Small Business and China

The Chamber’s "Small Business Success Stories in China" report, details U.S. companies that create jobs and opportunities through trade with China. Firms profiled in this U.S. Chamber report are from every corner of America – from a brewing company in Maryland to a wireless communications company in California.

To purchase a copy of "Small Business Success Stories in China" report call 202-463-5460.

IN THIS REPORT...

A Message from Thomas J. Donohue

Willard A. Workman on U.S.-China Trade Policy

Total 1997 Exports to China by State of Origin (in millions)

THE WEST

West:  Recent Export Growth to China

West Focus:  Digital Microwave Corporation, San Jose CA

West Company Profiles:  Action Instruments, San Diego CA; ETS Energy Technology Systems, Spokane WA; Harwood Capital Inc., Oakland CA; Jesse Engineering Company, Tacoma WA; New Light Industries, Ltd., Spokane WA

THE MIDWEST

Midwest:  Recent Export Growth to China

Midwest Focus:  Tramco, Inc., Wichita KS

Midwest Company Profiles:  Brustuen International Inc., Minneapolis MN; Diamond V Mills, Cedar Rapids IA; Hy-Line International, West Des Moines IA; Ibberson, Inc., Hopkins MN; Kemin Industries Inc., Des Moines IA; Lemna International, Inc., St. Paul MN; Poly-Tex, Inc., Castle Rock MN; YSI Inc., Yellow Springs OH

THE SOUTH

South:  Recent Export Growth to China

South Focus:   Post Glover Resistors Inc., Erlanger KY

South Company Profiles:   AsiaInfo Holdings Inc., Dallas TX; Encon Electric, L.P., Fort Worth TX; Lynch Systems, Bainbridge GA; Sentry Chemical Company, Stone Mountain GA; S-TEC Corporation, Mineral Wells TX; Tapco International, Inc., Riviera Beach FL

THE NORTH/MID-ATLANTIC

North/Mid-Atlantic:   Recent Export Growth to China

North/Mid-Atlantic Focus:  Frederick Brewing Company, Frederick MD

North/Mid-Atlantic Company Profiles:  CENTRIA, Moon Township PA; Federal Products Company, Providence RI; The Magnetizer Group, Inc., Fountainville PA; Morgan Pacific Company, Inc., New Haven CT; Robicon, New Kensington PA; Simmons Machine Tool Corporation, Albany NY

Resources for Small Business

Conclusion

A Message From Thomas J. Donohue, President and CEO, U.S. Chamber Of Commerce

The U.S. Chamber of Commerce is pleased to present this report on small and medium-sized enterprises that are successfully doing business with China. The Chamber is the world's largest business federation, representing more than three million businesses and organizations of every size, sector, and region. Small and medium-sized businesses represent the bedrock of our membership. Though everybody knows about the big U.S. multinationals that trade and invest in this growing area, the story of smaller companies in China is less often told - and that's what we intend to do in this report.

Increasingly, small and medium-sized businesses are going global. While the challenges of doing business in China may seem daunting to a small business person, this report highlights those companies that are taking up the challenges and finding success in the world's largest market. In the years ahead, we hope and expect to see increasing numbers of these firms taking advantage of the vast markets that lie outside our border, including China.

Clearly, American companies of all sizes and the workers they employ have a stake in the continued expansion of U.S.-China trade. Therefore, as Congress votes on whether to maintain China's normal trading status, we urge our Representatives to remember these small businesses (and others like them) around the country, that have invested people, capital, and time into building a trade relationship with China - a challenge in itself. Congress should not add a further obstacle by damaging U.S.-China trade relations. Small business is the engine of growth for the United States; international trade will power that engine well into the next century.

I want to take this opportunity to thank those companies who took part in this project. We hope your stories will be an inspiration to other small and medium-sized companies trying to find their niche in the China market. In addition, thanks to those state and local chambers of commerce who identified some of these success stories. Your cooperation is much appreciated.

Thomas J. Donohue
President and CEO,
U.S. Chamber of Commerce 

The U.S. Chamber's U.S.-China Trade Policy

Normalization of U.S.-China commercial relations is one of the top priorities for the U.S. Chamber of Commerce. American business and jobs depend critically on healthy U.S.-China relations. Economic engagement with China also supports many other U.S. policy objectives, from security to the environment to human rights. While engagement is not a panacea for all of our differences with China, the human impact is clearly positive.

On behalf of companies of all sizes, the U.S. Chamber is committed to:

• Permanent and unconditional extension of Most Favored Nation (MFN) trading status for China;
• China's entry into the World Trade Organization (WTO) on commercially viable terms; and
• Removal of unilateral economic sanctions against China.

In 1997, the United States exported $12.8 billion in goods and services to China. U.S.-China trade supported over 200,000 American jobs. We could further improve the climate for commercial activity between the United States and China by granting permanent MFN status to China. The term Most Favored Nation is a misnomer. MFN does not signal favored or special treatment for a country. It is simply the normal tariff treatment we accord to all but six countries in the world. The U.S. Chamber is pleased that the President may soon sign into law a provision to rename MFN "normal trade relations."

If the United States were to deny normal trade status to China, China would almost certainly respond in kind, which would inflict average tariff rates of over 50% on U.S. exports to China. Tariff increases on Chinese goods coming to the United States would represent a $300 tax increase on each American family, a burden that would fall hardest on lower-income families. Revocation of normal status would hand over the China market to our competitors and place billions of dollars of investments and thousands of U.S. jobs in jeopardy.

