More O.C. Firms Forging Links to China : Trade: They hope to follow in footsteps of AST Research, leading seller of PCs in the Asian nation.
Paced by computer manufacturer AST Research Inc., the leading seller of personal computers in China, numerous Orange County companies in recent years have established trade links to the Asian nation, the world’s largest emerging market.
In fact, AST Chairman Safi Qureshey joined 24 other executives accompanying U.S. Secretary of Commerce Ron Brown on his visit to Beijing this week. Other Orange County executives in the delegation include Leslie McCraw, chairman of Fluor Corp. in Irvine, and Susan Corrales-Diaz, president of Orange-based Systems Integrated.
On Monday, Brown signed a broad agreement meant to lead to improved commerce between the two nations. Brown, who met with Chinese Premier Li Peng, is the highest-level U.S. official to visit China since President Clinton renewed that country’s favorable trading status in May.
AST has followed what has become a common strategy for U.S. companies in China--establishing a joint venture to gain acceptance in local markets--and other companies have turned to partners in Hong Kong. Local trade experts said they hope Brown’s visit will reduce the need for such arrangements to gain access to the booming Chinese economy.
As things stand, “it’s hard to deal directly with a company in China,” said Brian Rauso, director of the Glasser Group Inc., an Irvine-based brokerage focused on international trade.
Glasser Group sells electronic banking equipment such as automated teller machines to the Chinese through a partnership with a Hong Kong distributor.
“It’s more than just a language barrier,” Rauso said. “It’s an unspoken language; it’s that everybody sort of scratches each other’s back over there.”
The partnership had been instrumental in helping his firm build up orders worth $20 million to $40 million within the past eight months, Rauso said.
Colleen Costello of the World Trade Center Assn. of Orange County in Irvine said arrangements with middlemen are common.
“The way the Chinese government has it set up, China is currently very difficult for you to go in there cold,” said Costello, the association’s director of member services.
Hugo Fruehauf, president of Ball-Efratom in Irvine, said he expected a recent joint venture agreement with several state-owned companies in China to lead to increased revenue for his company, which sold about $2 million worth of telecommunications equipment in China last year.
“The Chinese either want to have a technology transfer, or want to learn how to build what you’ve got,” Fruehauf said. In response, his company--a division of Ball Corp.--has tried to license older telecommunications designs for joint ventures, he said.
Although not part of Brown’s trade mission, several Ball-Efratom officials are in China now, Fruehauf said. “The market size is there,” he said. “We looked at that and said we shouldn’t ignore it.” Eventually, Fruehauf said, his company hopes to do several times as much business there as it does today.
AST’s entry into the Chinese market began with the 1985 opening of a manufacturing site in Hong Kong. The company opened a Beijing sales office in 1988. AST chose Hong Kong first because it was already open to western businesses, a company spokeswoman said Monday.
Earlier this year, AST completed construction of a $16-million manufacturing plant built in a joint venture with the Chinese government in Tianjin, about 60 miles southeast of Beijing.
The Irvine-based computer maker controlled about 33% of the Chinese personal computer market in 1993, according to International Data Corp. of Hong Kong. Compaq Computer Corp. in Houston was in second place with about 24%.
John Voisinet, general merchandise manager for Intersport Fashions West Inc. in Orange, said he once thought only companies of AST’s size could establish successful trade partnerships in China.
Explaining how his privately held apparel company decided to begin selling in China four years ago, Voisinet said, “It was mainly because we were already in Hong Kong.”
Intersport had contracts with factories in Hong Kong to manufacture motorcycle clothing with Harley-Davidson labels. But his only access to China was through his company’s Hong Kong distributor, Voisinet said.
“When you go directly in, you have government problems, political problems. One thing you learn very quickly is that Chinese like to work directly with Chinese,” he said. “You’re dealing with a regime that has a Communist philosophy but that’s full of capitalization.”
Uncertainty over the political future of Hong Kong after it returns to Chinese rule in 1997 also worries some investors, Voisinet said, although he said he doesn’t expect many changes.
The exact amount of trade between China and Orange County is difficult to determine, because the U.S. Department of Commerce does not keep such figures. However, the Los Angeles Area Customs District, which serves businesses in Orange County and throughout Southern California, handled $10.8 billion in imports from China in 1993, compared with exports to China of only $1.4 billion.
Those figures account only for goods shipped directly between the two countries. The actual trade balance is probably less extreme, because it would have to include the value of professional services provided to China by U.S. firms, such as architects, lawyers and investment bankers, said Gladys Moreau, director of the Export Small Business Development Center, a nonprofit trade group in Los Angeles.