A Durable 'Bamboo Network'

Ethnic Chinese businesses operating outside of China constitute a family-oriented "bamboo network" that transcends national boundaries. The heart of the network is Hong Kong, Singapore, and Taiwan. Companies owned by overseas Chinese also dominate the business sectors of Southeast Asia - notably Thailand, Malaysia, Indonesia, and the Philippines. In addition, overseas Chinese account for 80 percent of all investment going into China.

The founders of these overseas Chinese businesses are a fascinating breed. They started with little wealth. They built their firms from scratch - working, saving, and reinvesting at prodigious rates. Many of these small family firms have grown into enormous conglomerates, each of which includes dozens of companies. The combined output of the overseas Chinese is close to $600 billion.

Typically, these family-run enterprises consist of many modest-size firms, each of which has some ownership in the other family businesses. But there is no equivalent to Wal-Mart, Ford, or other single-family-originated business.

Most overseas Chinese take a low profile. No widely known consumer products have a Chinese brand name. The members of the bamboo network manufacture for others - or do sub-assembly work, wholesaling, financing, and providing transportation. Kinship, dialect, and common origin - in a clan or a village - are the basis for mutual trust in business transactions, even when conducted at great distances.

Centralized family control also minimizes company bureaucracy and paperwork. Key information is obtained in conversation and retained in the heads of senior managers. Consider the flow of studies and memoranda in a typical Western business before a major corporate commitment is made.

Chinese firms are almost always family-run. The father or grandfather is typically the chief executive. Sons, nephews, brothers, uncles - and only occasionally daughters - are other key officers. When Y.K. Pao, the Hong Kong shipping and property magnate, arranged for his succession, he had a problem - no sons. Pao divided his enterprises among his sons-in-law: a Chinese doctor, a Japanese architect, a Shanghai banker, and an Austrian lawyer. Apparently little thought was given to turning the business over to professional management.

And the future? Great uncertainty is attached to any scenario that involves China. But whatever the outcome, the bamboo network will accommodate the changing political and economic environment.

Should China continue to move to capitalism, the overseas Chinese will develop closer ties with the mainland. A happy unification with Hong Kong would be the basis for closer ties between Taiwan and the mainland. That could enable China to become the major superpower in Asia by the 21st century.

On the other hand, should China revert to communism - or mishandle Hong Kong's integration - the bamboo network will face West.

Overseas Chinese commercial families will develop closer ties with North America and Western Europe. At home, they will emphasize the opportunities elsewhere in Southeast Asia and in Australia.

The pacing element will be the American-educated younger generation. They will seek to exploit the tremendous possibilities that arise from combining their unique cultural characteristics with modern management and advanced technology. The big question is whether they can pull it off. Their culture provides a hint: Bamboo is the Chinese symbol for durability; it is flexible and constantly developing. In the words of the old saying, "Bamboo bends; it does not break."

*Murray Weidenbaum is chairman of the Center for the Study of American Business at Washington University and co-author of "The Bamboo Network" (Free Press).

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