The U.S. Chamber supports China's entry into the WTO if it enters under terms that will open China's market to American goods, services, and agricultural products. Membership in the WTO will require China to abide by internationally accepted rules of free and fair trade. It is in America's interest to lock China into these open trade and investment rules. American companies of all sizes have had a difficult time penetrating China's markets due to a variety of tariff and non-tariff barriers. These barriers have also contributed to our growing trade imbalance with China. Making China play by WTO rules is our best tool for bringing down the trade deficit and advancing free markets, open trade, and the rule of law.

The U.S. Chamber opposes the proliferation of unilateral economic sanctions, some of which are targeted against China. The United States needs to adopt a long-term, clear, and consistent policy towards China. Sanctions have proven ineffective in achieving change in China. They only serve to keep U.S. companies from gaining a foothold in the China market. An example of such a sanction is the current rule prohibiting the Overseas Private Investment Corporation (OPIC) and the U.S. Trade and Development Agency (TDA) from operating in China. OPIC and TDA programs help American companies enter markets around the world, but cannot be part of their China market strategy.

We are pleased to release this report highlighting small business' strong interest in and commitment to the China market. Companies of all sizes, small and large alike, have a strong stake in normalized U.S.-China commercial relations.

Willard A. Workman
Vice President, International
U.S. Chamber of Commerce

Total 1997 Exports To China By State Of Origin (in millions)

TOTALS 12,805  (Details may not add to totals because of rounding)

THE WEST

Recent Export Growth to China from Selected Western States
Percentage Growth 1993 - 1997

Hawaii - 226%
Colorado - 469%
Idaho - 657%
Montana - 2,908%
New Mexico - 7,823%

THE WEST

West Focus:

Digital Microwave Corporation, San Jose, CA
Charles Kissner, Chairman and CEO

Industry: Communications
Number of U.S. Employees: 600
Major Product(s) Sold in China: Wireless Communications Solutions, Including Microwave Radios and Network Management Systems that Extend the Infrastructure of Fixed and Mobile Telephone Networks.
Years of Involvement in China:  5
Growth Since Beginning Operations: 100% in recent years

Digital Microwave Corporation designs, manufactures and markets advanced wireless solutions for telephone network interconnection and access. The company's products are sold worldwide. In the Asia/ Pacific region, China is one of the fastest growing markets for telecommunications products.

With more than four years of experience in doing business in China, Digital Microwave Corporation realized a six-fold increase in revenues in China between 1995 and the end of 1997. Key to the company's success in China has been the establishment of a local presence through the company's office in Beijing and its partnership with a Beijing telecommunications equipment factory.

Digital Microwave Corporation has supplied digital microwave radios for several major wireless communications projects in China, many supporting the growth of China Unicom, the country's first private commercial supplier of nationwide telecommunications. Digital Microwave Corporation views China as an important world market and looks forward to continued success in deploying wireless communications solutions in China.  

THE WEST

Western Company Profiles:

Action Instruments, San Diego, CA
Frank Williams, President

Industry: Industrial Instrumentation
Number of U.S. Employees: 160
Major Product(s) Sold in China: Signal Conditioners, Network I/O (Input/Output)
Years of Involvement in China: 15
Growth Since Beginning Operations: 50%

Action Instruments has been involved in trade with China for over a decade. In the past 15 years, Action Instruments' line of control instruments has grown over 50%. The company was founded in 1972 and has made a name for itself in industrial instrumentation and networks. Action Instruments' vision is to be a world leader in industrial automation, and its progress in China indicates that the company is well on its way to realizing that goal. In the years that Action has been doing business in China, four facilities have been set up in the key commercial centers of Beijing, Shanghai, Dalian, and Kunming. These facilities include sales offices specializing in industrial control systems, instruments and meters, automation system engineering, and a factory that produces instruments. With a reputation for excellence in the U.S. and a firm stake in the Chinese market, Action continues to hold high growth potential.

ETS Energy Technology, Systems, LLC, Spokane, WA
Eric T. Sari, CEO

Industry: Manufacturing Electronics
Number of U.S. Employees: 25-30
Major Product(s) Sold in China: Automated Assembly Equipment for Manufacturing Printed Circuit Boards
Years of Involvement in China: 12
Growth Since Beginning Operations: 500%

ETS Energy Technology Systems specializes in building re-flow systems for surface mount devices for the electronics industry. In 1997 alone, $285,000 worth of equipment was sold to its largest Chinese customer. ETS expects more sales in equipment in the future as the electronics industry in China grows. While ETS works out of only two factories in Washington and Minnesota, the company's biggest customer base is in Asia. ETS has representatives in China, but conducts a lot of its overseas sales over the Internet. Total exports to China made up 20% of ETS Energy Technology Systems' 1997 sales.

Jesse Engineering Company, Tacoma, WA
Darrell W. Jesse, President and CEO

Industry: Automated Machinery Manufacturer
Number of U.S. Employees: 150
Major Product(s) Sold in China: Automated Pipe Fabrication Equipment
Years of Involvement in China:  8
Annual Sales in China: $1.2 million

Established in 1976, Jesse Engineering Co. has gained recognition for its high quality products and business practices. In 1997, Jesse Engineering received the Globe Award from the World Trade Center of Tacoma for its success in the world market. Jesse supplies to many industries, but primarily to the shipbuilding and boiler manufacturing industries, where it provides the pipe and tube cutting, welding and bending machinery. The attractiveness of the Chinese market for Jesse is due not only to the economic growth there, but also because the shipbuilding sector in China is an international leader in modernizing the industry. Jesse Engineering Co. credits its success in China to good agents, maintenance of personal contacts, reputation and fair prices.

