An American corporation plans to sign an agreement Saturday to form what is described as the first U.S.-China joint-venture company to be registered under American laws.
Desmond Wong, chief operating officer of the New York-based World Trading and Shipping Ltd. (WTS), said the new company's plans include producing and marketing a new stretch silk fiber, and opening fast-food hamburger outlets in sites near the Ming Tombs and Great Wall of China.
More than 90 American companies have joined Chinese partners in equity joint ventures. Several have done well, but many encountered problems with low labor productivity, rising costs, inadequate transportation and communications and red tape.
The new company, half-owned by two Chinese enterprises, hopes to avoid some of these problems by establishing itself in the United States under Delaware law.
The company, called the Good Earth Development Corp., will be unusual in another way. One of its partners will be the Kanghua Industrial Co. Ltd., whose chairman is Deng Pufang, son of China's senior leader, Deng Xiaoping. Deng Pufang is being asked to become honorary chairman of the new company, and is expected to attend the signing ceremony Saturday.
The company's other influential Chinese partner will be the China International Center for Technical and Economic Exchange (CICTEE), which is the business arm of China's powerful Ministry for Foreign Economic Relations and Trade (MOFERT).
Under the new arrangement, World Trading and Shipping will in effect be representing a Chinese government enterprise overseas, providing consulting and marketing services.
"Deng Pufang and MOFERT are strong partners," WTS official Wong said in an interview. "They can cut red tape for us.
"In China, business is based on personal relationships," he said. "Who you know matters more than anything else.
"The Chinese never say 'no' to a proposal," he continued, "but you can end up being disappointed. You have to be able to go behind the scenes to get the real answer, which is what we can do."
The Kanghua Industrial Co. was formed by Deng Pufang to support activities of the China Welfare Fund for the Handicapped, which he heads.
Pufang, the eldest son of Deng Xiaoping, was a victim of the cultural revolution of 1966-76. He became paralyzed from the waist down after he was pushed out of a window.
Wong, who is managing director of Good Earth, was born in the south of China in 1929 and speaks both Cantonese and Mandarin. Wong worked for the ABC television network in the 1970s, and it was then that he first met the late Chinese premier Chou En Lai and other Chinese officials. He joined WTS in 1980.
When Wong first discussed the idea of a new type of joint venture more than a year ago with the Chinese ambassador to the United Nations, he received considerable encouragement.
WTS holds half the equity in Good Earth. The other half is split equally between the two Chinese partners. According to Wong, all of the directors, including the chairman of the board, will share equal power.
Under previous arrangements, Wong said, the Chinese usually have insisted on holding the controlling voice through a chairman exercising greater powers than the other officers.
The headquarters for the new company will be in New York, with branch offices established in Peking, Hong Kong, Rotterdam and London.
Wong said the initial financing for the company is not being made public, and the capital has been provided in proportion by each of the parties.
Next year, the company plans to produce and market a new stretch silk for underwear, which would blend Chinese silk with nylon. The idea is to combine the softness of silk with the elasticity of nylon.
Wong said technologists of the Du Pont Co., who have acted as technical advisers, provided suggestions for the new product. The Park Lane hosiery company will be in charge of production. Wong estimates that retail sales in the initial stages could come to $60 million a year. If all goes according to plan, the new product would then be developed into sports wear.
The proposed fast-food project is still under study, but Wong said he has reached agreements on key sites for hamburger restaurants in downtown Peking and near the Ming Tombs and the Great Wall of China, which attract thousands of visitors each day.