The daily digest of Twin Cities culture | Secrets of the City

Minnesota’s most venerable company landed one of the biggest private contracts ever awarded by the Chinese government. And promptly lost it, because of—what else?—sex and cars.





The Orient promises untold riches. And yet for centuries those riches have remained untold. From Marco Polo to AOL, Queen Victoria to General Motors, the history of foreign investment in China is undistinguished, occasionally despicable, and mostly ruinous. But that’s never stopped anyone. In the early 1980s, as China began to open its markets to foreign investment, a new generation of corporate Marco Polos decided it was time, once again, to conquer the Orient.

Minnesota’s 3M led the charge.

In 1984, 3M became the first foreign corporation granted a license to operate on the mainland without a Chinese partner. It was a significant honor, and that’s what it remained for a long time: 3M maintained an office—or presence, as they like to say—that generated almost nothing. Twenty years later, 3M China’s Shanghai manufacturing facilities and seven national service centers produce dynamic growth rates and glowing press releases. Whether they produce profits is another matter, and one not revealed in the company’s quarterly earnings statements or filings with the SEC. Nevertheless, the company insists that it is in China for the long-term, and its long experience in the country is one of its primary marketing tools. “With ten years of business savvy to date,” the company claimed as early as 1995, “3M China is as knowledgeable as any in delivering its global technology.”

In June 2002, as part of his celebrated trade mission to China, Gov. Jesse Ventura visited 3M (3M China spokesman Kelvin Li fondly recalls the governor as the “King of Wrestling”). The drop-in was typical for an official visit: drums, dragons, a brief tour, and the announcement of a large deal. In this case, Governor Ventura was pleased to declare that 3M would be providing “digital license plate technology” to China’s Ministry of Public Safety. Kenneth Yu, managing director of 3M China and the China Region, told reporters that the deal could be worth more than $100 million over several years. He also told a Minnesota Public Radio reporter that Ventura didn’t deserve much credit for the transaction: “All the deals you see that are signed in any trade mission didn’t happen just because the trade mission is over there, you know.” Yu wanted the media to know that 3M had been working on the project long before Ventura crossed the Pacific.

Kenneth Yu’s pride would be tested. Less than three months later, the Chinese government had placed the deal “on hold.” Meanwhile Yu was revising himself, bluntly telling The Rake that “It was never a deal.” Deal or not, the suspension was covered in every major Chinese newspaper (it has never been covered in Minnesota’s business press, including the Star Tribune, despite that same paper’s enthused coverage of the original announcement). Though 3M was never mentioned in those stories, it is widely known in China’s foreign-invested business community that 3M let loose blatant sexual innuendo on the streets of Beijing, thus ending the program.

In the year since the suspension, the tale of how 3M botched a $100 million deal in ten days has taken on near-mythic status in China’s foreign business community. Some recount it for laughs and others for consolation. In free-market China, failure is more rule than exception for large corporations. Even the biggest players are capable of doing something breathtakingly stupid. In spite of its extensive China experience, 3M Corporation proved it.

Over the past decade, China has become the fastest-growing automobile market in the world. In the first half of 2003 alone, passenger car sales in China increased by eighty-five percent. By the end of the year they’ll certainly exceed the record 1.2 million units sold in 2002. Predictably, the growth in private car ownership has stressed public resources. Roads are overwhelmed by traffic; cities are choked with exhaust. More prosaically, China’s local governments are running out of license plate numbers.Beginning in 1992, the Chinese government devised a simple system for issuing license plates to the small but growing ranks of private car owners. The plates contained five numerals—generated randomly—and a Chinese character that identified the local government issuing the plate. But as private ownership proliferated, the small number of available plates dried up. As a result, some local governments initiated monthly auctions; in some major cities, winning bids have ranged as high as $4,000 per plate. Not surprisingly, the dearth of plates was a drag on China’s developing automobile industry. In response, Beijing actively sought a system to expand the number of plates available to China’s drivers.
Enter 3M.

