The First Step on a Ten-Thousand-Li Road
Would you like to start a business partnership with China, but feel overwhelmed by doubts and questions? Gleb Romanov has all the answers. He and his partners have managed to build a successful company specializing in importing Chinese equipment and setting up the manufacture of Russian brands in China, a country which has become his second home.
Heavy flakes of wet snow pummel the transparent roof of a loft office in what used to be a tenement building on Tverskaya Street. “Look, it’s so beautiful!” exclaims Gleb Romanov, pointing to the historical center of Moscow outside the floor-to-ceiling windows. His company, Eastex Group, moved into this sixth-floor office about a year ago, but it is still immaculate and tidy. “The landlord at our previous office gave us a list of unrealistic demands, but the price here is lower and the space is bigger. We can hire new people now,” he says casually.
Eastex’s managing partner does not deny that the move to the city center also has a lot to do with developing the company’s image. “We have a diverse group of companies under the Eastex brand, and one of the areas most important to us is setting up manufacturing facilities in China, as well as providing logistical support and consulting. By and large, these are all services, and service providers should look respectable,” explains 39-year-old Romanov. “A service remains intangible until the time it is provided, so you need to be able to instill confidence in your potential customer. One way of doing that is showing them we can afford an office like this one. If we were located in some basement in the Biryulyovo district, it is unlikely anyone would even want to talk to us.”
Eastex specializes in organizing contract manufacturing of industrial goods for Russian companies in China, as well as the logistics and import of Chinese polymer manufacturing equipment. The company, whose staff recently surpassed the 100-person mark, seems to have no trouble finding customers. An obvious testament to their success is the expansion of its Moscow office and its presence in Vladivostok, St. Petersburg, and Shanghai. The latter is where Romanov spends most of his time. It is also where he lives with his family: his wife Zhang Yixuan and their two sons, 4-year-old Ilya and 1-year-old Nikita.
Eastex’s history began in 2003, when Romanov and his three friends, who worked for a Russian company at the time, decided to embark on a business venture together. “The company we were working for was developing its brand in Russia, but its manufacturing was built entirely in China. It was 1999. At the time, any civilized business of setting up production in China was in its infancy,” says Romanov. “We built the company’s logistics and purchasing departments from the ground up, but then we had a disagreement with the owner and most of the team left to start their own business.”
The startup capital consisted of the personal savings of the four Eastex founding partners – about $5,000. This amount, however, was enough to rent an office in Vladivostok, where Romanov was born, and to pay their first employees when the company started to earn money.
Their first Russian client found them on the Internet. “He wanted to set up production in China, and asked us ‘Guys, who do I approach to do this?’ We told him we had all the answers to his questions. Not two months later, his first container was already shipping to Russia,” recalls Romanov.
At some point, Eastex became so successful that equipment manufacturers themselves started calling in with joint business offers. What’s more, the company began to make a mark outside of Asia. Eastex’s future plans included bringing the best of Asian equipment and industry solutions into the Russian market under a single brand
Essentially, Eastex offers its clients a way of outsourcing their production and procurement to China. All the clients need to do is choose the product parameters – naming convention, price, quality, conditions, and frequency of deliveries. Everything else – like the search for and negotiations with Chinese manufacturers, the design and set-up of the supply chain, including shipping and customs clearance, as well as the technical side of things from target product quality and production to quality control and repeatability – Romanov and his partners take on themselves. The customers receive a major advantage – a quick start that allows them to fully focus on building their brand, its marketing, and its promotion in the Russian market.
The benefits of Eastex’s services are getting noticed – word of mouth and the company’s own marketing efforts have brought new clients to the company, which has continued to expand its offerings. For instance, they have added logistics development systems and financial support for client projects in China.
As a result, Eastex was the first company to offer a comprehensive Russian service for setting up shipping from China. After formulating the problem, the client receives a turnkey solution, from procurement and production to delivery of finished goods to a warehouse anywhere in Russia. “That is to say, if at first we simply built a procurement system, we later moved on to offer technical consulting and full support for international economic activity in China,” says Romanov.
At the same time, Eastex began to develop its own import business of Chinese equipment for plastics processing. The team managed to get things started thanks to some old ties with their former employer, who had once asked Romanov to source and supply equipment. “We supplied him with three injection molding machines. Then it was all word of mouth again – people needed inexpensive but functional equipment. Initially we worked reactively, following up on customer requests, but later we started looking for customers ourselves and even decided to create a separate department to take care of sales, technical support, and customer service,” says Romanov.
In late January, its trading arm – Eastex Technologies – took part in the largest trade fair of plastics and rubber in Moscow, where it presented several brands of plastics processing equipment from leading Asian manufacturers.
