Feb 15, 2024
Risky Business in Rising China w/ Mark Atkeson
AZ TRT S05 EP06 (221) 2-11-2024
What We Learned This Week
- Mark worked in many industries in China - Aircrafts, EV Cars, Mobile Phones, Internet Co. & Aircraft Parts
- Mark first worked in Japan w/ Sony, China must be careful, not to repeat Japan‘s Lost Decade of 1990s
- China has a lots of investment in EV Car & Solar Market
- US v China Rivalry is not dying down, two most important Tech countries, who must learn to co-exist
Guest: Mark Atkeson
Mark Atkeson is an international business leader, investor, entrepreneur, and author. A foremost expert on doing business in China, Mark managed, partnered in or provided services to Chinese-based companies for more than three decades in industries ranging from machine tools to aircraft engines, automotive manufacturing, mobile technology, startup venture investing, and aviation asset trading. Most recently, Mark wrote and released Risky Business in Rising China: Deals, Ordeals and Lessons Learned as an American Entrepreneur in a Surging Superpower Grappling with Growing Pains, chronicling his real-life experiences managing joint ventures and startup companies in China.
Now living in California, Mark continues participating in the Chinese economy as founder and managing partner of China Aviation Partners LLC, which provides software services, market research and other consulting for China-related businesses. Mark is a graduate of Yale University and the Massachusetts Institute of Technology with master’s degrees in Electrical Engineering and Business Administration.
For more than 30 years, American entrepreneur Mark Atkeson found himself in the trenches of the Chinese economy managing joint ventures and startup companies.
His new memoir, RISKY BUSINESS IN RISING CHINA: Deals, Ordeals and Lessons Learned as an American Entrepreneur in a Surging Superpower Grappling with Growing Pains, chronicles Atkeson’s real-life experiences as the world’s most populous nation transformed itself into a global economic and military superpower.
Over his three-decade career, Atkeson worked across a variety of industries ranging from aircraft maintenance to electric-vehicle production, mobile internet to venture capital. In addition to Atkeson’s behind-the-scenes business dealings with entrepreneurs and government officials, the book offers an unprecedented glimpse into Chinese society, its economy and its governance into the near and distant future.
RISKY BUSINESS IN RISING CHINA has received high praise from readers.
Here’s what people are saying:
“Atkeson is a talented storyteller whose diverse and adventurous China business career winds along the path of China’s progress and setbacks.” – James McGregor, American author, journalist and businessman, and three-decade resident of China
“Mark Atkeson's China business memoir recounts his peripatetic career from the early days of the Open Door Policy to the Modern China of 2023 in an honest, humorous and detailed way. This book will be valuable for anyone seeking to understand the often messy ‘inside story’ of China's rise in the late 20th Century, and the role that foreign managers and investors played in the process.” – David G. Brooks, former chairman, Coca-Cola Greater China and Korea
“If you want to understand today’s China, and the forces changing it, you need to read Atkeson’s book.” – John Clasen, former director of China business development, Magellan Aviation Group
Notes:
Seg 1
Marc worked in China from the late 1980s to just after 2010. He saw the country go through their reform phase, and then capitalist rise. For nearly 20 years the political ideology took a backseat to market forces. An astounding 800 million people came out of poverty.
Mark worked with lots of companies in his career, dealing in venture capital, mobile phones, Internet, companies, EV cars, machines, and aircraft.
China is the 2nd most advanced nation in the world in technology, behind the US. Chinese Internet company TikTok is just one example of the Chinese advancement in AI and tech.
Products that people use on an average day usually have some connection to China, like manufacturing. Giant US corporations like Walmart, Amazon and Apple are all very dependent on China. China is the 2nd largest economy in the world.
The modernization of China was like a tidal wave from the 1970s to the early 2000s a 30+ year run. It seems though that in 2023 we’ve seen the crust of the wave with China slowing down. GDP in China is no longer 10% a year but more like 2 to 5%. Both property and consumer sales are down.
