Forum Archive Index - May 2000

[Mike Hudson <MHudson@placemakers.co.nz>]

Brian wrote

"Future progress will revolve around the China finished leather operations
which must have great potential for the future. It is interesting to learn
that the factories occupy an area equivalent to the size of two football
pitches..........I believe the key to this enterprise is the fact that in
the last 2 years they have been setting up their Chinese operations, at
considerable cost, and this investment is starting to show returns - revenue
in '99 increased 43% to $63 mill. with a 1M loss before unallocated expenses
down from 11.6M in '98"

A lot of money goes into China and very little comes out, ask Fletchers,
Lion Nathan and a host US and European companies who have had their fingers
burned in this market. Lion Nathan are still hanging in there but are still
losing money. The problem according to one of the Fletcher executives I was
talking to the other day  is that the cultural differences are so great as
to almost preclude doing business there. For example a contract means
nothing, there being no legal remedies for a breach. Western business
practices and ethics (such as they are) do not apply. The locals regard
Westerners as easy pickings. The situation was such that in the end
Fletchers walled away from a $50m investment. This may well be a jaundiced
view and may hide mismanagement on Fletchers part but I would be very wary
of investment in China until profits are turned into hard currency and
repatriated.  
 
Cheers
Mike H 




Mike  



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