, Cultural Observations. on July 2, 2011 by Ben Brown

Yao Wei and Shen Hao
In March I took my first trip to China since 2008. I got to visit many friends, including Yao Wei and Shen Hao (Pictured above. We’ve been friends since 1994, when I first went to China).

The trip in 2008 was my first since 2001, so the changes I witnessed then, as the paralympics were wrapping up in Beijing and the whole country seemed mesmerized by the afterglow of its Olympic-hosting accomplishment, far outnumbered the Changes I witnessed in 2011.

But I was amazed at how much Chongqing had changed in those two years. The Jiefang Clock Tower was still in the same spot, and most of the large buildings in that square were still the same, but there were other stunning changes.

I went to meet an old friend from 2001, who had returned to China from Alabama years ago to continue teaching in China. He told me to meet him at Starbucks. I went to the wrong Starbucks. When I was living in Chongqing in the late 90s, it would be impossible to go to the wrong Starbucks. There were none. One could also not go to the wrong McDonald’s (no McDonald’s) or the wrong KFC (only one KFC).

There was only one Ferrari store in Chongqing, but I currently live in Minneapolis, where there are no Ferrari stores.

I went to a bar with some friends called the Shark Bar. It’s real name was something else, but that’s what everyone called it because it had a huge tank running the entire length of one of the 12-foot-high walls of the bar with three or four live sharks swimming around in it. When we were parking in the garage two souped-up Porsches entered.

I guess what I’m trying to say is that Chongqing’s development has been massive. It’s growth, although I haven’t looked up the exact numbers, must be at percentages approaching or surpassing what Shanghai did from about ’97 to ’08. Chongqing has a monorail. It has a port that can accept ocean-sized freighters. It has an economic development zone. It has a booming real estate market and a vibrant manufacturing sector. The city is quite simply stunning to look at. I can’t wait to go back in the next few months to see it again. I can’t wait to go back and live there, and work in a professional capacity.

One thing that hasn’t changed much is the attitude of the people I met there. My friends had not changed. We spent six wonderful days together and they tried to convince me to move back. They didn’t really need to try at all. When I stepped off the train from Chengdu and saw them at the station, I was already convinced.

China’s growth faces many challenges over the coming decade. They’ve got to figure out how to develop their domestic economy enough to sustain the natural slowdown of a very much matured export-oriented industry. They need to bring up the level of domestic support programs so that their consumers will spend more. They need to develop jobs at home, from within. They need to have more foreign businesses in China that focus on China’s market rather than simply manufacturing things for export. This is all happening, but it needs to happen faster. The banks in China need to provide entrepreneurial, small-business development loans. They need to allow foreign competition to freely enter without throwing up blocks to competitiveness so that the local talent will rise to the top and won’t fall victim to the fate of artificial, protected growth.

I think all of this will happen. The government wants an economic powerhouse positioned to compete with the rest of the world. The people want opportunities to develop their careers and move ahead. I’ll write more on my opinions about China’s domestic growth soon.

Understanding Foreign Cultures….and Markets.

Posted in Cultural Observations. with tags , , , , on March 26, 2010 by Ben Brown

Google’s recent clashes with China bring up myriad questions about successfully managing a business in China or anywhere else around the world.

While understanding ROI, WACC, and foreign exchange risks can give one a picture of the potential profits and margins in a new foreign market, it does not tell the whole picture.

The Google case proves a company can address all the non-market factors that threaten its competitive ability and still fail. In the Google example it was a matter of understanding the consumer to whom it catered.

Entering a new country requires very careful financial analysis, assessment of the political and other non-market factors that potentially hinder acquisition of market share, and an understanding of the culture and preferences of the consumer. All of these factors must be taken into account and the information must be presented objectively and in an unbiased manner. Pizza Hut entered China in the mid 90s, and although the numbers worked out, the government was pro-American restaurant industry, and the expected profit margins were high, Pizza Hut failed to recognize it would have trouble selling cheese-covered pizzas to lactose-intolerant consumers. It quickly had to switch to lactose-free cheese.

