
In April 2011, I had just turned 63 and was supposed to retire after a 30-year career at Silicon Valley Bank (SVB), the final decade of which was spent as CEO. Somehow, things turned out a little differently.
Rather than pursue hobbies or get involved with nonprofits, my wife and I moved to China. SVB’s Board had asked me to found a brand-new bank: the Shanghai Pudong Development Silicon Valley Bank (SPD SVB), a joint venture between SVB and the state-owned Shanghai Pudong Development Bank.
The board had committed $100 million to establishing SVB’s operations in China, and I was filled with goodwill and optimism about the endeavor.
Although I thoroughly enjoyed my time in China and the many friends I met there, from today’s vantage point, I firmly believe we were (and are still) being played.
Despite SVB’s recent failure, I remain committed to its original vision and take pride in the work the bank did to fund innovation. By taking its unique model to China in 2011 and deploying it to finance Chinese start-ups, I thought of myself as not only expanding the bank — my professional home — but also as supporting global innovation.

By the time I returned to the U.S. four years later, however, I felt supremely cynical about U.S. business interests in China as well as personally exploited.
While most of the news coverage at the moment will, rightly, focus on SVB’s recent missteps, I believe it is also worth sharing and studying the bank’s decades-long challenges in China — not only because they predated the current geopolitical tensions, thus representing a more optimistic time, but also because countless Westerners have had similarly frustrating experiences to mine, but very few are willing to admit it.
Sometimes they’re afraid of disappointing their boards and engendering retaliation from the Chinese Communist Party (CCP). If they’re critical, they worry that the CCP will find some way of punishing the company they went there to build (assuming it still exists). Possibly, their egos won’t let them admit that they’ve been taken for a ride. And perhaps, in some cases, China is still milking them for knowledge, and for that reason treats them well. Their time will come.

This reluctance to share our failures makes it difficult for Westerners to learn from others’ mistakes. As a result, everybody must reinvent the wheel. Western companies as a group could perform better, I believe, if they were more inclined to talk with others about what worked well in China — and what didn’t. Collectively, we could make more progress more quickly.
I left my role as President and CEO of the joint venture at the end of 2014. Up until 2019, I continued to travel to China every three months to attend the quarterly board meetings. Ever since, I have been trying to figure out what China intended when they urged SVB to join them in building a JV bank. Although I thoroughly enjoyed my time in China and the many friends I met there, from today’s vantage point, I firmly believe we were (and are still) being played.
I’ve come to understand SVB’s experience in China as a kind of “stations of the cross” — the fourteen-step devotional sequence in Catholicism that commemorates specific events in Jesus Christ’s last day of life. The last of these, of course, has the body laid in the tomb.
STATION ONE: KISSING FROGS (2001–2007)
We were driven to be in China by two beliefs that have, over time, proven to be correct: (1) technology is a global phenomenon, and (2) China would eventually become a leader.

Our first trips to the People’s Republic of China (PRC) were in the year 2000. In fact, I was the featured speaker at the first meetings of both the Shanghai and Beijing chapters of the Chinese Venture Capital Association.
At the time, China’s innovation industry was hitting the gas. In 2000, China’s venture capital industry had raised $2.1 billion and its total private equity pool was $5.2 billion, up 39 percent from $3.7 billion the year before, due to China’s steady 8 percent growth rate and its accession to the World Trade Organization (WTO).
Even as the dot-com boom in the U.S. and Europe imploded, our clients — the VC firms who funded innovation — and our bank were keenly aware of the opportunities across the Pacific.

