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Culture Clash

By Allen Holub

December 1, 2005 — (Page 1 of 2)
The Nov. 1 issue of The New York Times ran an article on the front page that seems to have gone completely unnoticed in the trade press. The subject of the article affects our industry, however, particularly those of us who are considering outsourcing.

David Ji is a Chinese-American “electronics entrepreneur.” His company, Apex Inc., imports large numbers of DVD players and other electronics gizmos, many manufactured by the Chinese company Changhong—a formerly-state-owned defense-contractor-turned-consumer-electronics company. With clients like Wal-Mart and Circuit City, Apex was perhaps the top brand of DVD player in the country.

Allen Holub

The two companies ended up in a business dispute: Apex claims Changhong produced a substandard product, which cost it money dealing with dissatisfied customers. Changhong claims it satisfied its contract but wasn’t paid by Apex. Though we’re talking about manufacturing here, it’s easy to imagine an outsourced software project in the same predicament.

In October 2004, things took a Kafkaesque turn. Ji was in China on business, and he decided to call Changhong to arrange a meeting, hoping that he could work out their problems once and for all. The next morning, seven men claiming to be police officers forced their way into his hotel room and proceeded to spend the entire day “interrogating” Ji. He was then flown to Changhong’s company headquarters.

According to the Times, Changhong “cordoned off a floor in one of its guesthouses and barred the windows, a makeshift jail.” Ji was tortured in a low-key way (not allowed to sleep for several days, threatened with life imprisonment, intimidated into signing false confessions). Changhong used the obtained-under-duress paperwork to attempt to take over Apex, with Ji forced to act the part of a willing participant. Eventually, these shenanigans drove Apex into bankruptcy.

After seven months in Changhong’s private jail, Ji was handed over to the Chinese government, which continues to keep him a prisoner. Meanwhile, the Chinese prime minister has praised Changhong’s handling of “the matter,” and has even “ordered state banks to provide emergency financing totaling nearly $1 billion, roughly three times the amount Changhong claimed Apex owed it,” and seven times what Apex claims it owes Changhong.

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