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China Makes Its Manqué
Auto workers at a Shanghai car plant inspect the new Chinese-made hatchback produced by the Chin's only privately owned car manufacturer.

China may be the world's fastest growing car market, but take a drive through its richest cities and all you are likely to see are foreign cars.

That wounded the national pride of 38-year-old Li Shufu, a farmer-turned-millionaire, inspiring him to steer his family business into the fiercely competitive industry and launch his own brand of compact cars: entirely Chinese-made.

The chairman of China Geely Group "one of a new breed of increasingly powerful entrepreneurs driving both Chinese business and politics "is working round the clock to take on the likes of Volkswagen, General Motors and their State-backed partners.

"Frankly speaking, Li Shufu is already a millionaire many times over and doesn't need to work so hard to make money," said Chief Executive Officer Xu Gang at the firm's car plant at Ningbo in East China's Zhejiang Province.

"But he wants to show foreigners that we can make cars. He wants Geely to be a beacon of strength for the domestic industry and keep overseas firms at bay," said Xu, 41, dressed casually in a black polo shirt, dark slacks and black-cloth kungfu shoes.

Li was China's 49th richest man last year with US$110 million, according to Forbes magazine. He and three brothers from a small Zhejiang village founded Geely as a refrigerator components factory when he was just 20.

The odds are stacked against Geely and other private companies in China.

They don't have the government backing of a venerable State enterprise nor the strong brand recognition of many foreign firms battering at China's doors now the country is a member of the World Trade Organization.

But grass-roots businessmen like Li, who still goes to work in the same blue cotton uniform his employees wear, are redrawing the Chinese corporate landscape and pitting themselves with boldness and agility against much stronger global competitors.

Cheapest Car

Making deep inroads in sectors ranging from food and beverages to property, pharmaceuticals and electronics, the success of entrepreneurs has so impressed President Jiang Zemin that he has called for them to be admitted into the Communist Party.

Analysts say the one strategy nearly all have in common is price, even in an expensive industry like cars.

Geely was catapulted into the limelight last year when roaring sales of its cheap minis were said to have frightened much bigger competitors "foreign and Chinese "into a brutal price war.

China's only private car maker sells the cheapest compact in the country, a 38,900 yuan (US$4,700) Haoqing hatchback, equipped with Geely's own engine and entirely locally made components. Overseas brands tend to sell for at least 100,000 yuan (US$12,000).

While domestic carmakers have often been criticized for the wholesale copying of foreign cars, analysts said Geely's was a hodgepodge of designs "as original as you can get in China.

For example, the front of the car looks like a Benz while the back resembles another domestic compact, Tianjin Xiali, which is built using Toyota technology.

Like many rising small companies, Geely is aiming for the hearts of bargain-loving Chinese. Its cars are most popular in smaller cities where buyers care primarily about the price tag, not luxury or technology.

"I've often heard Li say a car is but two sofas, an engine and four wheels," said a chuckling Geely employee, one of about 4,000 who helped roll out 21,400 cars last year.

CEO Xu said he expected sales to double to 50,000 in 2002 and aims to raise capacity to 500,000 by 2005, eyeing an overseas and domestic share offering for funding.

Still, it takes guts to compete in China's auto market, already crowded with more than 100 domestic producers and the strategic focus of virtually all the big international names.

Nissan announced an 800 million-yuan foray into China this month, joining VW, GM, Honda, Ford and Toyota in targeting a market where car sales are expected to hit one million for the first time this year.

The experience of the first and best known domestic car, the Red Flag, is also hardly encouraging.

The People's Car

The patriotically named sedan was an object of national pride, the limousine of choice for elite Communist leaders before it was discarded in the early 1990s for trendier foreign models.

The car's producer, FAW, now makes far more vehicles with the VW logo of its German partner than its own brand and analysts said Geely may also eventually have to induct foreign technology to move up the value chain.

With global firms throwing resources into attacking the China market, analysts said Geely had to boost operations to survive.

So Li turned his back on Chinese tradition "passing the family businesses from father to son "and handed the keys to strangers this year.

He hired Xu, a former senior tax official, in May to crunch numbers and devise strategy. Another outsider, 35-year-old Bai Yang, was brought in to manage Geely's auto unit last December, the first and only woman to head a car firm in China.

Bai, who has been in the industry for 13 years said she had to restructure Geely from top to bottom, from installing computer systems to giving everyone email to reorganizing production.

That's not surprising for a firm that dabbled in fridges, construction materials and motorbikes before entering the competitive automobile industry in 1997.

Li, who also owns two schools and a football club, hopes Geely will rank among China's five top auto firms by 2005.

"Foreign engineers, designers and workers are no smarter or more hardworking than Chinese. But when something goes wrong, they know where it went wrong," Bai said.

"Li Shufu hired Xu Gang and me because he wants to turn Geely from a family business into a modern enterprise."

(Shanghai Star November 1, 2002)

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