The Maplewood-based multinational corporation, famous for its Scotch Tape and Post-it Notes, has a talent for converting obscure, seemingly worthless inventions into innovative and highly profitable products. The 3M digital license plate system is a classic example: It combines unrelated technologies in print heads, laminates, reflective sheeting, thermal transfer ribbons, and software to create a high-tech all-purpose license plate for motor vehicle agencies. According to a 3M brochure, “It seamlessly integrates your vehicle registration data with plate production to quickly and accurately produce high-quality plates.” Apparently, the pitch is a powerful one: Motor vehicle officials throughout the United States and Europe have begun adopting the system. In Minnesota, 3M is providing its system “essentially free” to Minnesota’s Critical Habitat plates program, hoping that the cash-strapped Minnesota DMV will be so taken with the system that it will upgrade all of its license plates. If other governments are any guide, it will.

On the occasion of the Ventura trade mission, the Chinese Ministry of Public Safety announced that it was choosing 3M for a license plate trial to begin in August 2002. The system would expand Chinese license plates to six characters—three numbers and three letters, or six numbers consecutive—thus making available 36 million plate varieties and presumably eliminating the need for further expensive auctions. Kenneth Yu bragged that the system would allow new plates to be processed in seconds. Of critical importance to Beijing was the fact that the system would centralize the process of issuing license plates, thereby expanding the government’s ability to track registrations while ending the practice of local governments issuing identical plates. The trial was scheduled to last four months, in four cities, including Beijing. If it was successful, it would be expanded nationwide.

In advance of the trial’s August 12, 2002, launch, a Ministry of Public Safety minor official held a press conference to explain the advantages of the new system. High-tech materials would be used to manufacture the plates; the plates would be secured with anti-counterfeiting measures; and they could be issued very quickly. But the Chinese media fastened onto a different feature: the possibility of vanity plates. “License Plate Numbers Up for Grabs” was the headline in China Daily on August 6, 2002. Though only a small portion of the official press conference had related to personalized plates, the Daily’s story excitedly announced, “A pilot project to allow automobile owners to decide their own license plate numbers will be launched in Beijing, Tianjin, Hangzhou, and Shenzhen.” Similar coverage was repeated throughout the Chinese media. In spite of the Ministry’s best efforts to excite the public about anti-counterfeiting measures, it had clearly lost control of the story and the program.

In China, lucky numbers are a cultural obsession with very practical consequences. For example, the Mandarin and Cantonese word for “eight” is quite similar to a word that means “getting rich”; the number is highly prized for everything from addresses to phone numbers. In Shanghai, cell phone numbers containing a series of 8s are worth hundreds of dollars (I have been offered the equivalent of $400 for my Chinese cell phone number). In Sichuan Province, the government recently auctioned the land-line number 8888-8888 for the equivalent of $290,000. And in Hong Kong, license plates containing 8s can be worth millions.

Prior to 3M’s system, mainland Chinese license plates incorporating the number were usually obtained only by the well-connected and those willing to engage in what the state-controlled press euphemistically calls “corruption.” Thus, when the government announced that it was enabling car owners to choose their own plate combinations for a uniform fee, it was a signal consumer event. China Daily went so far as to post an Internet survey in which “55 percent welcomed the license-plate reform, regarding it an exciting way for vehicle owners to show their personalities.” The assumption was that the 8s would be exhausted quickly.

