Chinese Invest In China

DaShi · December 14, 2003, 07:03

http://www.nytimes.com/2003/12/14/in...ia/14CHIN.html

Quote:

Chinese Born Overseas Invest in a Distant Homeland
By JANE PERLEZ

Published: December 14, 2003

TAIXING, China — A decade ago, Chan Hian Siang's property company in Singapore foresaw a slump in the local economy, and with some investment experience in China already in hand, turned anew to the mainland.

Today, Mr. Chan is the chief executive officer of a chemical plant that his company built from scratch on the northern banks of the Yangtze River not far from Shanghai. It is doing well — there is an expansion planned for next year, its second — and the appetite in China for the caustic soda, chlorine and other basic chemicals the plant produces seems insatiable.

"At first we made a lot of mistakes," Mr. Chan said about earlier ventures. "People here are very, very smart," he said, referring to Taixing. "A lot of things that you think can't happen can happen."

But with Singapore no longer a place to make much money, China was the place to be, he said.

In increasing strength, overseas Chinese businessmen from Southeast Asia are investing in China, where they possess linguistic and cultural advantages over big Western corporations. Navigating layers of government and the rituals of business etiquette is easier if you speak the language and appreciate the history.

China has long been alluring to ethnic Chinese living in Southeast Asia. Ethnic Chinese tycoons from Indonesia have been doing business on the mainland in pulp and paper, tires and property. Robert Kuok, who was born in Malaysia, held investments in China and built Shangri La hotels there when Mao Zeodong was still alive. In contrast to these big fish, smaller businessmen dabbled in modest ventures in their ancestral villages to help lift relatives out of poverty.

But an entirely new wave of serious investment by overseas Chinese is occurring, experts say. For example, one of a new generation of hoteliers, Ho Kwon Ping, the executive chairman of Banyan Tree Hotels and Resorts, is diversifying from his usual tropical locations and building China's first Banyan Tree hotel in Yunnan Province.

Primarily, the investors are attracted by rapid growth in China, compared to the anemic growth at home, particularly in Singapore and Indonesia.

These moves toward China have been eased recently, experts said, as governments in the region accept China more as a friend than a foe.

Thus it is more difficult for Southeast Asian governments to disparage overseas Chinese investment on the mainland as capital flight. Concerns about overseas Chinese money in China having a "hollowing out" effect on some regional economies are, for the moment, muted.

"More Chinese are now investing directly from their home countries," said Wang Gungwu, director of the East Asian Institute in Singapore, a noted scholar on overseas Chinese. Some of the home countries are "actually encouraging them to do so," he said.

But the catalyst was profit. "The main drive recently towards China comes from the perception that, relative to any part of Southeast Asia — or anywhere else within their reach — China provides many opportunities for investment and growth not found anywhere else," Mr. Wang said.

After some unhappy experiences doing business on the mainland, and an underlying suspicion of Beijing, Chinese were now "somewhat more confident," Mr. Wang said.

The investors were also emboldened by a regional awareness that trade with China was now a two-way street, with goods made in China by overseas Chinese firms being exported back to the region, said Ernest Z. Bower, president of the U.S.-Asean Business Council.

Mr. Chan's odyssey, which has taken him from Singapore merchant banker to chief executive of the chemical plant here, began when he first came to China in 1987 in a tour group for his annual vacation. There was barely food in the hotels, he said.

He came back after the Tiananmen Square crackdown in 1989, when Western investors were pulling out, and "good deals were to be had" in land.

His Singapore-based company, Asiawide Holdings, which was doing well in the hot Singapore property market, bought land in Nanjing for the development of an office tower.

But Asiawide, which is headed by a 72-year-old Indonesian Chinese businessman, Lucas Sasmito, wanted to diversify beyond property.

By accident, but the kind of accident that was likely to happen only to an overseas Chinese investor, Mr. Chan met a small group of chemical engineers from a state-owned chemical factory in Nanjing.

With the engineers providing the know-how, and Asiawide providing equity, they set up a new plant in 1993 in the city of Yangcheng. It was a rocky venture, with plenty of problems, he said.

But Mr. Chan said he had confidence in the technical team, and began to scout around for a new start-up venture.

In Taixing, Mr. Chan discovered an industrial park devoted to chemicals. The location on the banks of the Yangtze, close to industries that needed chlorine and caustic soda, was superb.

"They gave us incentives on land cost, a rebate on electricity, and breaks on the local government tax," Mr. Chan said.

It took 13 days to register the company with the Taixing authorities. Construction started in November 1996 and finished after 20 months. The initial investment was $33 million, and there was a $20 million expansion this year.

Good relations with the local authorities were essential for survival, he said. It was the Communist Party secretary in Taixing who negotiated with the Beijing government on important matters, including a license for a new $40 million power plant planned for construction next year to supply the chemical plant's increased electricity needs.

For his part, the mayor of Taixing, Cao Su Min, said he found it easy to deal with the chemical plant, called Singpu, a reflection of its Singaporean origin.

"There are barriers with the multinational companies — they can't communicate well with us," Mr. Cao said. "They take a long time to make decisions because they are invested in so many places."

Competition in the Yangtze delta for overseas investment is fierce, and Mr. Cao is one of scores of mayors trying to attract foreign businesses. In return for the municipality's help, Mr. Chan lent his general manager, Huang Wan Yuan, one of the chemical specialists he met a decade ago in Nanjing, to travel to Japan and South Korea with Mayor Cao to try to persuade more chemical companies to come to Taixing.

For Mr. Chan, who lives in a dormitory on the plant site along with the more than 400 workers, running a chemical factory in China seems a long way from the moment he first set foot in his ancestors' land.

"That night when we landed at the airport there was no coach to pick us up from the plane," he said. "It reminded me of the movie `Casablanca.' '

"I never dreamed of running a $100 million plant 15 years later."

I put in the bold the reason why I will never touch "Future Cola."

Anyway, what effect do you think the influx of successful and wealthy non-native Chinese, such as ABCs, will have on the native population?

Drake Tungsten · December 14, 2003, 09:51

Old news. The overseas Chinese community has been one of the major investors in China for years now.

As for the effects, your guess is as good as mine.