The self-made ride stitches to riches

For the Chinese lunar New Year Lin Jian Ning and wife Ci Yan willfly to palmy Hainan Island, something they've only seen others do on TV. As part owners of a small shoe factory on the Fujian coast, they see the resort holiday as a sign of success amid a rise of new competitors.

The Lins are part of a reemerging class of entrepreneur on China's east coast. They represent a self-made family business, whose small toy, appliance, and garment factories are a driver of China's economic growth - which clicked off an impressive 9.9 percent in the final quarter of last year.

The Lins' business rose swiftly. Two lanky brothers, along with half this neighborhood, got a message in the early 1990s - a green light by leader Deng Xiaoping, who told a nascent mercantile class that "to get rich is good."

The Lin brothers agreed. They used family savings to buy a roomful of sewing machines and learned how to make tennis shoe parts by hand. By the mid-1990s, joined by a third brother, and with little official red tape, they made the leap to a home factory with 100 workers.

Contacts with industry middle-men came along with a global sports shoe boom. A small loan launched them into full-scale production, adding three buildings, 2,000 workers, and advanced machinery. They now make 300,000 shoes per month, with contracts from Puma and others.

"Before the communist revolution, a quarter of [Fujian] cities were business people, and I think you are moving in that direction again," says David Wank, a China specialist at Sophia University in Tokyo. "Everyone there wants to be a small boss, a xiao laoban. Having a small company is a powerful aspiration."

Accordingly, Yang Dai is a place that cheap labor and the tennis shoe transformed. In the 1980s this was a rusting village of 7,000 with no industry, just south of Quanzhou, the ancient Silk Road port where Marco Polo landed. Now, in half a square mile of intensity, for up to 16 hours a day, some 60,000 peasant migrants, move and breath to the pace of the sewing machine, the fabric stamp, and the glue swabber.

Factories range from two rooms in a house, to long corrugated sheds of 3,000 people. Thick fabric rolls are raced down streets on the backs of scooters; bicycles carry discards with punched out foot-shaped holes, or stacks of shoe boxes. Think New York's crowded garment district, circa 1915. As Jin Ning says dryly, "in this neighborhood, everyone is in the shoes business."

Yet this profit paradise has new problems. Competition has gotten rough. Fewer factories are opening, and many are scaling down. Gone are the halcyon mid-90s, when any homeowner could start work in a spare room, when no one could contain the flood of contracts. New South Korean and Japanese money has arrived. But a worrying shake out has begun. New designs arrive so fast that larger firms have started investing in R&D. Suddenly the Lin brothers find that management is important. They worry about competition from Guangdong in the south, where labor is even cheaper - as well as from two streets over. Firms fight bitterly for niche markets and new orders. The pie is not shrinking, but competition is thickening. The neighborhood energy feels like a tennis-shoe shark feed.

Must be savvy to survive

Private business also faces corruption, a weak judicial system, ambiguous property rights, and uncertain contract enforcement, to name a few.

"Businesspeople in China, at any level, have to be near geniuses," says an expert in Beijing. "The minute a market opens up, everyone piles in, and the margins shut down. People talk about China's rising economic power. But inside China, the growth is not stable and consistent. You have to be very savvy to survive."

"Look at falling toy prices," says Robin Munro, research director of China Labor Bulletin in Hong Kong. "Factories will cut each other's throats to produce at the lowest price. It is a real race to the bottom."

Still, east coast residents have prospered. According to the Asian Development Bank, 89 percent of foreign investment in China is on the east coast. In Yang Dai, migrant worker dorms with plywood interiors are interspersed among fancy rebuilt homes with Greek statuettes, inlaid tile, and gurgling fountains.

The Doozer factory owned by the Lin's has a good reputation. Jin Ning is youngest of the three brothers. Polite, tall, understated, he spends much of his day in a suit, on the cellphone, moving about the office and factory.

His wife, Ci Yan, is the executive assistant who plays off him like a violinist in a duet. He, they, are all business, all the time, but in a steady manner that seems to ask, "What else would we do?" Jin Ning anchors the front office, conducting an all day ritual pouring of oolong tea to those seated inside, refilling tiny two-sip cups with a piquant pale yellow liquid. When he is interrupted, which is often, another staff member seamlessly takes over pouring. If you are a buyer or a contractor, you come here to deal. There is no sports shoe that Doozer can't make, they say.

The Lin's world has changed past reckoning. "We could never have believed that every year we would make more profit," Jin Ning says. Doozer owns several cars, a computer room, and loads of new furniture.

The area added a small airport, with direct flights to Beijing and Shanghai. Some locals have investment condos in Quanzhou. But inside this tennis-shoe town, that adjacent city seems another world. To keep your business edge you have to be in Yang Dai, on site. The bosses tool the crowded lanes in shiny sports utility vehicles, cellphones to ear behind tinted glass, flashing past trodding migrants, leaving clouds of dust. If you miss a deal here, no one will care.

Yang Dai's intensity seems to restrict long- term thinking. Daily effort is focused on increasing production. What constitutes success in Yang Dai is keeping the contracts coming fast enough to be a full shoe producer, rather than a shoe pieces producer.

"At some point, you either make shoes, or you give up and make shoe pieces as a contractor," Jin Ning says. "We think we've made it. But we are never quite sure."

Little state help

Fujian is one of five special economic zones in China. But owners here get little state help. Banks are state owned. Doozer is a top shoe firm in Yang Dai, but can't get a bank loan. Credit is a top problem facing small and medium sized private firms in China. Only 7 percent of available loans go to private firms, according to ADB figures.

"Small private business is a major developing part of the Chinese economy," says Bruce Murray, ADB director in Beijing. "But they get little support. They do well despite the circumstances."

Family is the anchor. "We have to depend on ourselves," says Ci Yan. Mr. Murray says a new law expanding credit to small businesses is "a recognition by China of the problem; the next step is implementation."

The Lin brothers make all decisions; friends are allowed in the inner circle as exclusive subcontractors. After a couple of hours, Jin Ning pulls out the family treasure book - a thick three-ring with plastic folders. It is the master list showing hundreds of past and current contracts. He flips through it but won't let visitors touch the book or see the illustrated designs for more than a second. Would an NFL coach share his playbook?

Three streets down is factory owner Yi Wei. His family owns a pharmacy and he went into shoes with his sister-in-law 10 years back. Silver bracelets, an expensive watch, and a car outside tell a success story. But Yi has abandoned the idea of a full shoe factory. "We've found that there isn't an endless market," he says. "This town is saturated."

Cheap labor arrives in many ways. Owners paste up a "help wanted" sign. Others use a network of agents that have contacts in rural villages. Yang Dai employs some entire villages from Sichuan and Anhui Provinces.

Doozer workers live "free" in dorms owned by the firm. The Lins want satisfied workers, they say, because constantly shifting labor is hard to plan around. They allow workers two or three days off per month. To Westerner ears, that may sound brutal. But here it's fairly liberal. Human rights groups say workers in Guangdong Province average one day at most. Many migrants here moved from Guangdong, after bad experiences.

The Doozer plant is clean and airy, compared to some crowded home factories. Jin Ning admits not all owners look out for the migrants who come from inner China, in what is an historic shift - from the farms to the city.

Tomorrow: China's migrant workers

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