In Beijing, car owners began lining up at the traffic bureau two days before the program commenced. By 8 a.m. on August 12, there were three hundred people waiting for a chance to show their personalities. By noon, 1,165 plates had been issued (a number that astounded officials at Minnesota’s DMV). As expected, demand was high for plates with 8s, as well as lucky 6s and 9s. Particular demand was shown for any plate with the combination 168 (the numbers, when spoken, sound very similar to “smooth path to riches” in Mandarin). Birthdays and names were also popular.For reasons that are not entirely clear, the new system contained only one restriction on three-letter combinations: CHN. This common abbreviation for “China” is often used in an official capacity, and so the government naturally did not want the masses displaying it on their newly acquired Volkswagen Santanas. Beyond that, Chinese car owners were allowed to select any combination that suited them. And that’s exactly what they did. By the end of the first day puckish car owners were sporting plates with personalizations that included FBI 007, CNN 001, GOD 001, and USA 911. These combinations were bound to draw attention, and so they did. But it was another combination that doomed the new arrangement. “The last straw was SEX 001,” explained 3M’s Kenneth Yu. “Someone picked up a phone at the ministry and asked, ‘Is this appropriate?’” While the appropriateness was being discussed, the SEX series underwent a rapid run-up: SEX 069 was also issued on the first day. Quite likely, Minnesota’s DMV would’ve taken offense at the “SEX” series; in modest Beijing, it was a major affront. Likewise, the use of brand names was bound to anger a central government increasingly concerned (publicly, at least) with intellectual property rights. “GOD” is, needless to say, strictly off-limits. And even hinting at allegiance to a foreign government or organization is grounds for an official investigation. It was a rough first day.

Ironically, 3M, which laudably applies Minnesota labor and environmental standards to its operations worldwide, did not bother to apply Minnesota common sense to the system it provided to the Chinese Ministry of Public Safety. According to an individual associated with the personalized program at the Minnesota DMV, Minnesota’s personalized license plates are vetted by a committee that includes law enforcement. But because one of the new system’s assets is the speed at which new plates could be issued, a censoring committee was not built into the process.

China’s Ministry of Public Safety is unwilling to discuss 3M and its licensing system, and inquiries into whether it had or would form an “appropriateness committee” were left unanswered. But even without Ministry comment, it is worth noting that Kenneth Yu himself highlighted the rapid processing of plates during the Ventura trade mission. So: Should 3M have asked its software engineers to insert code prohibiting the issuance of plates which were likely to offend Chinese government sensibilities? “It’s pretty amazing that 3M wouldn’t have thought of that ahead of time,” commented the Minnesota DMV employee involved with the state’s personalized plate program.

As the world learned during the SARS outbreaks, the Chinese government doesn’t explain itself when it’s been embarrassed. Though 3M may quibble with who should have been responsible for vetting offensive plates, it was not lost on the Ministry that the old system managed to offend nobody. On August 22, 2002, just ten days after the 3M system had debuted with much fanfare, Chinese newspapers announced the program’s suspension. “The Beijing Traffic Administration issued a notice saying that registration of the new license numbers was suspended due to technical problems, but did not give a set date for its resumption,” explained People’s Daily. “Although the administration did not give any clear explanation why the registration came to a sudden halt, some suspect that a creative naming of license numbers might be part of the reason.”

When I asked whether or when the suspension would be lifted, Kenneth Yu sighed, “It was put on hold pending a system to screen.” 3M’s software engineers have had over a year to devise a system to prevent Chinese car owners from touting their devotion to GOD, SEX, and the WTO. But as of yet, there is no indication that the hold will be lifted. So either the engineers haven’t been successful or, more believably, the Ministry of Public Safety would prefer to forget 3M and its high-tech license plates. In early August 2003, one year after the program’s commencement and suspension, The Rake asked 3M China spokesman Kelvin Li if the Ministry had given any indications as to when the program would be restarted. “No,” he answered. “But it’s very difficult to say with a matter like this.”

3M’s blocky logo is a common sight in Shanghai. It hangs over shops and supply stores throughout the city’s sprawling industrial sectors. Foreign brand saturation is a rare accomplishment in free-market China, hard won, and greatly envied, but success breeds curiosity about failures, and so 3M’s license plate debacle has been thoroughly debated, analyzed, and toasted in the expensive bars where Shanghai’s foreign-invested business community congregates. The verdict is simple. “Why would anyone suppose that mainland Chinese, if unchecked and left to their own devices, would be any less ‘creative’ and shameless in personalized license plates than Americans?” asks an American businessman with several years’ experience in China, as he relaxes in the elegant bamboo-lined garden at Cotton’s Bar. “We’ve seen example after example of businesspeople disregarding their own common sense and experience in looking at China,” he sighs over his red wine. Experience only gets a company so far, it seems—even when that company is 3M.