In June 2004, SVB led a six-day trip to China for many of the best-known and most successful venture capital firms in Silicon Valley, to give them the lay of the land. The 25 venture capitalists who traveled with us represented more than $50 billion under management and participated in 20 meetings with technology companies, regional venture capitalists, private equity firms, local entrepreneurs, and educational and governmental institutions. Virtually every firm represented on that trip established a beachhead in China in the next year or two. In Silicon Valley, that trip became legendary.
In December 2005, SVB set up our first Chinese office in Shanghai. Initially, it was difficult to accomplish much. First of all, we had no licenses, so we could only engage in activities that didn’t require them, which means . . . almost none. Our Chinese office supported our venture capitalist clients as they invested in Chinese tech start-ups that were owned by off-shore companies (usually located in the Cayman Islands) for the sole purpose of raising money from dollar-denominated funds. These Wholly Owned Foreign Enterprises (WOFEs, pronounced “woof-fees”) were a government-sanctioned (or at least ignored) work-around of the ostensible prohibition on domestic Chinese companies receiving U.S. dollar financing.
Before we could move beyond financing WOFEs, we needed a banking license in China. But to get a license to do much of anything in China requires the assistance of one of the myriad government agencies. And these agencies are under no obligation to grant anyone a license to do anything, unless they want to.
So, for seven years, from 2000 till 2007, we wandered around China kissing frogs — meeting as many people as we could, trying to interest them in our bank.
STATION TWO: FINDING A PRINCE (2007–2008)
Finally, in 2007, we found a prince: a high-ranking Shanghai Party official from the Yangpu District, who for this telling, I shall refer to as Ding. He was one of the city’s leaders.
One of Ding’s key tasks was to turn his district, which was a rustbelt of old industry, into a hub of innovation. In us, he found the only commercial bank in the whole world exclusively dedicated to financing the creation and development and, ultimately, commercialization of technology. In other words, the only people who could teach him how to finance his district’s transformation. He was the first government official to embrace us, literally. Every time we met with him, he gave me a monstrous bear hug.
Our team spent hundreds of hours with Lao Ding (“Lao Ding” is an endearment meaning “Old Ding”) and his team helping them understand our business model so that they could do a better job of explaining it to the relevant government officials, whose assistance we would need if we were to obtain a license. Lao Ding needed to show them how helping us get a banking license could help China.
In fact, unbeknownst to me, Lao Ding had asked his CFO to leave his team, join the Shanghai Rural Commercial Bank, set up a tech lending team, and test the model in the real world to see if it really worked as we’d described it. The experiment was successful enough that Ding ended up giving me an award for being a top “innovation innovator in Yangpu.”
This sort of “tech transfer” was inevitable. It was how China did things. If we hadn’t participated, we would have been constrained to working with WOFEs. And the relationship with Lao Ding did prove fortuitous for SVB, as he then began introducing us to the government officials who could help us get a license.
STATION THREE: “YOU ARE THE BEST BANK IN THE WHOLE WORLD” (2009–2010)
Lao Ding had a great network. He set us up with the city’s vice-mayor, Tu Guangshao, the head of financial services in Shanghai. Tu later became head of the China Investment Corporation (CIC), one of the largest sovereign wealth funds in the world. But even more importantly, he introduced us to Yu Zhengsheng1Yu’s father had been a former husband of Mao’s infamous fourth wife, Jiang Qing, who was a member of the famed Gang of Four; and Yu’s brother was one of the highest-ranking defectors in the history of the CCP., then Party Secretary of Shanghai, and later a member of the Politburo Standing Committee — in other words, one of the most powerful people in China.

Yu was highly complimentary of SVB and courted us assiduously. China was building its own innovation space, he told me, and among other things, needed to learn how to finance technology. He had concluded that we were the best in the world at financing technology.
Yu made it very clear that this was no off-the-cuff judgment. His team had searched the globe and determined that we were better than Morgan Stanley or Goldman Sachs. It would be an honor for China if we would build a bank, especially in Shanghai. He would personally see to it that we’d be welcomed with open arms and that we’d be successful.
How could I resist? How could my board resist? After all these years kissing frogs, we’d finally found a prince (Lao Ding), and he’d led us directly to the king himself (Party Secretary Yu). Back in Santa Clara, the board decided to commit $100 million to establishing SVB’s operations in China.

STATION FOUR: “DON’T WORRY, I WILL HELP YOU” (2010)
Under the guidance of Yu, everything began to fall into place. Beijing, the seat of the China Banking Regulatory Commission (CBRC) — the banking regulator at that time — miraculously began to show interest in granting us a license. Tu Guangshao, the vice-mayor in charge of financial services in Shanghai, even traveled to Santa Clara to visit with our management team.
With Yu paving the way for us, getting to know the regulators was a piece of cake. They knew that, in the end, if Yu wanted us to have a license, they would probably have to comply.
But we would need a joint venture partner.
If you’re in China and your joint-venture partner is a Chinese state-owned company, the Chinese government is in control, no matter how much you own.
That’s the law: to obtain a license to found a new bank in China, you must have a joint venture partner. The ostensible reason was stated in the following way, and with some justification: “You need a joint venture partner because China is different, and as such, risky for those unfamiliar with it. Therefore, to make sure you can succeed, you will need a partner.”
The logic is sound, and the reasoning is correct. Chinese banks are not the same as U.S. banks, and the context within which they operate is not the same. Not all of the differences were clear to me at the time, of course, but I still knew we’d need guidance.
Secretary Yu was going to help us, he promised. He and his team would find a good JV partner for us. We needn’t worry. He would help.
STATION FIVE: “ONE BED, TWO DREAMS” (2011)
The ostensible reason for having a JV partner and the actual reason are somewhat different. While the ostensible reason is true, the real reason is this: China wants to learn from the foreign banks, and it’s easier to learn from them if China, in effect, owns them through the structure of a joint venture.

