In August 1974 I received the legendary life changing phone call from a China trading company in London to ask me if I would represent them in a commercial arbitration on some Texas sheepskins that were languishing in Shanghai.

Once or twice in my business life I have been made the proverbial “offer that cannot be refused” and this was one of those occasions. It was readily accepted as a great opportunity for my company to investigate the opportunities in China.

The sheepskins were the subject of a dispute between the London company and their Texas supplier.

On receipt of the request I had to contain my enthusiasm to ensure that my acceptance of the offer was not seen as being unduly hasty. Never the less I accepted as circumspectly as possible.

The China trade of the ‘70s and ‘80s was littered with the corporate corpses of companies that traded beyond their technical competence.

Sheepskins were a complicated business with thousands of different grades and types that were used for the production of a wide range of products spread across the wool, leather and fur industries. Because they are a natural product there is a considerable variation even within any one particular grade that made it difficult to use a small sample to represent a large commercial shipment.

The London company for whom I was to act had been asked by the Shanghai Animal By-products Corporation if they could supply some sheepskins. They had never previously traded this commodity; however with contacts in the USA arranged for six skins to be dispatched to Shanghai as samples of what could be delivered.

After some time Shanghai asked for an offer of skins similar to the sample. The Texas supplier made an offer to the London broker who finally negotiated a deal with Shanghai that left a margin in the middle for the London broker. Everyone was satisfied. Payment was established by letter of credit and the goods were shipped against an internationally recognised specification.

The goods duly arrived conforming to specification; however they were not the same as the samples.

The arbitration was to be between the London broker and the Texas supplier on very valuable goods that at this time were the property of the London broker and were physically in Shanghai.

The Texas supplier nominated Steve Deifik a well-known and well-respected US sheepskin merchant to represent them in the arbitration.

On December 11, 1974 the two of us travelled by train from Hong Kong to Lo Wu where we crossed the bridge marking the border between Hong Kong and China closely followed by two PLA soldiers with loaded rifles.
We travelled to Guangzhou by train through what is now Shenzhen that was only rice paddies at that time.

We overnighted in the famous Dong Fang Hotel in Guangzhou before travelling the next day to Shanghai. Little did I realise at that time how the Dong Fang was to become a home away from home twice a year for almost the next 20 years, and become the place where I was to meet so many people who were to become lifelong friends and associates.

Steve and I travelled to Shanghai in a CAAC Airlines Boeing 707 that, to my surprise, had a first class cabin as well as the economy cabin. We were seated with all the other passengers in the economy cabin whilst the first class seats were all fully loaded with bananas.

On arrival in Shanghai, we were transferred by our Animal By-products hosts to the fabulous Peace Hotel. No jazz band in sight as yet, 1200 workers in the hotel and on a very cold December day we were the only two guests in the hotel. We were allocated a suite each.

On arrival I was drawn aside by our Shanghai hosts and in no uncertain terms told that the London company for whom I was acting was an “old friend” and it was expected that they would succeed in the arbitration. No pressure!

That evening we were invited to dinner where I enjoyed my first Chinese Banquet.

Four Chinese hosts, Steve and me in a beautifully mahogany panelled private dining room in the Peace Hotel. The evening started with very stilted and difficult conversation through the interpreter, and I later realised that our hosts were probably as apprehensive of us as we were of them. All the conversation was directed at me as I suspect at that time Steve, as a US citizen, was almost persona non grata. I did my best to involve him in the discussion and kept referring the conversation to him.

After 10 or 15 minutes of somewhat difficult conversation our host said: “Shall we drink?” An offer I find difficult to refuse!

I carefully observed that the protocol following the toast to friendship was to empty the small glass of clear liquid in one shot. My first experience of Mao Tai!

For one moment I thought I would never breathe again; however I recovered in time for another of our hosts to propose a toast, and this time I was prepared for both the protocol and the effect.

After the third toast I had a slightly unfortunate but humorous breach of protocol. My first important lesson in China; that is most Chinese have a wonderful sense of humour and enjoy sharing an amusing situation with others. From that moment on we had a less formal and enjoyable evening of relaxed conversation and exchanging a number of toasts including one to the United States of America.

