How to Be A Player in Beijing

Remember Peter Chung? Back in May 2001, Mr. Chung was a 24-year-old Princeton University grad posted to Seoul by the Carlyle Group and living, by his own account, quite large. A week and a half into his new buy-side job, he emailed home telling friends about his opulent digs, about riding around in the VP's Porsche, about the bankers who treated him to rounds of golf, banqueted him, and took him clubbing—and about his intention to bed every hot woman in Korea: "5 down, 1,000,000,000 left to go," he wrote.

Mr. Chung's email circled the globe, eventually finding its way to his bosses at Carlyle, who promptly fired him. The picture he painted is familiar to young people working at investment banks, private equity firms, or VCs almost anywhere in East Asia, Beijing included. China's tech boom has given rise to a new class of moneyed elites—overwhelmingly young, single men in their late 20s and early 30s—for whom nightlife is an integral part of business.

The Details of Dealmaking

In a booth in one of the capital's swankier discos, amid the thumping din of techno and the gyrating hips of the girls who invariably surround them, the young bucks talk shop: who's raising a fund, which VCs got good deal flow, what new telecom technology is about to burst disruptively onto the market, who paid too much for some wireless value-added services play, what high-flying Chinese Internet stock is just begging to be shorted, which dot-coms are ripe for acquisition.

They're mostly returnees or Chinese-Americans—either ABCs (American-born
Chinese) or Taiwan- or Hong Kong-born Chinese educated in the United States.
They're with many of the VCs active in China, including WI Harper, SAIF (formerly Softbank Asia Investment Fund), and IntelCapital. The group is top-heavy with alpha males. Shanghai, once known as the Paris of the East, may have gone a long way toward reclaiming the glamour and notoriety of its pre-Communist nightlife.

But Beijing, which has never been known for its wild club scene, is chock full of bars and clubs where there's no last call, and where revelry often lasts until well after sunup.

"I think it's a shock to a lot of people who come," says David Chen, a Sunnyvale-based corporate development manager at AMD who is halfway through a six-month posting in Beijing. Mr. Chen, who says he's been out "a lot" in his time in China, has come to believe that this particular style of nightlife—the not-so-latent sexism, the boy's club business machismo—is all "a natural part of business in East Asia." "China's in a time warp," he says. "It may be catching up in technology but it's still 50 years behind the U.S. in terms of the values that have been formed."

Rocky Lee's World

It's 1:00 a.m. on a Friday night and Rocky Lee is holding court at Vic's, a popular club in Beijing's Sanlitun entertainment district. Mr. Lee, 32, spearheads the venture and private equity practice for a law firm in Beijing. A University of California, Berkeley, graduate with a law degree from University of California, Los Angeles, Mr. Lee has been active in the Chinese technology, media, and telecommunications (TMT) sector for four years.

Some in the industry call him "the next Carmen Chang," referring to the well-known Silicon Valley China VC lawyer.

He's knowledgeable and tapped into the technology scene, articulate and accent-free in both Mandarin and English. Just as important, he's perfectly bicultural, slipping easily between expatriate and Chinese friends, his body language shifting imperceptibly as his audience changes.

He also happens to be six feet tall, with boyish good looks, a bright smile, and a muscular frame. The women who've attached themselves to his table—Xiao Wei, Tracy, Naomi, Mimi, Xiao Bing, Juanjuan, Tammy, and a couple whose names he doesn't remember—are all friends he knows from "going out." They're all attractive locals in their 20s, and are here because Rocky Lee throws a good party. It's no surprise that he occupies a space at the center of the tech biz social swirl.

The women aren't working girls, Mr. Lee insists, though the assumption could be forgiven. Their bare midriffs, plunging necklines, and microshorts leave little to the imagination but he says they're secretaries, teachers, or personal assistants, "and they all speak English." But there's another woman at the table—much more conservatively dressed, doing no gyrating.

Ling Ong, a Singaporean who recently completed her law degree at Oxford University, has just started a three-month stint as a paralegal. "You see the same sort of thing in clubs in Singapore or in London," she says. "It's just not so blatant." Watching Mr. Lee in action, she comments with measured ambivalence: "He certainly seems at ease with the whole scene."
While he insists he doesn't "party to facilitate business," Mr. Lee estimates that 80 percent of club time is business-related.

Going Local

He knows that not everything that goes on at the bars and clubs would pass muster at home. "I've had to make some adjustments to the style of doing business here," he admits. But the whole nightlife scene, he says, is "part of the lifestyle, and you can either embrace it or shun it. And you're at a disadvantage if you shun it." Nightlife in Beijing would go on with or without him, he says, and so he participates. "The VCs come to me because I have access to deals, not because of the social scene," he adds. The tab for his table—"Rocky's table" is all his guests need say to avoid the 50 yuan ($6.25) cover at the door—doesn't come to all that much. He drops three or four hundred dollars in a night ("That's much less than you'd spend going out in New York"), but picking up tabs two or three nights a week adds up.
His firm, he says, doesn't pay for any of it—he has never expensed any of the entertaining.

Being in the thick of it keeps him in the loop, and that makes him more valuable as an attorney. "It's not hard to see why an out-of-town VC would want to give its business to Rocky," says one private equity investor, watching Mr. Lee work another crowd, this time on the roof deck of The World of Suzie Wong, another popular Beijing bar. Business has been good. Legal fees had been trending down in recent years, says Mr. Lee, but when China's State Administration of Foreign Exchange (SAFE) issued new regulations that created problems for companies planning eventual offshore exits, firms saw a return to a "favorable fee structure."