Shanghai Pudong Development Bank (SPDB), Shanghai’s largest bank and one we had been courting assiduously, was selected to be our JV partner. In retrospect, I realized that we had chased them until they caught us. But that understanding was long in the future. We were thrilled to finally be making progress.
In early 2011, my wife and I moved to Shanghai to officially set up the JV. I had numerous battles with James Luo, my counterpart at SPDB, over everything from hiring to our logo. But during these negotiations, we were granted a number of “wins.” At the time, I was proudest of our percentage ownership in the new bank.
In the past, the CCP had never permitted an American commercial bank to enter into a joint venture with a Chinese commercial bank that involved creating a new commercial bank. In that sense, this was a watershed event.
On occasion, the CCP had allowed American commercial banks to buy into Chinese commercial banks, but their percentage ownership was typically limited to 5 percent; on rare occasions, 10 or 15 percent; and the absolute maximum was 20 percent. We negotiated 50 percent! We thought we were geniuses.

I came to learn that percentage ownership in China is irrelevant. If you’re in China and your joint-venture partner is a Chinese state-owned company, the Chinese government is in control, no matter how much you own.
Fernando Moreira, who’d led the joint venture life insurance company created by China Merchants Bank and Connecticut-based Cigna Insurance, said something that always stuck with me. Although his JV was completely different from ours, his perception on JVs in China was that they almost never work. His reasoning: “One bed, two dreams.”
STATION SIX: “YOU’RE ALL SET, EXCEPT ONE SMALL THING…” (2012)
By August of 2012, almost a year and a half after my arrival in Shanghai, the CBRC deemed us ready to open our doors to the public. At last, we could finally do what we did best: Lend money to innovative start-ups. We couldn’t wait.
But actually, we had to.
In the fine print, the license did allow us to open the doors to our bank. But there was a law in China that said that if you’re a foreign bank and you’re a partner in a JV with a Chinese bank, that JV bank may not lend Chinese currency for the first three years of its existence. We could have an office and a staff, but we could not make any loans in domestic currency.
Again, there’s an ostensible reason, which is real enough; and there’s an actual reason, which is even more important than the ostensible one because it’s the operative one.
The ostensible reason here is: China is very different from the U.S., and therefore it is very risky for you because you don’t understand it, and perhaps never will. Therefore, for the first three years or so, you can’t do business to avoid getting yourself into trouble. It’s for your own good!

And the real reason: We (the Chinese) want to learn from you, so we want you to spend the first three years teaching us so that as soon as you can actually do business, we (the Chinese) can immediately begin competing against you, using those aspects of your business model we like most.
Should we have seen this coming? Yes. But we were stupid. We thought that because we were a 50 percent JV with SPDB, the government would want us to get moving as soon as we could. Although the restriction on lending RMB was written into the agreement, we believed it was just for appearances and we’d actually be lending RMB as soon as we got our license.
Not the case. For the next three years, we had nothing to do apart from teaching the staff how to execute SVB’s model in preparation for the day when we’d actually be able to lend RMB.
STATION SEVEN: “SPEND YOUR TIME TEACHING US” (2013–2014)
As my initial two-year commitment came to a close, my wife and I made the decision to stay on for longer. Partly because China fascinated me. And partly because I thrilled at each discovery as we peeled back the layers of the Chinese business onion, weeping as we went.
During the three years we were unable to do business in Chinese currency, we were constantly under pressure to spend our time teaching others: the Bank of Beijing, China Merchants Bank, the Bank of Hangzhou, various SPDB branches around the country, a brand-new bank in the Zhongguancun Science Park in Beijing, and so on.
Their managers regularly requested meetings to pick our brains and learn as much as they could about how we made loans. Every deal they suggested we do together was 99 percent in their favor. To them, a “win-win” deal meant they won twice. Sometimes the proposals they made were so extremely one-sided that we could only infer they thought we were stupid or lacked any leverage whatsoever.
Similarly, it started to feel as if some at SPDB, our JV partner, didn’t want us to be successful. There were (and are) warring factions at SPDB. Those in opposition to the JV generated a plethora of roadblocks. For instance, after promising not to, the corporate bankers at SPDB competed openly with the new bank. Accepting their disingenuous excuse (“We’re not competing; we’re letting the customer decide.”) was tantamount to acknowledging that we were both naive and stupid.
We started to feel like we were doomed to fail. During this time, I was invited more than once to speak at the Party School in Beijing about our business model. The government officials in attendance were not only attentive, but utterly enthusiastic. At the end, they told me they “loved” our business model — so much so, in fact, that they wanted one of their own, just like ours. I told them they already had one, and it was this one. They owned 50 percent of it; 99 percent of our employees were PRC citizens; and 100 percent of our clients were PRC-registered companies. If this wasn’t theirs, I didn’t know what was.
They all smiled and nodded in apparent agreement. “Yes, yes, we know,” they said, “but we want one of our own.”
STATION EIGHT: “THERE’S JUST ONE OTHER THING…” (2015–present)