The following morning we set out to commence the arbitration. We were driven for over an hour to a warehouse where the offending goods were awaiting our appraisal. The goods consisted of the six skins that had originally been sent as the sample, and the commercial consignment of 20,000 sheepskins in about 200 bales. These were partitioned behind hessian walls that had been erected so that we could not see what else was stored in the warehouse. We were accompanied by a number of additional personnel from the Animal By-products office and this contingent was augmented by more from the warehouse.

After the initial introductions and briefing we commenced inspecting the sheepskins which meant sorting every skin in a bale to ascertain if it matched the specification, and had been correctly cured prior to shipping so that the skins had not suffered any deterioration in transit.

After about an hour, by which time we had graded half a bale of skins, our hosts announced that it was time for lunch and a rest.  We were taken back to the Peace Hotel, after which we returned to the warehouse to resume the arbitration.

The round trip being two hours travel time plus the obligatory time for lunch and rest.

By the time we had graded the balance of the first bale, including a conference with our 14 hosts on the merits of each skin, the warehouse was due to close for the day and we were returned to the hotel.

First day, one bale inspected, 199 to go! It was looking like Christmas in Shanghai.

That evening Steve and I decided to take a walk down Nanjing Road East and at the same time completely rewrite our plan for conducting the arbitration.

We concluded that we respected each other’s expertise and that we were both intent on achieving the correct outcome for the parties. Therefore the best way forward was to accept each other’s judgement and from the next day we would each separately grade bales, record our findings and move on to the next bale without holding an inquisition on every skin.

A walk down Nanjing Road East at about 6:00pm was not the place to have a quiet conversation. We were accompanied by hundreds, if not thousands of people who very politely simply wanted to observe us, and for those who were English language speakers or students to engage us in limited conversation to practice their English.

Our Plan B worked well and after day three we had completed our inspection and were in a position to make a judgement. We had inspected about 30 bales or about 15 percent of the consignment.

The entire episode was a classic example of people becoming involved in a business without being fully cognisant of all the technical ramifications. Apart from a small percentage of the skins that had deteriorated because they had not been correctly preserved prior to shipment the major problem was that the delivery did not conform to the original sample.

In the dispute between the London broker and Texas supplier we found in favour of the London broker, which enabled me to maintain face with our new Chinese friends, and we awarded a judgement of US$28,000 against the Texas supplier.

Despite the fact that under international law a judgement of that size entitled the buyers to totally reject the goods we persuaded Shanghai to take the goods at a discount of the judgement amount and thereby avoid the complications of returning the goods to Texas.

It was a unique experience that introduced my company to China, opened a whole new component of my life and led me in a direction that resulted in 40 years of public life and involvement with national and international business and political leaders.

Since first travelling to China I have wondered why we continue to approach China as one market. In my experience it is a minimum of 26 different markets and building relationships with Provincial and Municipal authorities and commercial organizations can be very rewarding.

The economic benefits to Victoria and Melbourne as a consequence of the relationships with Jiangsu Province and the Municipality of Tianjin have been, and continue to be of inestimable value. ■

*Since his first visit to China in December 1974, Michael Pointer has held numerous positions within the Australia-China landscape promoting stronger business ties between Australia and Victoria with China in the ‘70s, ‘80s and ‘90s. Michael was the inaugural Victorian President of the Australia China Chamber of Commerce and Industry (ACCCI) when it was formed in 1978, later joining with the Australia China Business Cooperation Committee (ACBCC) to form today’s Australia China Business Council. Michael has been a chairman of the Victorian Government China Advisory Committee and a director of the Port of Melbourne Authority, which during the 1980s, shared a Sister Port relationship with the Port of Tianjin. Michael was also responsible for assisting in the establishment of the Victoria Jiangsu Joint Economic Committee. He has held positions with the Australia China Trade Advisory Group and the Australia China Council.

Michael pointer established the Dewez Sheepskin company with Max Glover when they purchased the sheepskin assets from the very old established T. Dewez & Co Pty Ltd in 1969.

**With special thanks to the ACBC Victoria for their assistance with this story.