China has a middle class of 400 million people and most of their net worth is in their real estate. Real estate has been down in China the last few years, so millions of people have taken a hit.
Mark worked in Japan for Sony Corp. from 1988 to 1989. Japan in the 1980s was the rising superpower to challenge the US. It was number 1 in growth. Then in 1990, the dual economic bubble burst (stock mkt & real estate) in Japan and they entered their lost decade.
It took 30 years for the real estate in stock market to get back to the 1989 levels. China may be facing some of the similar problems of Japan, dealing with too much growth, leverage, debt, and possibly demographics. China will need decades to de-leverage from their current debt situation.
Seg 2
Mark’s grandfather was stationed in China in the late 1930s. This was during the start of the conflict with Japan and pre-World War II. Mark‘s father worked in Far East banking circa 1970s – 19080s.
Mark actually took Chinese in college. In 1982 he took his first trip to China. He remembers the country being poor with small buildings and very few cars. During the 1980s foreign businesses were investing more in China.
In the early 1990s, Mark got his first job in China working the aircraft industry. They were maintaining airplanes for a Chinese airline. Regulations were lax and implementation was lacking. He ran a factory in China in the Szechuan province.
They installed the Toyota production system, for more efficiency, collaboration, built and grew the factory. Factory dealt with diesel and fuel.
Unfortunately, corruption and theft mafia style was very common. Example of the corruption was the sales force would take bribes. This was a state owned auto group and corruption. Scams were not uncommon in the business world in communist type countries.
Seg 3
In 2001, Mark got involved in a venture capital company. He was being replaced by the local population and younger managers to run the factories he had built up. He decided it was time to transition to a new industry.
Him and some partners created an investment fund. They were investing in products in mobile tech and the Internet. He could see the upcoming Internet business on phones which were very popular in China.
Consumer products like payments, info services and entertainment. The idea was to build an incubator - set up to invest in Chinese entrepreneurs. Then raise Series A funding and strategic buyers over the long term for an exit.
They were paying 8 Chinese engineers for 12 months in an angel investing deal for just $100,000. It was a Portfolio of 10 businesses, involved in things like gaming and payments.
Result: 8 out of 10 of the businesses return 0%, 1 did OK, and 1 was a home run. The home run company made a deal with China mobile for an exit and sale to a NASDAQ listed company in 2007.
After that he represented US companies that acquired Chinese Internet businesses and Mark was a liaison to the US company in China.
Mark actually worked in Internet entertainment. They put on a singing contest which acquired 800 million votes from audiences with cell phone text voting. At the time, this was a major example of democracy - voting through Phone. This was regulated out of existence.
Seg 4
BYD EV car company was a mobile phone company and supplied to Apple. China makes good low-cost cars and has a lot of electric vehicle development. In 2008 Tesla was building electric vehicles, when oil was priced at $140 a barrel.
Circle back to US with US engineers going to China to build the EV cars. Design was localized in China. EV cars has 3 challenges – tech, then US safety requirements, then fit & finish of the car. Produce cars in China and then sell in California.
2012 was the end of the road for Mark working in China. He was working in Hong Kong with an AR financing leasing and appraisals type airline business. They would buy an old A23 or A3 aircraft, disassemble and sell the parts.
It was like a high-end junkyard business. These were Chinese aircraft models. Mark connected with a company in Florida, who had a business partner in Air China. They moved on to buy 747 and disassemble them in the Chinese Beijing airport. Now Mark’ career came full circle in Aircrafts, with salvaging aircraft 20 years later.
What is the future of China?
US v China rivalry not dying down. They are the two most important tech innovators on AI batteries and solar and must figure out how to coexist. Tesla makes more cars in China versus the US. They have a big factory in Shanghai. Apple outsources to China in their supply chain.
Chinese economy has slowed from 10% growth per year to 3%. China may not be 10 feet anymore but it’s still 6 foot four.
The Chinese private economy and services could ultimately come to the US. BYD EV car company as an example, that could become the face of a Chinese company in the US.
BYD US - https://www.byd.com/us
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