Peking — Success has come fast to Liu Shang. So fast, in fact, that this reporter, who last visited him 18 months ago, was astonished at his success. The story of Peking's most successful private entrepreneur would be remarkable anywhere in the world. In China, it is almost unbelievable.
In the summer of 1984, Mr. Liu and his four friends were making motorcycle helmets in two shabby rooms of a peasant's house. They had all been youths ``waiting for jobs,'' the Chinese euphemism for unemployment.
With a loan of 8,000 yuan ($2,496) and his father's Fiat car, Liu had started a cottage industry making fiber-glass helmets. He taught himself and his friends the technique and found a ready market at a time when motorcycles were becoming affordable and available nationwide. Among thousands in Peking, he was licensed to operate a private enterprise. Demand was so great that he expanded within a year, though he still had to follow government rules for private companies limiting the number of employees to eight.
Now, at the age of 25, Liu is one of the wealthiest men in the capital city (and one of its most eligible bachelors).
Liu's Soar Helmet Factory occupies a new three-story building with 1,500 square yards of floor space. The courtyard of his factory compound features a 20-foot-high monolith with the name ``Soar'' emblazoned on two sides. There are several new Japanese cars and a large delivery truck parked inside. Liu's offices are as well appointed as those of China's most prosperous trading and investment corporations.
The key to his overnight success has been a three-party joint venture with a Chinese state agency and an American company. The venture has brought in several hundred thousand dollars in investment capital and permitted quick expansion. It has also subjected him to close government scrutiny, especially from the Foreign Economic Relations and Trade Ministry, which regards him as a ``test case.''
Soar is the only privately owned company in China that has been permitted to enter into a joint venture with a foreign business. Liu and his four friends own 40 percent of the joint venture, including the company's popular trademark, with the rest split 35/25 between the state-run Foreign Enterprises Services Corporation (FESCO) and the California-based Sino-US Trading Corporation.
``The reason for the joint venture was to develop the company more quickly,'' said Liu, leaning back in a plush Scandinavian chair in his spacious office. ``We also needed new technology and new workshops if we were to break into the international market.''
The latest chapter in Soar's corporate history began in June 1984, when Liu placed an inquiry with FESCO, the state's personnel agency for foreign businesses in China. He was looking for a foreign company to help with technology and investment capital. FESCO did a feasibility study that concluded that the domestic market for protective helmets was ``vast.'' The state agency decided to chip in some of its own funds in scarce United States dollars. It also located US partner Paul Chen, a Chinese-American with experience in China.
Liu signed a 10-year contract last June and got a business license in November, after a full year of negotiations. His new business colleague and deputy general manager, Li Xiandong, explained that negotiations with the state were lengthy, because there was no precedent.
``This joint venture is unique in China,'' said Mr. Li, a 1980 graduate of the Peking Foreign Languages Institute, who worked as an English interpreter for FESCO before being assigned to work with Liu.
One unusual provision of the contract is that Soar may sell 75 percent of its output on the domestic market. Manufacturing joint ventures with foreign companies are normally required to sell most of their products abroad to earn foreign exchange. Liu's contribution to the venture was his industrial property, including the Soar trademark, valued at 100,000 yuan (about $30,000). Both his joint-venture partners agreed that this was ``rather cheap,'' he said. But he explained that his goal was to expand operations and that the trademark reverted exclusively to him in 1995.
With a staff of 48 employees, 20 of whom were hired only a month ago, helmet production has risen to about 3,000 a month, all handmade. When new equipment arrives from the US later this year, production will increase rapidly to several times that amount, Liu said. He also plans this year to begin making helmets for coal miners and to expand into the leather-clothing business.
Liu's four friends are still working with him, but there is now a division of labor: Each of his partners is in charge of a workshop. After working hours, the five bachelors, all in their 20s, live and play together as before, drinking tea and playing ping-pong on the factory's third floor, which serves as the company's dormitory and entertainment center.
How does a former motorcycle enthusiast and middle-school graduate with no management experience handle a fast-growing company?
``The main management method is the same as before,'' Liu said. ``Of first importance is the work attitude of all employees. We educate the staff to love the factory and consider it their own. We've also adopted the system of more work, more pay.'' Liu has set up a system for screening new employees which he designed himself. Five new employees are university graduates in business and finance. The biggest problems he faces are dealing with the bureaucratic state agencies and maintaining product quality.
Business is good, and he is still beating out the state-run companies, he said, though now he is not willing to offer his manufacturing ``secrets'' to his competitors. ``It would hurt our survival if we gave away our know-how,'' he explained.
As for the 8,000-yuan loan that got him started two years ago, Liu said his father didn't want it back. But he gave his father a new Nissan sedan to replace the old Fiat that Liu wore out last year.