Harwood Capital Incorporated, Oakland, CA
Thomas R. Swaney, President

Industry: Energy Venture Capital
Number of U.S. Employees:  7
Major Product(s) Sold in China: Oil and Natural Gas Services
Years of Involvement in China:  6
Growth Since Beginning Operations: 2,000%

Harwood is a venture capital investor in natural resource projects. The company scouts for investment opportunities, conducts original analysis, and leads investors in developing projects. Harwood is helping to develop an oil and gas field in Manchuria in northeastern China. This project, having an estimated potential of more than $100 million, has allowed the company to enter into a major energy deal, something which its lack of capital prevented in the United States. The company's small size allows it to research an idea quickly, and bring in a big U.S. partner, the Baker Hughes Corporation, in an efficient manner.

New Light Industries, Ltd., Spokane, WA
Steve McGrew, President

Industry: Information and Technology
Number of U.S. Employees:  7
Major Product(s) Sold in China: Optical Document Security, Holography
Years of Involvement in China:  10
Sales Since Beginning Operations: $5 million

New Light Industries was founded in 1988 and conducts research on holographic printing and replication processes, optical security seals, nano-lithography and micro-machining processes. New Light Industries attributes its success in China to its reputation for good service and high quality products. The company has encountered many opportunities to form joint ventures and notes that these joint ventures have usually been lucrative. China is currently the world's biggest user of anti-counterfeit labels. The Chinese market for products that combat piracy and intellectual property rights infringement is likely to grow as China continues to build on its intellectual property protection efforts.

THE MIDWEST

Recent Export Growth to China from Selected Midwestern States
Percentage Growth 1993 - 1997

Missouri - 161%
Ohio - 176%
Nebraska - 275%
Indiana - 312%
North Dakota - 447%

THE MIDWEST

Midwest Focus:

Tramco, Inc., Wichita, KS
Leon Trammell, Chairman and Founder

Industry: Cereal Foods
Number of U.S. Employees: 160
Major Product(s) Sold in China: Conveying Equipment
Years of Involvement in China: 14
Annual Sales in China: 10% of total sales

Tramco, Inc. manufactures and sells high-production conveyer product lines. As a company, it made international relationships and sales one of its primary missions. When Tramco first went to China, the grain industry's idea of transporting grain was "one farmer or gardener, one sack of grain and one bicycle." Five years ago saw the beginning of the construction of a system of what the company called country elevators.

They were primarily employed in ship cargo areas. Tramco would like to believe that China is leaving a period of "labor intensity" and entering a period of "brain intensity." Obviously this shows great promise for a manufacturer of high-quality, labor-saving equipment.

Today, Tramco's involvement in China is as a supplier of engineering and manufacturing expertise to provide conveying equipment to a ship unloading facility in Yingkou. This project is one of many financed by the World Bank. With these funds, China is finishing up the greatest grain system expansion the world has ever known. It should be noted that in part due to Congress' annual MFN renewal process, no U.S. design and engineering firms have been involved in these projects. Most of the work goes to Canada, England, Australia and the Netherlands. The current MFN activities take away two qualities that Tramco expects in a long-run client relationship: continuity and consistency.

Withholding permanent MFN status from China restricts Tramco's ability to compete and does not punish China, because the world's largest potential marketplace will buy from some other country. The people being punished are American manufacturers and engineering experts. Tramco does not want to be given a disadvantage. As a company, it has gained its reputation and success in the toughest arena of all - the free marketplace.

THE MIDWEST

Midwest Company Profiles:

Brustuen International, Inc., Minneapolis, MN
Eldon Brustuen, President

Industry: Export Services
Major Product Sold in China: Services
Years of Involvement in China: 12

Brustuen International specializes in establishing trade relationships between U.S. companies and those based in Asia. Brustuen recently facilitated formation of a joint venture to publish in China a directory of American manufacturers and service providers in cooperation with and with the endorsement of the Ministry of Foreign Trade and Economic Cooperation.

Brustuen hopes to help expand the presence of U.S. companies in high-growth areas including software, medical, and industrial automation. The challenges most companies face in China can be overcome with an understanding of the market, cultural sensitivity, and the right support.

Diamond V Mills, Cedar Rapids, IA
William A. Bloomhall, President and CEO

Industry: Manufacturing
Number of U.S. Employees:  72
Major Product(s) Sold in China: Livestock Feed Ingredients
Years of Involvement in China:  6
Average Monthly Sales in China: $28,000

With the markets for livestock feed ingredients in the U.S. and Europe near saturation, Diamond V Mills saw huge market potential in China and began positioning itself to do business in China in 1992. The road to success was a long one as the first two years were spent running products through registration and testing. After several animal trials were completed, sales began and have increased incrementally ever since. On a recent trade mission with the state of Iowa, representatives from Diamond V Mills met with the three top feed mills of China and will start selling to one in northeast China very soon. In addition, joint venture exploratory talks with several leading Chinese companies have been initiated.

The company is presently averaging sales of $28,000 per month and expects them to increase to $75,000 per month by the end of the year. China's strong emphasis on and interest in all levels of improving livestock and poultry production have been instrumental in Diamond V Mills' success.

Hy-Line International, West Des Moines, IA
Dr. Dennis W. Casey, President

Industry: Agriculture
Number of U.S. Employees:  350
Major Product(s) Sold in China: Poultry Breeding Stock
Years of Involvement in China: 10
Annual Sales in China: $2 million

For over 60 years, Hy-Line International has been the leader in the layer breeding industry by expanding the frontiers of genetics and producing the world's most superior poultry stock. Many Chinese industries have found Hy-Line's products to be of excellent quality and well supported by an effective sales and service team. The potential Chinese market for egg laying breeding stock is four times the size of the U.S. market.