Given the uncertainty at that time, Eastex approached the trade show with the utmost seriousness, preparing three possible story lines. The first was intended for the ‘everything-is-terrible’ crowd. Eastex planned to spend the least amount of time on that topic, simply informing the audience about the company’s capabilities, giving them confidence, if possible, and moving on. The second scenario was aimed at the ‘doubters.’ In this scenario, only one idea needed to be conveyed – that the crisis would weed the weak out of the market, and, therefore, that now was the best time to expand market share and purchase new equipment. In other words: don’t wait – act now.
In fact, it was the third scenario that struck gold with the people who were ‘happy about everything.’ “Our booth had a lot of those people who generally had everything under control. Business was steady and orders were coming in. The only issue that everyone complained about was shrinking margins. If they used to keep 60%, now they were only getting 30-40% for themselves. It was not a comforting situation, but it was nothing disastrous,” Romanov recounts with a smile. As a result, during the three days of the show, the company signed four equipment supply contracts and got a few potential agreements in the pipeline.
Eastex’s future plans included bringing the best of Asian equipment and industry solutions into the Russian market under a single brand. “We believe that this service will be close to the European level – the availability of all current models in stock, fast delivery of that which is lacking, a package of the most sought-after, well-developed solutions, as well as service – commissioning and start-up, the availability of the necessary spare parts, repair facilities, and so forth,” he adds.
At some point, Eastex became so successful that equipment manufacturers themselves started calling in with joint business offers. What’s more, the company began to make a mark outside of Asia. Last year, Eastex received an invitation from the Italian brand Maretto to become their dealer in Russia. “I can’t say that this is some kind of superhuman achievement, but it is an important milestone,” notes Romanov modestly.
It’s All Chinese to Me
So how is it that Romanov ended up in China, which is now such a big part of his life? A conscious interest in Russia’s large Far Eastern neighbor bloomed at a time when the country entered a period of ‘savage capitalism.’ “It was the beginning of the 1990s. Russia was experiencing all kinds of difficulties and a lawless free-for-all. Yet business with China was developing rapidly, and I thought that it looked very promising,” he says.
Romanov decided to study at the Far Eastern State University in the Department of Chinese Economics, where he began to learn Chinese. However, come graduation, the first wave of booming trade with China had already passed. “Everyone had already managed to stiff everyone else – the Russians had ripped off the Chinese, the Chinese had ripped off the Russians. Everyone had had enough of low-quality products and poor service, so it all went a bit downhill from there,” he recalls.
For about three and a half years after graduating, the future managing partner of Eastex was doing “all kinds of different things” – until 2001, that is, when he received an invitation to work in China from an old friend. The latter had been working to set up shipments from China, but realized he could not keep up with the increased workload. That was how Romanov got his first stay in China, which stretched over nearly 15 years.
China gave not only a successful career to Romanov but also a family. In 2003, he went on a trip to Taizhou to negotiate with one of his suppliers – that’s where he met the supplier’s daughter, who later became his wife. “We met at the factory. She was a student at the Central Academy of Drama – it’s more or less on the same level as our Moscow Art Theatre School – and she came home for the holidays. We got to know one another, started to write to each other, and then we would travel to see each other as well,” says Romanov.
Romanov’s wife, actress Zhang Yixuan, put her theatrical career on hold to focus on raising their children (pictured reprising one of her roles on the Shanghai stage)
The relationship continued during his years of study at Zhejiang University. Romanov went there to “brush up on his Chinese,” and later graduated with an MBA degree. Then there was a wedding and the birth of two sons.
What was it about Zhang Yixian that caught Romanov’s attention? “First of all, she’s an actress. So, she’s certainly a looker,” he explains. “Second, I was impressed by what an open, cheerful person she was, but that she was somebody who was not at all practical. Me, I’m the opposite; I am a pragmatist who can’t help but analyze everything. She’s a bright light, and I’m rather brooding by nature. So it seems that we complemented each other well.”
What drew her to him? Although he seems slightly embarrassed, Romanov still answers the question. “If you are European, not Chinese, you stand out from the crowd no matter what. So I didn’t have any problems getting noticed,” he says. “And if you also happen to understand something about the culture of the country, you get a step closer. If you are fluent in Chinese and understand some of the history and culture, at least on a basic level, you become even more like family.”
His transformation into someone “more like family” and his understanding of the Chinese culture took him considerable time to achieve, admits Romanov, and it was not always smooth sailing. The Chinese, he says, “are like onions.” Relationships among people are multi-layered; the closer you are to your own circle, the less formal it becomes, which includes politeness. “To give you a rough idea, if you are a guest from a faraway place, they will go out of their way to address you with respect; they will wine and dine you, dote on you, and give you tea, food, and water. But if you’re ‘more like family,’ people won’t even greet you in the morning. You walk into a room and they might not even look in your direction. I used to get annoyed by that at first, but then my wife explained it. ‘What’s the use in greeting you? You’re family,’” says Romanov.
