A Fistful of Yuan 5: Beijing, Week 2

SUNDAY, MARCH 29, 1981

Angelica and I worked on the contract some (on) Sunday afternoon in preparation for the Monday meeting.

This is where, as the old expression goes, we “got down to brass tacks.” The Chinese are very keen on detail, so it was necessary to have every item, every quantity, every price and every addition to be absolutely correct. At that time, it was necessary to use of of those “new” portable paper tape spitting Canon calculators from Japan to do the math, then type the quotation up on paper. What we would have given for spreadsheet and word processing!

MONDAY, MARCH 30, 1981

Commercial discussions resumed at 0900. We went over the contract itself and made some changes to the basic Chinese contract. Once again they asked for a price reconsideration and once again we told them that we would rather wait for the finalized equipment list since every meeting they added or deleted some item. Hammer spare parts list was finally settled on with this meeting, except for the Ascon.

One of the first things that the Chinese informed us of was the attempted assassination of Ronald Reagan in Washington. They informed us that their leadership had sent messages of sympathy to our government, wishing President Reagan a complete recovery. We were taken by surprise. The only television we had available to watch was CCTV, which didn’t have an English channel at the time, so we didn’t find television very entertaining or informative. CNN was in its infancy in the U.S., and wasn’t in China. We thanked the Chinese for their sentiments.

It is ironic that, six years later, we began our commercial relationships with the Russians at the Soviet trade mission, just around the corner from the Hilton where the assassination attempt took place.

Meeting adjourned at 1130. That afternoon Angelica met with He Ping and found out some interesting information concerning our competition. The Japanese package started out at around $1,070,000 total but after our arrival the Chinese had met with the Japanese again and the latter were seeking authorization for a 10% discount from Japan. Nevertheless, the Chinese were very interested in our equipment after the presentation but would like some additional discount to make their purchase of our equipment more justifiable. The Japanese were well entrenched in Tianjin and such a purchase was something of a novelty.

Keep in mind that the Japanese price included freight, which wasn’t much from Japan to China. Evidently the Japanese were trying to make up for whatever they gave away to get the barge contract in the hammer and boiler, but things now weren’t going according to plan.

The practice of “bid swapping,” whereby you were informed (or thought you were informed) where your competition’s price was, was unappealing to Americans but is common practice in other parts of the world. Vulcan had experienced it before, more overtly in some cases. Machimpex used this kind of tactic in the normal course of business and evidently the rest of the bureaucracy followed suit.


We met with the technical team from Tianjin and He Zheng at 0800 and took a very rough four hour bus trip to Tanggu to see the barge. We were not sure that we would be able to do this due to the work that this barge was doing in the Bo Hai but fortunately it had put into port the previous day. After lunch in Tanggu we went over to see the barge. There were few surprises here—the barge was fairly new, with an 800 ton crane. After going around examining the barge we had further discussions in the barge captain’s office. They decided first to standardize all hoses at 4″ X 50′. They then asked us to add the hose swivel connectors to the quote and asked again concerning the price. I told them that the equipment would have to be settled first so He Ping informed me to put it together without the swivel connector and discuss it as soon as possible.

The bus ride to Tanggu was a long affair on the two-lane concrete road from Beijing through Tianjin. Most of our weather in Beijing was cold but dry; when we got to the coast, we experienced some raw, misty weather as we stood on the barge deck.

We rode back to Beijing in a train with He Ping, He Zheng, and Zhu Li Cai. There He Ping asked us to meet with them the next day at 1400 to discuss the price. We arrived at Beijing at 2030.

Once this trip was done the three men who came back with us became “the Chinese” we were negotiating with. The train ride was an improvement. But when we returned to Beijing, Jesse remarked, “That barge is pitiful.”

“Why?” I asked.

The main reason adequate freeboard is needed.

“There’s only eight feet of freeboard,” he replied. This meant that there was only eight feet between the deck and the waterline (and the barge wasn’t loaded with equipment or material, either.) Inadequate freeboard allows high seas to wash over the deck more easily. Sure enough, the barge eventually sank in one of the hard storms that the land-surrounded and shallow Bo Hai is famous for.


Angelica and I worked on the quotation in the morning. This was not a very long process since most of the work was complete. After having given the matter considerable thought and looking at past discounts, I decided to start out here with 11% discount on Vulcan items and 5% on the rest.

The differential was due to the fact that we were resellers of the Johnston boiler and other items, not the manufacturer. I did not ask Johnston to take additional discount, figuring that, by the time I got an answer, a) they would say no and b) the deal would be lost due to delay.

The commercial meeting began at 1400 in Amtech’s office. We first discussed delivery. I had originally committed for a 15 August 1981 delivery but upon rechecking had second thoughts so the previous day I had taken up a 15 September delivery with He Ping. He was noncommittal then but now agreed to this. They then examined the price very carefully and told me that they had been looking for a 12% discount on the entire package. I then offered a 12 1/2% discount on the hammers. They discussed the matter again while Angelica passed me a note stating that the Japanese had offered a package price of $937,000. They then asked me for a 14% discount on the Vulcan part of the quote. I came back with a 13 1/2% offer. They informed me that 13 was an unlucky number, at which I told them that that is why we had offered 13 1/2. Then they informed us that it was settled and we had the order.

Once the Chinese had departed, the jubilation began. It was not only our first contract in the People’s Republic of China, but it was also Angelica’s first contract with Amtech.


Angelica worked on the final contract in the morning with no problems. He Zheng came over to the office at 1400 to pick it up so that his superiors could review it. The return banquet was that night at 1800 when the signing took place, I for Vulcan and He Ping for the Petroleum Corporation.


He Zheng and Chen Gui De met us at the hotel at 0945 to take us to the airport for the return to the U. S.

It’s time to go: Berwald and Perry outside of the Beijing Hotel, waiting for Mr. Chen to arrive.

After the Sale

Vulcan produced a good number of offshore pile hammers this size and larger, but this contract had some special challenges.

The first was of our own making: our bank, American National Bank (now SunTrust,) did not have a corresponding relationship with the People’s Bank. So it was necessary to turn to First City National Bank in Houston (one of many which perished in the oil crash a few years later) to facilitate the letter of credit.

The production of hammer and boiler received an unusual level of oversight from Vulcan management. In June my brother and I visited Johnston Boiler in Ferrysburg, MI, to take a look at the boiler production and to impress upon them the importance of being on time in the delivery of the boiler. This is the first and only time that either one of us visited this facility.

The contract called for delivery on or before 15 September 1981. Both Vulcan and Johnston experienced some production delays; Vulcan, however, completed the hammer on 24 August 1981. The most significant delays occurred with the procurement of the ship. The contract specifically called that the ocean freight be handled by the China Ocean Shipping Agency in Tianjin. Unfortunately PENAVICO (the Chinese acronym for the organisation) had difficulties in booking the ship. It wasn’t until 11 December 1981 that the entire package left Chattanooga. It was shortly placed aboard the ship in New Orleans and the product of nearly a year of hard work was on its way to the People’s Republic.

With the hammer gone and the L/C fulfilled, Vulcan awaited the next step, which was start-up of the hammer. But in the midst of that another event in Beijing took centre stage, and that was the Society of Petroleum Engineers first oilfield show in China.


3 thoughts on “A Fistful of Yuan 5: Beijing, Week 2

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