| BUSINESSWEEK ONLINE : SEPTEMBER 27, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- ASIAN COVER STORY
The Very Model of a Modern Chinese Juggernaut (int'l edition) The carefully manicured grounds of Broad Air Conditioning stand in stark contrast to the jumble of small factories and scattered patchwork of rice paddies outside Changsha, Hunan. With its whitewashed buildings and neatly paved roads, the factory compound is a mini-city where most of Broad's 1,200 employees live and work. Broad's chief, 38-year-old Zhang Yue, a former elementary school teacher and lover of Chinese calligraphy, wants to stand out by making his $192 million company markedly different in management, production, and finances from the mass of China's ailing state enterprises. He aims to create a company spirit more akin to that of a Japanese or Korean outfit than the typical loosely run Chinese enterprise. Broad's workers must undergo 10 days of boot camp, at which a retired army sergeant supervises punishing 10-kilometer runs to instill esprit de corps. Broad insists workers live in company-provided dormitories and requires a neatly pressed and freshly laundered company uniform. This saga started 11 years ago, when Zhang Yue and his younger brother, Zhang Jian, an engineering student, patented a special technology for boilers, ensuring that the volatile machines wouldn't blow up--a common problem for the shoddy state-manufactured ones then available. They quickly sold that technology to 20 companies, and with some $4,000, Broad Air Conditioning was born. That initial grubstake has allowed Broad to finance a decade of expansion that has made it into one of the country's largest fully private enterprises. Continuing royalties, as well as a tightly run business, have allowed the company to expand without taking on bank debt. That's a rare feat in China, where most state companies have fueled their growth with often reckless bank borrowing. ''We rarely think about government policy and how it affects us. We rely on ourselves,'' says Zhang. Broad sells a range of large central air-conditioner and heating systems at $300,000 to $500,000. That's 20% more than competitors charge, but the difference pays for itself because of the energy efficiency involved in using natural gas instead of electricity. Today, the company has snapped up more than 80% of its sector of the national market and won kudos across China for its product reliability and quality. The next step is to start exporting to the U.S. and Europe. Despite those big plans, it's not going to be easy for Broad to avoid the problems created by the turbulent Chinese economy. Two years of deflation have also hit prices in his industry, leading to a 20% drop in Broad's revenues in 1998 over the year before. Zhang declines to reveal profit figures but says Broad is still in the black. He hopes that a turnaround in the construction sector is ahead and that Broad's emphasis on quality will bring in large numbers of customers again. His big advantage is that, unlike other entrepreneurs, he has not lost his focus on his core business. And he's not burdened with the debts and costly benefits programs that state firms shoulder. But even for one of China's best private businessmen, the struggle never ends. By Dexter Roberts in Changsha _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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 RELATED ITEMS China's New Capitalism (int'l edition) ASIAN COVER IMAGE: China's New Entrepreneurs TABLE: China's New Private Sector TABLE: The Long March to Capitalism Payoff for a Pioneer in Shanghai (int'l edition) The Very Model of a Modern Chinese Juggernaut (int'l edition) INTERACT E-Mail to Business Week Online | |||