Ibberson, Inc., Hopkins, MN
Walter Hanson, CEO

Industry: Agricultural Design, Engineering and Construction Services
Number of U.S. Employees: 182
Major Product(s) Sold in China: Services
Years of Involvement in China: 14
China Sales: China accounts for over a sixth of total sales

Ibberson's reputation for excellence in its operations in China stems from its strategy of investing in developing relationships and devising customized solutions to clients' problems. Ibberson's management began working with the National Academy of Sciences in China in 1978 and has since developed an extensive network of contacts that permeates various government ministries. These relationships have not only helped Ibberson to execute several significant projects, but they have demonstrated Ibberson's serious commitment to do business in China. Ibberson shows this commitment to success in implementing projects as well. Its comprehensive project evaluations include variables such as raw production material analysis, availability of capital, product marketing capabilities and infrastructure assessments.

Since Ibberson began pursuing opportunities in China in 1984, its sales have grown exponentially. The international arm of Ibberson presently accounts for 50% of company sales, with the Chinese market accounting for a full third of the international branch. Long-term, quality relationships with Chinese officials, business development personnel and high-level management have been key to the many significant projects in the past decade and are vital to Ibberson's continued success.

Kemin Industries Incorporated, Des Moines, IA
R.W. Nelson, CEO

Industry: Agriculture - Animal feed
Number of U.S. Employees: 150
Major Product(s) Sold in China: Ingredients for Animal Feeds
Years of Involvement in China:  10
Annual Sales in China: $10 million

China is the fastest growing market for animal feed in the world, and Kemin Industries plans to invest in its future. At a time when many of its competitors have decreased research expenditures, Kemin Industries remains committed to investing in technology, research, development and people. Its dedication to achieving high-quality, cost-effective and efficient products and the application of the same uncompromising standard to every aspect of sales, service and technical support have resulted in consumer trust and satisfaction in China and the more than 50 countries where Kemin products are marketed. Kemin cites hard work and the willingness to take risks as two reasons why it has been able to achieve success in the China market.

Lemna International, Inc., St. Paul, MN
Viet Ngo, President and CEO

Industry: Infrastructure and Environment Technology and Services
Number of U.S. Employees:  40
Major Product(s) Sold in China: Water and Wastewater Treatment
Years of Involvement in China:  3

Lemna International develops and implements environmental and infrastructure projects throughout the world, with a special focus on developing economies. It specializes in technology-intensive and environmental projects. On March 30, 1997, Lemna International and the Guangzhou (China) Tunnel Development Company formed the first joint venture between a U.S. company and a Chinese entity for a water sector project. The Guangzhou-Lemna Xilang Wastewater Treatment Company, Ltd. was created to finance and build a 52 million gallon per day municipal wastewater treatment plant to help clean up the Pearl River. This joint venture is evidence of the benefits of the U.S.-China relationship.

China is a significant anchor market for Lemna International because China has great needs in several sectors in which the company works, including waste management, energy, potable water supply and wastewater treatment. Projects in China provide credibility for Lemna throughout the Asia/Pacific Rim area.

Lemna International received excellent assistance from the Department of Commerce in dealing with China's myriad requirements and the continuing changes in those requirements over the past few years.

Poly-Tex, Incorporated, Castle Rock, MN
Terry Crombie, President and Owner

Industry: Manufacturing
Number of U.S. Employees:  45
Major Product(s) Sold in China: GreenHouse Structures and Related Equipment
Years of Involvement in China:  5
1997 Sales: $1.8 million

Evaluated by Inc. magazine in 1993, Poly-Tex was one of the top 500 small and medium-sized companies enjoying the fastest growth in recent years. Poly-Tex is one of the major players in the greenhouse industry as well as the only U.S. advanced greenhouse manufacturer in China. Poly-Tex introduced a low-cost standard design greenhouse that utilizes an assembly line production process and allows the company to be the leading greenhouse manufacturer for the retail market. This technology also gives the company a competitive edge in the China market.

Poly-Tex anticipates that retail greenhouse sales will make great progress this year. The company hopes to apply this retail market knowledge and expertise to the China market as that market matures. The company has more than 40 U.S. suppliers that provide the raw materials needed for manufacturing. Poly-Tex's trade with China benefits its U.S. employees as well as those of all of its suppliers.

YSI Incorporated, Yellow Springs, OH
M. Matthiessen, Chairman and CEO

Industry: Environment, Health Care, Sports Medicine
Number of U.S. Employees: 270
Major Product(s) Sold in China: Environmental Water Monitoring Systems
Years of Involvement in China: 10
Growth Since Beginning Operations: Approximately $400,000

YSI Incorporated is a commercial enterprise that designs and manufactures precision measurement sensors and control instruments for use in such areas as water testing, heath care, and bioprocessing. YSI has established a number of joint ventures, which have strengthened and complemented YSI's own capabilities. YSI has established a worldwide network of selling partners in 54 countries. Sales offices in Hong Kong support distribution partners in the Pacific Rim. Clearly, developing a working relationship with key partners in China is of central importance to the sustained success of YSI in the international, and particularly the Asian, market. YSI Incorporated believes that nowhere is maintaining and encouraging free market economies more important than in China.

THE SOUTH

Recent Export Growth To China From Selected Southern States
Percentage Growth 1993 - 1997

Mississippi - 240%
Louisiana - 241%
Arkansas - 312%
Kentucky - 500%
Tennessee - 647%

THE SOUTH

South Focus:

Post Glover Resistors Inc., Erlanger, KY
Neil Gambow, President

Industry: Manufacturing
Number of U.S. Employees: 110
Major Product(s) Sold in China: Electrical Resistors
Years of Involvement in China:  3
Growth Since Beginning Operations: 150%

Founded in 1892 and dedicated to supplying the electrical industry with quality products and services, Post Glover Resistors has seen its market share grow due to its commitment to customer service. Post Glover is the number one worldwide producer of heavy duty resistors. In the summer of 1995, Post Glover ran an editorial in the Asian Electrical Journal explaining the benefits of grounding power systems with the use of its neutral grounding resistors to ensure quality and reliable power. After the publication of the article, Post Glover was contacted by the Shenzhen Farad Complete Equipment Company in China. Several weeks later, the Kentucky-based company decided it was the right time to make a visit to Shenzhen.

