A Tag Team Links Two Cultures

By Sonja Steptoe/Palo Alto

JOHN-PAUL HO, IAN MORTON

CRIMSON INVESTMENT, PALO ALTO

When China opened its markets to foreign investment, no one was more eager to go in than John-Paul Ho. Before the communist takeover in 1949, the company his engineer-businessman father ran was the local partner of American companies operating in China. Ho, a Harvard-trained applied engineer and M.B.A., left a prestigious Wall Street investment-banking job to start Crimson Investment in 1993. At first he and his partners found nothing but state-owned companies with outdated equipment, poor management and, understandably, little comprehension of the concepts of capitalism. "I couldn't find any management teams I felt comfortable trusting our assets to," Ho says. So he pursued opportunities in Hong Kong, Singapore, Taiwan and Japan instead. When he did invest on the mainland in 1998, he avoided the risky emerging companies and state-owned enterprises with their murky finances. Instead Crimson has focused on helping U.S. and foreign middle-market industrial manufacturers set up operations in China. "China's emergence is reshaping the competitive playing field," says Ho, 45. "Multinationals are making serious profits on their operations in China now."

Crimson has about $600 million under management and investments in some 20 companies with a presence in China. A dozen other investments have either gone public or been sold to large multinationals. Crimson partner Ian Morton says Midwestern manufacturing executives who once were reticent about moving production offshore now interrupt him to ask for help before he can finish a presentation.

Among the crucial bits of advice they get: "What works in China may not work in America, and vice versa," says Morton, 37. U.S. managers tend to air problems publicly and resolve them through collaboration, whereas Chinese managers--accustomed to hierarchical reporting structures--prefer to handle conflict privately, so that no one loses face. Crimson's companies tap ethnic-Chinese executives trained in international business practices to manage the work forces there. Along with financial payoffs, Ho gets the satisfaction of carrying on his father's legacy. "He always wanted to link the U.S. and China in a positive way, and I'm helping to make that happen," he says. That kind of payoff is priceless. --By Sonja Steptoe/ Palo Alto