Assessment of a foreign market requires asking fundamental questions before analyzing ROI: Can we sell this thing there? What does the consumer want? Should we sell hamburgers in India? How about smoked pork shoulder in Israel?

Finding and managing to success in foreign markets requires more than assessing profit margins. It requires understanding cultures, fulfilling needs, and doing enough homework to understand objectively what is going to work.

Negotiating on the Plateau.

Posted in Cultural Observations. with tags , , , , on January 30, 2010 by Ben Brown

I was talking to a friend the other night when I remembered my first successful attempt to negotiate Chinese style.

I had been in China for nearly a year and could speak Mandarin fine at that point. A friend and I decided to get out of the overwhelming heat and humidity of Chongqing by catching the bus to Hongyuan. That’s right, I said “the” bus. There was only one.

Hongyuan was a gorgeous Tibetan village on the northwestern sector of Sichuan province. It sat on a huge plateau and consisted primarily of herders and monks. There was a beautiful monestary up there, and we took a trip to the countryside with a guy who knew some herders. We sat in their yurt and drank tea that was half goat’s milk.

After one full day and two nights, we decided to head back. Although Hongyuan was absolutely beautiful, it was a tiny village with few things to do or see once you had drank some goat’s milk tea and burned incense at the large, cold, drafty monestary. It was rainy and cold, which was a welcome reprieve from Chongqing, but the lack of heaters or furnaces made it uncomfortable.

The trip up to Hongyuan had been on a bus that had six spare tires strapped to the top. It was scheduled for 9 hours. It took 18, involved four tire changes, and was stalled at one point when we got to the top of a mountain to discover an accident between a small Volkeswagen and a large bus coming from somewhere else on the plateau. We had to climb off the bus to let it drive around the accident, because there were no guardrails at the edge of the road. There was also no shoulder: just a 75 foot drop straight down. The other side of the road was a wall.

The bus made it around the accident site, but one of the double tires on the back was hanging over the edge. It was an impressive drive and a breathtaking trip.

The negotiating began on the morning we were set to leave. The bus came through town roughly every two days. We did not want to stay an extra two days, so we were on the packed bus, ready to go, when the ticket-woman spotted me sitting in the back trying to look inconspicuous.

“You must pay 400 RMB” she said in Chinese. This was robbery. I was an English teacher. I didn’t have 400 RMB with me, nor did I have access to it. The ticket up had cost 40 RMB. In fact, the ticket back down had cost everyone else on the bus 40 RMB.

Needless to say, an argument ensued. She eventually came down to 200 RMB, but was unwilling to budge any further on the price. I believe someone had told her I had enough money.

Just as she was about to have the driver stop the bus at the edge of town to let me off to think about my misfortune for two days, the wheel blew. While they changed the wheel, the argument ran out of steam.

As I sat there trying to think of a way out of this, the answer became clear. I told my friend, who was Chinese but not a very good negotiator and not much help in this instance, to let me climb out the window. The bus was standing room only and I didn’t want to get off through the front door because I didn’t want to get into another conversation with the ticket-woman.

I went to the refreshment store across from the road where the bus was parked and bought a dozen bottles of Mountain City beer. Each bottle was one litre. It was about 10am at the time. I walked back to the bus to the ticket-woman and stepped into the front.

“Who wants beer?!!” I yelled in Mandarin.

The Tibetan herders couldn’t speak really good Mandarin, but they knew what I was up to. For the next half hour we drank and pieced together conversations about each others’ cultures. By the time the tire was repaired, the beer was gone and I had learned a few Tibetan plateau drinking songs. When the argument started up again, I had a whole bus on my side. I told the ticket-woman to be fair, and that for her graciousness I would be willing to pay her 60 RMB instead of 40. I got what I wanted.

I didn’t get 40 for a price, but the herders that rode all the time were going to be spending more cash over the course of their lives than I would, and she knew that. I think by the time we pulled into Chongqing only 12 hours later, I had earned just a little bit of respect.

CQ Brew

Come out to Testbed 2 at E'Ling for a craft beer and a great view of Chongqing 来鹅岭印制二厂,享受精酿啤酒,吸引完美的环境



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