Post Glover's first trip actually resulted in a small order for use by the Shenzhen power supply bureau, but more importantly, the company laid the groundwork for a long term business relationship and friendship. It built a strong trust, which is the key to growing business in China.

THE SOUTH

South Company Profiles:

AsiaInfo Holdings, Inc., Dallas, TX
Louis Lau, Chairman

Industry: Computer
Number of U.S. Employees:  6
Major Product(s) Sold in China: Software
Years of Involvement in China:  4
Sales Growth in China: $10 million in 1995 to $40 million in 1997

AsiaInfo was founded in 1994, and the company established its first office in Beijing the following year. AsiaInfo has earned the reputation for being one of the pioneers in computer networking and has ridden on the tide of "computer fever" in China as development of the industry has taken off in recent years. The company has built much of China's Internet backbone known as "ChinaNet." The company also won contracts to install "Shanghai On Line" and "Beijing On Line" in 1995 and 1997, respectively. As AsiaInfo Holdings purchases millions of dollars worth of computer equipment from U.S. companies, denial of MFN status to China would hurt AsiaInfo Holdings and its American suppliers, such as CISCO Systems and Hewlett Packard.

Encon Electric, L.P., Fort Worth, TX
Michael Markwardt, President and CEO

Industry: Ceiling fans
Number of U.S. Employees: 100
Major Products Sold in China: Decorative Ceiling Fans
Years of Involvement in China: 18
Growth Since Beginning Operations: $18 to $68 million

America's oldest and largest ceiling fan importer, Encon Industries L.P. was launched in 1977. Today, Encon's impact on the ceiling fan industry can be seen throughout the world. As the first American company to offer ceiling fans at affordable prices, Encon quickly grew from a small town operation to a global enterprise. The company distributes over 200 models internationally, reaching over 40 countries worldwide, with total sales exceeding two million products each year.

Strategic expansion efforts into new export markets have successfully brought the company to a new threshold of growth. Encon has been doing business in China for nearly two decades and believes the Chinese market continues to hold great potential.  By introducing quality ceiling fans and economical prices, Encon has played a significant role both in the ceiling fan industry and in the lifestyle of the American consumer. If China were to be denied normal trade status, the cost of 80% of the ceiling fans imported into the United States would rise.

Lynch Systems, Bainbridge, GA
Arnold Bowling, President and CEO

Industry: Glass
Number of U.S. Employees: 85
Major Product(s) Sold in China: Pressing (forming) Equipment and Electronic Controls
Years of Involvement in China:  3
Sales Growth Since Beginning Operations: $20-30 million

In operation since the early 1900's, Lynch Systems initially served as the supplier of bottle washing machines to Coca-Cola. Over time, the company installed in excess of 700 presses in over 62 countries around the world. Until 1995, when it began to introduce cathode ray tube (CRT) glass presses into China, Lynch's last press sale into China was in 1948. Between 1995 and 1997, growth in the CRT glass industry in China generated $25.8 million in revenue from customers in China. This revenue represented about 33% of Lynch's overall revenue for the period and increased Bainbridge's workforce by 25%. Lynch successfully competed with rivals NEG and Asahi of Japan and won the president's E-Star Award for exports. With the largest glass making countries in the region, Korea and Indonesia, in financial turmoil, China will be an ever more important market for Lynch's global success.

Sentry Chemical Company, Stone Mountain, GA
Charles E. Reeves III, President

Industry: Industrial Chemicals
Number of U.S. Employees:  60
Major Product(s) Sold in China: Industrial Disinfectants
Years of Involvement in China:  3
Growth Since Beginning Operations: 20% per year

A good knowledge of Chinese culture and an intuitive understanding of the Chinese through its Asian Business Development Manager, Dr. Ax Wu, have been the keys to Sentry's success. Sentry believes the Chinese market is a core element of its future growth. Not only is an open Chinese market important to Sentry's revenues, but the company believes it is critical for maintaining a sound economic base.   Sentry has a joint venture in Xinjiang in northwest China and an exclusive distributor in Shenzhen in southeast China. Sentry plans on opening an office and warehouse in China this year and continues to lay the groundwork for long-term growth in China. Chemical products account for almost a third of all exported manufactured goods to China from the state of Georgia. Sentry intends to generate its share.

S-TEC Corporation, Mineral Wells, TX
David Alexander, President

Industry: Aviation
Number of U.S. Employees: 143
Major Product(s) Sold in China: Airborne Navigation and Communication Electronics
Years of Involvement in China:  9
Sales Growth in China: Over $1.5 million in the first two years

S-TEC was founded in 1978 and has since evolved from a single product company to the leading producer of a broad line of autopilots, autopilot accessories and panel mounted avionics. The company found that providing high quality goods and services from the very first stages of development allowed it to build a strong corporate image and develop a long-term relationship with mutual trust between American and Chinese management.  S-TEC currently does business with three companies in China. It offers them support in locating, purchasing and shipping service parts for other U.S. manufactured goods and also sells its own products. The growth potential in the Chinese aviation market offers many opportunities for expansion of S-TEC's sales and operations in China.