My wife Ruth and I left China at the end of 2014. Six months later, on May 19, 2015, the Shanghai government announced that the JV could use RMB. The bank had technically opened in August of 2012, so May 19, 2015 was three months ahead of the prescribed three-year waiting period.
I was in China for the occasion — primarily to attend our regular Board meeting — and when the officials told me in person, their announcement was filled with praise. We were receiving permission three months early largely because I’d done “such a brilliant job of lobbying the government; seldom has anyone done so well,” they said.
… I have come to the conclusion that trying to implement a U.S.-based banking system in China will simply not work, and the ramifications of that impossibility will affect a host of bilateral business efforts.
In fact, I’d done so well that the State Council had decided to change the law altogether. Henceforth, any new bank with any element of foreign ownership would only be subject to a one-year prohibition on the use of Chinese currency, rather than the three-year prohibition we’d been subject to.
There was also “just one other little thing.” They admired our business model so much that they’d decided to open a bank of their own, using our business model. Would I mind spending some time with the management team of the new bank helping them better understand some aspects of our business model that had eluded them in the past, just to make sure they got it right? They asked me this without even blushing.
CONCLUSION
Before SVB collapsed, when people would ask me how well our bank in Shanghai was doing, I always gave them the same answer: As well as the CCP wants us to.

Although there is much speculation about what will happen to the joint venture now, my strong sense is that it was never intended to have a “happily ever after.”
More Chinese banks, like Tencent-backed WeBank, have emerged to serve China’s startups. And even before the recent developments, SVB’s joint venture had, sadly, lost much of its allure. When we first started hiring in 2011, we attracted many young people who were enthusiastic about the idea of working for an American company. In the meantime, due to the rise of Xi Jinping with his incessant anti-American propaganda and the influence of Donald Trump who succeeded in making America look like a nation of buffoons, we are nowhere near as attractive as we once were. In 2021, the joint venture had a net profit of only $7.4 million.
A lot has changed since we left — in China and for the bank. But I have come to the conclusion that trying to implement a U.S.-based banking system in China will simply not work, and the ramifications of that impossibility will affect a host of bilateral business efforts.
The West has a series of institutions that safeguard the banking system — not just the Fed, but the IRS, accounting standards, financial transparency, the requirement for regular audits, accounting firms that perform these audits, the rule of law, contract law, and the like. They’re so fundamental that we don’t even think about them. The business practices that we simply take for granted in the U.S. still do not exist in China — especially for foreigners.
In the third plenary of the 18th Central Committee, the CCP vowed to create a “level playing field” on which foreign companies could compete on terms equal to those governing the indigenous companies. It is now a decade later, and so far, nothing has changed for the better. Since Xi Jinping came to power, things have only gotten worse, from a Western point of view. Some Western companies will tell you the opposite. In my assessment, they believe what they’re saying. The Party is treating them well because they possess knowledge that the Party has not yet accrued. When the CCP has learned all it wants to know, these companies, too, will feel as I do.
Excerpted from One Bed, Two Dreams: When Western Companies Fail in China, a forthcoming book by Ken Wilcox. Copyright © 2023 by Ken Wilcox.

Ken Wilcox is a former CEO of Silicon Valley Bank and author of Leading Through Culture.