To illustrate how different the two countries’ customs can be, he brings up the New Year as an example. In Russia, it has now become customary to go out somewhere. In China, Chunjie (Chinese New Year) is a ‘sacred’ family holiday – all relatives must go home, eat copiously, and play mahjong. “Almost every holiday is spent like this – with food and mahjong. For me, this is rather difficult, even now. I am an active person. I like to be doing something, but if you just sit and eat from dawn till dusk – I just can’t do that,” he says.
Romanov is very into Sanshou, a Chinese martial art and combat fighting sport. His appearance – a lean figure, a focused look, and a shaved head – leaves no doubt about his commitment. “I try to devote at least an hour or an hour and a half to training every day, even on business trips. I also do some boxing, but sparingly – I need to protect my head,” he says.
It turns out that martial arts are not only helpful for staying in shape but also to negotiate with contractors. Romanov tells the story of how he once showed up for a negotiation with a black eye he’d gotten in training. Despite his misgivings, the Chinese businessman was not bothered in the least. “It’s totally fine, I understand. I train myself,” is how he reacted, recalls Romanov. “The conversation turned friendly right away.”
Knowing the local language and understanding the culture is another effective weapon in business negotiations, which Romanov wields masterfully. “A lot of people believe it’s enough to get by in Chinese, and they stop there. In many cases, they are right. But I decided to persevere and learn the language properly. Frankly, it has opened up many new opportunities for me,” he says.
To illustrate his point, he alludes to his ‘onion’ allegory again. “Fluency in spoken Chinese is only the first layer. If you need to go beyond that, the first layer is not enough,” he advises. “But when you start speaking a person’s language – not just what’s in the textbooks and average pronunciation, but when you really start to operate within the same context, then the person understands that this is a whole different level of relationship. It’s a different level of confidence, and you can talk to that person about cooperation on a different level.”
In what way? For example, Eastex can easily negotiate to defer a payment of several million dollars with their Chinese partners. “They trust us with that kind of money. That’s because we already have a reputation, and because there is a certain level of trust. Many people in the Russian market work like that, but when we were starting out, it was no easy feat,” says Romanov.
Not surprisingly, Romanov’s eldest son is fluent in two languages (at home, his father speaks to him in Russian and his mother, who learned Russian with a private tutor, talks to him in Chinese). Their younger son is still too young to speak, but he seems destined to become completely bilingual.
Both of their sons will likely learn English as well, since that is the language they will use in one of the many international schools in Shaghai that their father is planning to send them to. Additionally, both sons are Russian citizens. A Russian passport, says Romanov, has certain benefits in China. Not only will it be easier for his kids to get a good education (foreigners get priority in international schools), but it will also be easier for international travel – China still has very few bilateral agreements on visa-free entry, even compared to Russia.
The Pivot to Asia
Meanwhile, Eastex’s business continues to grow. Romanov plans to devote a lot of his time to the development of Eastex’s own brand of electrical tools. To promote them, the company is building a nationwide distribution network in Russia. Eastex is planning to include its partners’ brands as well. “In other words, our distribution network is growing our product offerings, and what’s more, we are expanding the network itself. It’s a lot of work,” says Romanov.
The company is watching closely for potential opportunities in connection with Russia’s ‘pivot to the East’ – a reorientation of Russian policy in response to Western sanctions. This spring, Eastex threw itself into selling Chinese-made pharmaceutical equipment in Russia. Because of the sharp devaluation of the ruble, the cost of European tech has skyrocketed, but the rising prices on imported medicines offer an excellent opportunity for local pharmaceutical companies. “Russia has several pharmaceutical manufacturers, and they are profitable. There used to be a few and there are even more of them now. Production is expanding. People are buying new equipment,” Romanov explains.
This strategy is consistent with the idea of further improving the traditional Eastex services. “We will continue to polish, perfect, and build up our traditional services, because everyone is talking about the infamous Eastern vector. Many people are thinking about working with China, but they don’t know what to do.”
Romanov has a few tips for those who are thinking about a push to the East. According to him, there are only two difficulties. The first is strategic. More than anything else, you need to understand what this is for. “What is it that you’re doing – risk diversification, a new opportunity, or a transfer of manufacturing or procurement from Europe to China? Then you need to act accordingly.” The second difficulty is logistics, but that could be resolved easily enough if the first issue has been addressed.
Next, you have to determine your level of commitment to China. “You can tackle things every time you visit, or you can set up a permanent office, your own buying or trading company, or a representative office. There are many ways to go about it. Everything depends on your goal,” explains Romanov.
His own example proves that. With his business acumen and appreciation of the local language and culture, he’s shown what it takes to be successful in China.