Tapco International, Inc., Riviera Beach, FL
Paul Pellitieri, President

Industry: Automotive Parts
Number of U.S. Employees: 14
Major Product(s) Sold in China: Complete line of Cherokee, Jeep Auto Parts and Engines, and Engine Parts from the Hercules Engine Co.
Years of Involvement in China: 8
Sales in China: Over $3 million in 1997

Tapco attributes much of its success to the programs and support services offered by agencies such as the U.S. Department of Commerce, trade shows, effective advertising campaigns, personal attention to the needs of its customers, and good communications between Chinese and American staff. Another reason for its strong performance in China was the success of the Big Three auto makers in China. These large auto and truck makers opened the way for the small and medium-sized companies, like Tapco, in the after-market parts business.

THE NORTH/MID-ATLANTIC

Recent Export Growth to China From Selected North/Mid-Atlantic States
Percentage Growth 1993 - 1997

Massachusetts - 37%
New Hampshire - 50%
Maryland - 73%
Pennsylvania - 75%
Maine - 113%

THE NORTH/MID-ATLANTIC

North/Mid-Atlantic Focus:

Frederick Brewing Co., Frederick, MD
Kevin Brannon, Chairman and CEO

Industry: Manufacturing
Number of U.S. Employees: 44
Major Product(s) Sold in China: Beer
Years of Involvement in China: 2
Growth Since Beginning Operations: Revenue increase of 76% to $3.3 million in 1997 (up from $1.9 million in 1996)

Frederick Brewing Co. (FBC) is the Mid-Atlantic region's largest craft brewer and is among the fastest growing craft brewers in North America. In May 1998, FBC announced its decision to begin distributing three of its best-selling beers in China, becoming the first U.S. craft brewer to enter this market. As a manufacturer with excess capacity in a highly competitive industry, every marginal dollar contributes 40 cents to Frederick's bottom line. Having recently completed a $10 million brewery and increased employment from 18 to 44 people in the past 14 months, the vast Chinese market is of potentially great value to the company.

Frederick Brewing Co. is now engaged in two-way trade with China. More than 35% of Frederick's sales come from its "Hempen" line of beers, the first in North America brewed with sterilized hemp seeds. Because no domestic sources of hemp seeds are available, Frederick purchases this critical ingredient from Chinese producers. In addition to helping Frederick's own employees, the hemp seed trade benefits the U.S. importer in Portland, Oregon; the shipping and freight handling employees at the New Jersey port; the New Jersey company which sterilizes the seeds to ensure that they will not germinate; the trucking companies which haul the sterilized seeds to the processor in Ohio; the processor in Ohio and the numerous other pharmaceutical and cosmetic companies, to name a few, that use the hemp seed oil which results from the processing of the hemp seed.

THE NORTH/MID-ATLANTIC

North/Mid-Atlantic Company Profiles:

CENTRIA, Moon Township, PA
Mark M. Sherwin, President

Industry: Manufacturing Construction Products
Number of U.S. Employees: 650
Major Product(s) Sold in China: Painted Metal Roofing, Siding and Window Systems
Years of Involvement in China:  6
Growth Since Beginning Operations: Over 100% annually

CENTRIA has become the world leader in metal building product systems. In addition to manufacturing non-residential metal roofing, metal wall and floor systems, CENTRIA provides architectural and engineering design services, project supervisors who will train installation crews, referrals to a world-wide network of service-providers, and a unique background in coating technology, innovative product development and attention to detail. In 1992, one of CENTRIA International's major sales was an exterior metal cladding system for use on a power plant in China with a special protective finish to prevent corrosion. Since that time, CENTRIA has had numerous successes in a variety of different construction markets throughout China. The company believes that its success is due to:

•  CENTRIA's world-wide product representation and the embracing of a "global" versus a "local" mindset in dealing with China.
• An understanding of the importance of "guanxi" (connections) and a recognition that China desires state-of-the-art technology.
• Conducting business in China's special economic zones.

With production facilities in Kentucky, Ohio, Arkansas, and Pennsylvania, CENTRIA demonstrates that trade with China affects small and medium-sized businesses and their employees all over the United States.

Federal Products Co., Providence, RI
Joseph Golemme, President

Industry: Measurement, Primarily of Metal Cutting Industries (Automotive, Aerospace)
Number of U.S. Employees: 500
Major Product(s) Sold in China: Mechanical Dial Indicators, Geometry and Surface Systems, Automatic Measurement Systems
Years of Involvement in China: Over 10 years
Sales Growth Since Beginning Operations: Sales flat until 1997, when sales increased 400% over previous 5-year total

Federal Products Co. helps to identify dimensional measurement solutions to precision manufacturers in industries such as automobiles, aerospace, defense, medical devices, and plastics. The company attributes its success in China to the direct involvement of personnel in operations there. Direct involvement with Chinese companies through Chinese-based representatives that can speak Mandarin shows Chinese companies that Federal Products is truly committed to doing business in China and shortens product cycle times by cutting through translation problems.

The Magnetizer Group, Inc., Fountainville, PA
Arthur L. Pease, President

Industry: Manufacturing
Number of U.S. Employees: 250 (including distributors)
Major Product(s) Sold in China: Water and Fuel Conditioning Devices
Years of Involvement in China: 7
Sales in China Since Beginning Operations: $200,000

As China's economy continues to grow and become more industrialized, the need for technology that increases the efficiency of production has grown. Magnetizer has experienced continual success in China in addressing environmental concerns and providing fuel savings. The Magnetizer Group, Inc. is wholly representative of a company that has successfully managed the development of technology cognizant of both consumer and industrial needs as well as the growing importance of developing environmentally friendly products.