"In the Valley, you do a deal in Starbucks," says Mr. Lee. "In Beijing, we do them in a lounge or a bar." Centro, the fashionable bar at Beijing's Kerry Centre Hotel, is one of the more deal-heavy locales in town. One evening this summer Mr. Lee met Ian Goh from TDF Capital (Venture TDF) there to "discuss fees and ways to work around the SAFE issues" regarding the Shanghai-based VC's investment in a new media company called M-Zu, or Gmedia.

'Deal Napkin'

M-Zu provides a platform for retail sales by mobile phone, allowing cellular subscribers with camera-equipped handsets to snap pictures of bar codes in catalogs or advertisements and send them to retailers to purchase merchandise. SAFE's regulations, widely known as Circulars 11 and 29, had stymied international VC investment in Chinese companies by effectively preventing PRC residents from setting up wholly foreign-owned enterprises
(WFOEs) through offshore vehicles.

According to his firm, the resulting deal—a $2.3-million investment by TDF and Draper Fisher Jurvetson ePlanet Ventures—was the first cross-border investment to close with a PRC company that hadn't registered as a WFOE before the SAFE ban took effect. "The structure was complicated," says Mr.
Lee. "It took three napkins." He displays another "deal napkin"—this one a single napkin—for an investment that hasn't closed yet. The investee, he says, is a unit of "a major entertainment company using mobile and Internet for content delivery," and the likely investor is "a major venture capital fund which invested in the biggest exits of the year, Baidu and Focus Media," says Mr. Lee.

Back at Vic's, revelers pour out onto the dance floor as the DJ spins the Romanian dance pop hit "Numa Numa," apparently without irony. Vic's is one of four big discos all on the same block—the club, along with archrival Mix, is on the north side of Worker's Stadium; Babyface and Angel are on the stadium's west face.

The party often moves among these clubs and Tango, another disco two miles to the northwest. The settings are interchangeable: the music is the same, high-decibel and bass-heavy, and the drink of choice is, too. Periodically, a waitress comes by the table to mix the stuff up. She pours six or seven ounces of Chivas Regal into a big glass pitcher, then adds two plastic bottles of sweetened ice green tea. The unlikely cocktail has become the unofficial drink of the Chinese clubbing set in recent years. "It actually tastes OK," says AMD's Mr. Chen. Scotch drinkers may balk, but Pernod Ricard, which owns the Chivas brand, doesn't seem to mind: Chivas global sales were up 19 percent in the first half of 2005, largely on "spectacular progressions" in the China market, the company reports.

Circles of Hell

Like Dante's Inferno, the Chinese business world is organized into descending circles of decadence. The layer occupied by the Beijing new economy boy's club is positively mild compared to some of the lower circles.
The party life of the telecom and media set looks far more debauched than it actually is.

A few pitchers of Chivas and green tea and yes, there's plenty of highly suggestive dancing, but at the end of the night, everyone has his or her clothes on. Drugs like ice (crystal methamphetamines), Ecstasy, and ketamine are still fairly common in the Chinese club scene but are virtually unheard of in its tech and finance subset. Deeper down, there's the traditional, coastal, export-focused world of, say, electronic components, plastic injection molding, or textiles—a mix of private-sector and state-owned companies—peopled with nouveaux riches with their own nightlife subculture:
Hennessy VSOP shots decanted by young hostesses in slinky dresses in the private room of a karaoke parlor, expensive plates of exotic fruit, off-key crooning of Taiwan and Hong Kong pop—and then homeward, hostess optional.
Even deeper down, there's more grunge still. Mr. Lee stays clear of all that, and has kept his liver healthy.

He is, in fact, a teetotaler. Like about half of East Asians, he lacks liver mitochondrial aldehyde dehydrogenase, an enzyme that helps detoxify acetaldehyde, a byproduct of the breakdown of alcohol. He gets what is called the "Asian flush"—his face turns red, he says, after just half a drink, and he's utterly wasted and "absolutely will throw up" after a whole one. As a matter of survival, Mr. Lee has acquired a magician's skill in misdirection, learning how to get rid of alcohol on the sly. "You have three friends at a banquet: the wet towel, the cup of tea, and the glass of Coke,"
he says. "You can spit baijiu (sorghum liquor) into the towel, beer into the tea, and red wine into the Coke."

While others are suppressing their central nervous systems with Chivas and green tea, he's stimulating his with a highly caffeinated vitamin drink:
"Red Bull is the same color as Chivas," he says. By 3 a.m., he's wired, alert, and in an advantageous position vis-à-vis his fellow partygoers. No Peter Chung, Rocky Lee is cautious, grounded, and pragmatic. He won't kiss and tell. While he now plays Virgil to the Dante of many a newly arrived VC in their descent into the Beijing nightlife demimonde, Mr. Lee still recalls his early encounters with the often bizarre milieu.

"The first time I went to a karaoke bar, I just sat there," he recalls. "It was weird to have these girls—the hostesses—sitting next to you, just talking about business like they weren't there. But you get used to it—you realize they don't know what value-added services are." At least not in the context of telecoms.