U.S. firms realizing century-old dream of penetrating Chinese market

March 11, 1992|By Robert Benjamin | Robert Benjamin,Staff Writer

CANTON, China -- In a scene that would heal the broken dreams of countless American business adventurers over the past 100 years, two stylishly dressed Chinese women perch on a sofa discussing the merits of various beauty products -- all of them American.

Mo Yu has just persuaded He Chun Jing, a 22-year-old computer operator, to shell out about $33 for an array of skin lotions, cosmetics and shampoos.

The 20-year-old saleswoman is very pleased with herself and her client. "She's becoming prettier," Ms. Mo says, "and I'm becoming richer."

Ms. Mo is one of about 9,000 saleswomen in this southern Chinese city for Avon Products Inc., the world's largest cosmetic company, long famed for its door-to-door marketing.

Avon set up shop here in late 1990, the first Sino-American partnership following the 1989 Tiananmen Square massacre of pro-democracy protesters in Beijing.

After only a little more than a year, "ya fang dao fang" -- "Avon calling" -- is widely recognized in Canton. Sales have been twice the U.S. company's expectations. It has added four branches nearby and now is aiming at more northerly Chinese markets.

"There's been a real breakthrough in China," says Barry Wong, Avon's Canton manager. "Many Chinese people now have money to spend, and they're looking to spend it on quality products."

Avon's experience reflects two trends that have quietly emerged in China in the last year, especially in Guangdong province, the nation's richest, most rapidly developing and most capitalistic region:

* Pledged foreign investment in China, which dropped sharply amid the political uncertainties from the Tiananmen crackdown, dramatically rose last year by about 70 percent to a new high.

* For the first time ever, some U.S. consumer-products companies have begun realizing a century-old dream of substantially penetrating China's huge domestic market.

After two years of corporate caution about China's future and about being associated with one of the world's most repressive regimes, relatively bullish announcements from U.S. ventures here have again become a regular occurrence.

U.S. companies were the most active investors in China last year after those from Hong Kong, Macao and Taiwan. They poured in at least $400 million, a record that was 40 percent higher than the year before.

Chrysler is expanding its production of jeeps in Beijing. General Motors soon will begin making pickup trucks in the northeastern city of Shenyang. Heinz, Dupont, 3M, Johnson and Johnson, Wrigley, Pabst and Colgate-Palmolive -- to name just a few -- are all expanding or initiating China operations.

"In the last six months, there's been a gradual warming again toward China on the part of American investors," says John Frisbie, director of the U.S.-China Business Council's Beijing office. "I wouldn't say that the unrealistic China fever of the 1980s is back, but there's definitely been an uptick in interest."

The alluring potential of the Chinese marketplace -- long reflected in the dream of "If they each only bought one shoe" -- mostly turnedout to be a myth in the 1980s. In the euphoric reopening of China to the world, many U.S. companies rushed to set up businesses here that only lost money.

But now some large U.S. companies have begun successfully peddling their products here with a more realistic view of their market: the top echelon of China's 200 million urbanities, not the entire country of 1.1 billion consumers.

The driving force behind the recent success of U.S. companies is the rapidly rising living standard in many parts of China, especially in coastal areas such as Guangdong.

Because of its large concentration of foreign-funded factories, Guangdong boasts the highest per capita income in China, more than $450 a year.

The province's savings rate now tops 30 percent. Newly rich farmers rent safety deposit boxes for their jewelry. Cities and townships invest in overseas property and run Hong Kong trading firms.

Consumer demand here has jumped upscale from TV sets to motorcycles. To enter the Southern Mansion department store in Canton these days -- with its huge wall of video screens, its myriad foreign brands and its trendy boutiques -- is virtually to step into Hong Kong.

"This entire province is rocking. People have an unbelievable amount of cash," says Daniel Loeb of the Nike shoe company.

Lately, Nike has been pitching its athletic shoes in Canton and other large Chinese cities the same way it does in the United States, with TV ads featuring basketball star Michael Jordan.

The company's history in China illustrates much about the new rush of many U.S. companies to produce and sell in southern China.

Nike had to ditch failed joint ventures it set up in northern China in the early 1980s. But the shoe company now obtains 17 percent of its worldwide production from 10 Taiwanese-funded factories in Guangdong and neighboring Fujian province -- up from 5 percent five years ago -- and it expects to reach 25 percent next year.

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