Jeremy Gordon at China Business Blog is out with his latest in his eminently quotable “Don’t Quote Me” series. This one is entitled, Don’t Quote Me (On When US$100=RMB100) and it quotes Jack Perkowski, of “Managing the Dragon” (the book and blog) on how Chinese view money.
I always carry two bills with me – an RMB100 bill and a $100 bill…The point I make is that these two bills are treated in exactly the same way in their respective countries. Just as the $100 bill is the highest unit of currency that you can get in the United States, an RMB100 bill is the highest unit of currency you can get in China.
When Americans look at a RMB100 bill, I say, divide by 8 and see $12.50. But when Mainland Chinese look at the same bill – and I don’t care how wealthy they are – they see what Americans see when we look at our own $100 bill.
Jeremy goes on to say that “anyone who has conducted price negotiations in China will know what he is talking about.”
So true.
In the Managing the Dragon book, Jack talks about how much he spent on a haircut compared with how much his well paid Chinese executives spent, and on how silly they all thought he was for spending something like $10. The book also uses hotel prices to show the purchasing power parity between a 100 RMB note and a USD$100 bill.
The relevance of all of this is that if you do not understand how money is valued/viewed in China, you cannot be well positioned to negotiate anything there.