Dhanin Chearavanont (18): Company 0001, the first foreign company in Shenzhen
Shenzhen today is a major metropolis with a population of 10 million people. But back in 1979, when neighboring Hong Kong was still a British territory, it was a small fishing village with a population that numbered in the tens of thousands. There weren't even any hotels in Shenzhen.
When Deng Xiaoping, who had fallen out of favor during the Cultural Revolution, returned to prominence as China's supreme leader, he designated this fishing village a special economic zone and made it a model district for introducing foreign investment.
Many foreign companies viewed the Shenzhen special district skeptically, but I figured Deng could be trusted. Even before the Cultural Revolution, he had demonstrated a pragmatic way of thinking about the economy that did not rule out the role of the private sector. When I returned to China in 1979, I immediately sensed that the people were desperate for a better, more prosperous life. This convinced me that China would never return to the path of the Cultural Revolution.
Open playing field
In 1980, the Chinese government formally designated the four cities of Shenzhen, Zhuhai and Swatow (Shantou) in Guangdong Province and Amoy (Xiamen) in Fujian Province as special economic zones. My father had long run a farm in Swatow and had many friends among the local officials. Many of these officials lost their positions and influence during the Cultural Revolution, but were soon restored once it ended. Among them was a senior official in the Guangdong provincial government. It was at his personal residence in Guangzhou that we held negotiations for setting up a joint venture.
A joint venture was established between Charoen Pokphand Group and Continental Grain of the U.S. The first two of the four Chinese characters for the joint venture's name were taken from the seed store -- Chia Tai -- that my father had founded in Bangkok. Since then, the Chinese word for Chia Tai Group has been the name we've used for CP Group in China.
In short order, China issued a certificate permitting us to invest in Shenzhen, bearing the number "0001." In other words, we were the very first foreign company to move into Shenzhen. In 1981, we started operating a feed plant there. Near the plant, we built chicken and hog farms and began to set up the same kind of vertically integrated production we had in Thailand.
In Swatow, too, the Chia Tai Group became the first foreign investor. There we built a carpet factory, because Chinese hotels had a shortage of carpeting, and we eventually expanded the business into Guangzhou and Zhuhai.
In Shanghai, the largest commercial city in China, our business negotiations did not move forward right away. We tried to explain to the mayor at the time, Wang Daohan, how a single farmer in Thailand could raise 10,000 birds, but words were not enough. Knowing that seeing is believing, we invited Shanghai's deputy mayor and other officials to Thailand.
When the group of Shanghai officials arrived at Bangkok's Don Muang Airport, they were startled -- it was several times larger than their airport back home. Moreover, the roads were filled with automobiles. While China had been stagnating during the Cultural Revolution, Thailand had been reaping the fruits of economic growth.
The officials were unable to hide their astonishment. "We thought Thailand was a backward place," one said. "We were obviously wrong."
Once we showed them that a single farmer really could raise 10,000 chickens, several nights of negotiations immediately followed. It was decided that our poultry production system would be introduced in Shanghai, and that chicken and hog raising, as well as meat processing, would begin in the city.
After Shanghai, the Chia Tai Group entered the farming regions of Sichuan Province and three provinces in the northeast, becoming one of the largest feed producers in China.
Chia Tai Group brought vertical integration to China, and local companies were quick to imitate not only our modern production methods but also our cutting-edge technology. In a short period of time, China's production of feed, chickens and hogs expanded and became more efficient. In this way, CP Group helped spur the advancement of Chinese agricultural technology.
Before China opened its economy and began introducing reforms, its people could only eat eggs and pork if they saved up enough ration tickets. Now they can easily get their hands on these and other foods. Private-sector companies accomplished what people's communes and state-owned enterprises could not.
Dhanin Chearavanont is chairman of the Charoen Pokphand Group.