Magnetizer's goals in some of its principal areas of activity are:

• Fuel - Increase Fuel Efficiency & Reduce Harmful Emissions
• Agriculture - Increase Crop Yield
• Water - Solve Hard Water Problems
• Bio-Magnetics - Control Over Pain & Level of Wellness

Morgan Pacific Company, Inc., New Haven, CT
R. Mark Van Allen, President
RMarkV@aol.com

Industry: Medical, Dental, Other Technology
Number of U.S. Employees: 4
Major Product(s) Sold in China: Medical, Dental, Other Technology
Years of Involvement in China: 6
Growth Since Beginning Operations: 450%

Morgan Pacific attributes its success to its persistence and a consistent approach to the market. Although the Chinese market is difficult to penetrate, Morgan Pacific believes that a long-term strategy allows firms to exploit the vast market potential that exists there. Realizing that Chinese entrepreneurs are extremely amenable to doing business with American companies, top management at Morgan Pacific has invested considerable time and resources in its Chinese operations. Company representatives visit China once a quarter. Morgan Pacific has set up a distribution system for some companies in the northeastern United States and has claimed a share of the market for dental and industrial products in China.

Morgan Pacific's success in China has translated into more jobs for the residents of New Haven, Connecticut, and has brought greater economic development to the city, as well. With success on so many levels in such a short amount of time, Morgan Pacific has also taken the initiative to form the China Business and Investment Center of New Haven. The 5,000 square foot facility will help American companies to do business in China and will also help Chinese companies to set up operations in the United States. Morgan Pacific believes that its relationship with its Chinese counterparts is symbolic of how diplomatic relations between the U.S. and China should evolve. A stable political environment creates opportunities for increased business for American companies. The opening of the Chinese economy will, in turn, lead to increased political and economic freedoms for the people of China. In short, expanded business between China and the United States means new opportunities at the local level, for Chinese and Americans alike.

Robicon, New Kensington, PA
Jody Kurtzhalts, President

Industry: Power Electronics
Number of U.S. Employees: 450
Major Product(s) Sold in China: Variable Frequency Drivers
Years of Involvement in China: 4
Growth Since Beginning Operations: Continued Growth Since Beginning Operations

Robicon manufactures power controllers and variable speed drives and its product line includes a diverse range of precision-engineered, electronics-based power equipment and system solutions. With a strong global focus, China is one of 57 countries with which Robicon does business.  Because Robicon management believes its global operations are integral to its continued success and that China is a keystone of the entire Asia market, it has entered into a long-term business relationship with China. Robicon's rate of development in the U.S. has made it the fastest growing company in drives and power systems as well as a leader in wastewater applications. These are just two of the areas into which Robicon hopes to expand its operations in China.

Simmons Machine Tool Corporation, Albany, NY
Hans Naumann, CEO

Industry: Railroad
Number of U.S. Employees: 125
Major Products Sold in China: Machine Tools
Years of Involvement in China: Over 10
Growth Since Beginning Operations: Fluctuation From Year To Year

Establishing extensive networks in China and working to maintain a presence in the market in China has allowed Simmons Machine Tool Corporation to experience periods of rapid growth. Based in Upstate New York, the company manufactures and services heavy machine tools for production and maintenance of railway axles, wheels and wheel set assemblies. China represents an extremely attractive market for Simmons with its large and developing railroad infrastructure. The company's first project in China began in 1988. Since then, the company has exhibited a high level of commitment to the market by visiting three to six times annually for specific projects, general sales activities, and trade shows. The efforts of Simmons Machine Tool Corporation culminated in 1996 with the opening of the company's first representative office in China. Simmons has worked to involve culturally sensitive personnel in its operations in China and this has helped the company to overcome the vast cultural differences that often hinder American companies doing business in China.

RESOURCES FOR U.S. SMALL BUSINESSES

U.S. Chamber of Commerce

With a particular focus on greater outreach to small businesses, the International Division of the U.S. Chamber of Commerce plays an integral role in improving the ability of U.S. business to compete in the global marketplace. By keeping members informed of the latest changes occurring around the world, the International Division gives U.S. companies of all sizes the tools they need to succeed. Call the International Division of the U.S. Chamber at 202/463-5460 to learn about our many international trade publications or to speak to a Chamber regional specialist.

Export-Import Bank

The Export-Import Bank of the United States (Ex-Im Bank) is an independent U.S. Government-held corporation that helps finance the overseas sales of U.S. goods and services. Ex-Im Bank provides a level playing field for U.S. exporters through providing working capital guarantees and export credit insurance to creditworthy small and medium-sized companies, and guarantees of commercial and direct loans to foreign buyers of U.S. goods and services. For more information, call 800/565-EXIM. To obtain a seminar brochure and scheduling information regarding Ex-Im Bank's briefing programs for the small business community, call 202/562-3912. Visit the Ex-Im Bank homepage (see Programs, Small Business).

Overseas Private Investment Corporation

The Overseas Private Investment Corporation (OPIC) supports U.S. businesses by providing political risk insurance to protect against currency inconvertibility, expropriation, and political violence. OPIC also provides direct loans to small and medium-sized businesses. The Allied Capital International Small Business Fund, an OPIC-supported, privately managed and capitalized equity fund, provides growth capital to international projects sponsored by U.S. small businesses. For more information, call the OPIC InfoLine at 202/336-8799 or visit the OPIC homepage. To receive information directly by fax, call the OPIC Facts-Line at 202/336-8700.

Small Business Administration

The Small Business Administration (SBA) helps America's entrepreneurs form successful small enterprises. Today, SBA's program offices in every state offer financing, training, and advocacy services for small firms. The SBA's Office of International Trade (OIT) works in coordination with other federal agencies and public and private sector organizations to encourage and assist small businesses to expand their export activities. For more information, call the OIT at 202/205-6720 or visit the OIT website.

