The headquarters of Tongchan Inter-national Investment Group in a sky-scraper in Beijing looks more like a museum devoted to Mao Zedong. Mao's quotations greet guests in the reception area. In the office of the company's founder and chairman Chen Jinfei, the walls are covered with more Mao quotations and nine photos of the Great Helmsman.
"This army has an unbeatable spirit, it will fight any enemies and will not give in. No mat-ter how harsh the environment, even if there is only one person left, he will keep on fighting," reads one quotation.
Sitting in front of a giant national flag, Chen is clearly devoted to Mao. "I don't have any faith or religion," he explains. "Whenever I'm in trouble, I think of Mao as my spiritual sup-porter. At least Mao is closer than God. I adopt his military strategies in my business."
Chen, 37, was a Red Guard in 1974. The Beijing native with long, well-groomed hair now runs one of the largest private companies in the city. It has assets amounting to Yn3.5bn and an annual average profit of Yn I00m.
In 1987 Chen quit his public sector job at the former Post and Telecommunications Ministry and built a workshop next to a pigsty on the outskirts of Beijing. His starting capital
Chengdu-based private company has A devel oped a computer information net-work, known as C.Net, aiming to bring together at least 1m users throughout China.
Sichuan Zhongcheng Network Development Corporation launched the network in October 1998. It is a closed system like an intranet and works like an electronic version of the Yellow Pages. Each user pays a Yn5,000 annual fee for membership of the Chinese-language network. The user is given a website to post information about itself, such as product specifications and advertising. The web address is the user's real name. Each user can conduct business deals with other users on the network.
Founder and president Xia Chuanyou says the software was originally developed for his trading business. Xia ran a company selling machinery in Chengdu between 1988 and 1992. With 500 suppliers and 10,000 clients, the biggest problemwas only Yn600, which was mostly spent on wining and dining potential clients. The first piece of business was printing seven basketball shirts which earned him Yn35.
Chen later targeted foreign clients in the hand-printing textile business. His team made a profit of Yn I m in the inaugural year of 1987 and double that amount the next year. Chen was in constantly updating information on prices and products. He hired five typists to input all the updates but even they couldn't keep up.
Formerly an engineer who knew nothing about computers, Xia bought a few PCs and hired a mathematician to write a programme to manage his files. Two years later in 1995, the programme took shape and Xia started to market it.
Xia says very few people understood how the system worked and the government gave his work the cold shoulder. "Our network is some-thing you can't touch or see ?it's a whole new concept," he says.
The marketing campaign quickly drained the company's funds. Total assets of Yn8m in 1995 dropped to Yn 1 m two years later. As a private company, it couldn't get any bank loans, Xia recalls. In response, he reorganised his trading company into a shareholding company with investment from other enterprises.?The number of private enterprises in China reached 1.28m by the end of June 1999, according to figures released by the State Administration for Industry and Commerce. This was 80,000 more than at the end of last year. The number of people working in the sector was 17.84m, a rise of 22 per cent on the June 1998 total.
took his share and went to Hainan Island, where the economy was booming. He bought a block of land for Yn48,000 per acre and quickly resold it to a US businessman at Yn91,000 per acre. That deal made him Yn l0m. By 1992 Chen had earned Yn300m from property deals.
He returned home and invested in residential, office and commercial property. But private companies were shunned by banks for loans and until recently had no rights for directly importing and exporting. "Society doesn't recognise us. We are treated like children of concubines," Chen complains. "We grow like a weed between hard rocks."
In just a dozen years, Tongchan has grown rapidly. When the market was soaring in 1992 and 1993, Tongchan's net profit margin was 200-3(X) per cent. In today's sluggish market that rate has dropped to 20 per cent. The company now has 25 subsidiaries and the business extends to paging, building materials manufacturing, and hotels and restaurants. Chen even established an investment bank on Wall Street, planning to use it to raise capital.
Chen is a member of various organisations, lobbying the government to encourage the growth of private business. He also advocates the establishment of a special zone in Beijing solely for private enterprises.
Sichuan Zhongcheng franchises the network by hiring an agent in each city for the exclusive rights to market the network there. The amount, anywhere between Yn20,000 and Yn20m, is determined by the size and economic vitality of the city. The agent submits 30 per cent of the users' annual fees to the company.
Xia says around half the company's net prof-its are used for research and development. By October 1999 the network had more than 3,000 users, all of them Chinese companies, from about 130 cities. The aim is to cover 362 cities in China.
Not everyone is convinced of its merits. Academics and government officials were invited to judge the network for themselves ?and many raised doubts. A professor in computing at Hong Kong Polytechnic University questions if C.Net has the capacity to succeed as Chinese internet usage is rapidly increasing. "The internet is free, so why would anyone pay thousands of yuan to join C.Net?," he asks.
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