The SBA administers the Small Business Development Center Program (SBDC) to provide management assistance to current and prospective small business owners. Located throughout the United States, the SBDCs offer counseling, training, and technical assistance to small businesses, particularly new-to-export companies. For more information, call 202/205-7303 or visit the SBDC website.

U.S. Agency for International Development

The U.S. Agency for International Development's (USAID) Center for Trade and Investment Services (CTIS) offers a full range of individual counseling and information services for small and medium-sized businesses. CTIS provides information on USAID's programs and activities in development-related sectors, including environment, energy, agribusiness, and health training. For more information, call 800/872-4348 or visit its website (see Business Support Services). Also, visit the USAID homepage.

U.S. Department of Agriculture

The U.S. Department of Agriculture's Foreign Agricultural Service (FAS) serves U.S. agriculture's international interests by both expanding export opportunities for U.S. agricultural, fish, and forest products, and promoting world food security. A number of FAS programs are available for small companies that plan to export their agricultural products. To find more information, visit the FAS website.   Be sure to look at the FAS Market Access and Foreign Market Development Programs, specifically designed to aid the small business community. Call 202/720-4327 to request more information.

U.S. Department of Commerce

The U.S. Department of Commerce, the U.S. Small Business Administration and the Ex-Im Bank have formed a unique partnership to establish U.S. Export Assistance Centers (EAC). EAC's, located at major metropolitan areas throughout the United States, are "one-stop shops" that provide small and medium-sized businesses with hands-on export marketing and trade finance support. Find the Export Assistance Center nearest you (see Export Assistance Centers or Trade Information Center). Or call 800/872-8723 to receive more information.

The Department of Commerce's Trade Information Center (TIC) is a valuable resource when trying to locate and use federal export assistance programs. TIC provides export counseling, sources of international market research and trade leads, sources of export financing, and advice on export licenses and controls. For more information, call 800/USA-TRADE (800/872-8723), or visit the TIC website.

U.S. Trade and Development Agency

The U.S. Trade and Development Agency (TDA) is an independent agency that assists in the creation of jobs for Americans by helping U.S. companies pursue overseas business opportunities. TDA's programs help small businesses in several ways. First, companies gain entry and exposure to overseas business opportunities by participating directly in TDA-funded activities. Small companies receive approximately 20% of TDA program funds. Small businesses can also benefit indirectly by working as a subcontractor on a TDA feasibility study. For more detailed information, visit the TDA website (see TDA Briefs, TDA & Small Business).

Conclusion

This report highlights small and medium-sized business' interest in and commitment to the China market. American companies of all sizes see many opportunities in China's rapidly growing economy. Chinese consumers will buy increasing numbers of America's goods, services, and agricultural products, and American companies can make an enormous contribution to China's infrastructure modernization.

It is important to note, however, that while this report focuses on a sample of the American small and medium-sized companies that have found success in the China market, other companies have been frustrated in their efforts to do business with China. China is a challenging place to do business for U.S. companies of all sizes, and the challenges for small and medium-sized businesses are particularly keen.

China's inconsistency in applying rules and regulations and problems with enforcing contracts make doing business with China more difficult. Lack of transparency, poor currency convertibility, import-licensing requirements, and high tariffs in some sectors are further challenges. These obstacles are among the critical areas China must address in the context of its ongoing negotiations to enter the World Trade Organization (WTO). It is vital that U.S. officials press the Chinese Government to take tangible steps to make their market more accessible to small business. The U.S. Chamber of Commerce will continue to work towards this goal.

While China must do more to open its market to the full participation of small and medium-sized companies, the U.S. Government must also reexamine those policies that hinder American companies from pursuing business opportunities in China. By prohibiting the Overseas Private Investment Corporation (OPIC) and the U.S. Trade and Development Agency (TDA) from operating in China, for example, U.S. companies cannot use the programs of these agencies to assist their market entry in China.

Many small and medium-sized businesses are finding success in China's huge and growing market. The U.S. Chamber expects that trend to continue as China's market liberalization proceeds. The U.S. economy stands to gain from this trend. Long-term sustainable economic growth here at home will be fueled by the active participation in international trade of America's small and medium-sized businesses.

In January 1997, the U.S. Chamber launched an active, forward-looking trade education initiative, working with our state and local chambers of commerce and small businesses around the country to increase awareness of the benefits of international trade. Twelve corporate sponsors have supported our initiative, and are listed below. We very much appreciate their continued support and are pleased to release this report as part of our trade education initiative.

• Amway Corporation
• The Boeing Company
• Chrysler Corporation
• The Chubb Corporation
• Exxon Corporation
• FedEx Corporation
• Ford Motor Company
• General Motors Corporation
• Motorola, Inc.
• Pentair, Inc.
• The Southern Company
• TRW

Report Prepared By:  Myron Brilliant, Manager, Asia and Leslie Griffin, Director, Asian Affairs. 

U.S. Chamber of Commerce
International Division
1615 H Street, NW
Washington, D.C. 20062-2000
Telephone:  202/463-5460

Our thanks go to Jennifer Hellawell, Amy Huang, and Grace Wang for their outstanding research assistance in compiling this report.

Copyright 1998 by Chamber of Commerce of the United States.   Library of Congress Cataloging in Publications Data Main entry under title:  Small Business Success Stories in China.

This  report is presented by the U.S. Chamber of Commerce as a service to its readers and may be used for information purposes only. The U.S. Chamber of Commerce assumes no responsibility for errors or omissions in these materials. The U.S. Chamber retains the copyright in all the materials in this report as a collective work, which may not be copied without the express consent of the U.S. Chamber of Commerce.

TOP