Something ventured in Shenzhen

China's capitalist revolution is about more than cheap goods and labor. A tantalizing promise of wealth has created a freewheeling spirit and eager entrepreneurs. By KRIS HUNDLEY Published September 18, 2005

[Times photos: Bob Croslin] China opened its doors to Western business in Shenzhen. The former fishing village is now a showpiece.

SHENZHEN, China - This may be the biggest place you've never heard of. More people live here than New York city. It has more factories than the Midwest; a skyscraper taller than the Empire State Building; the busiest port in China. And a premier golf course that has been played by Tiger Woods. Shenzhen was nothing but a fishing village 25 years ago when it was picked by government officials to become the showplace of

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China's economic resurgence. Now this city of 10-million rivals Hong Kong as a mecca of capitalism. Said Rick Cui, a computer engineer who bolted Atlanta for a job in Shenzhen two years ago: "Here all anybody talks about is how to make money." John Lackey and George Asselin of Pinellas County certainly had never heard of Shenzhen when they first came up with the idea for a tool that rips shingles from rooftops. The two men, then unemployed machinists, invented the gadget after Lackey nearly suffered heat stroke during a brief foray into roofing. Using parts from Home Depot, they built a prototype in Lackey's Kenneth City garage and applied for a patent. They called their invention the Roof Shark. Short of cash but not confidence, the two men wrote to 40 companies around the United States looking for someone to produce their invention. But nobody would bite. "They just didn't want to take a chance on two guys in a garage, I guess," Lackey said. Some wouldn't consider ideas from outsiders, others said they were too busy. A couple of companies wanted thousands of dollars upfront just to make the production molds. The men figured if they could get the Roof Shark made in the States, costs would drive the retail price to more than $200. Then they read a newspaper article about CSD Worldwide, which has offices in Oldsmar and Shenzhen, China. Its forte: taking brainstorms and turning them into products. Lackey and Asselin got halfway through their homemade video showing Lackey ripping off shingles with the Roof Shark when CSD's Jim Wetzel said his company would bring their idea to market. In a matter of months, CSD's engineers in China refined the design and lined up factories in Shenzhen to do the manufacturing and assembly. The Oldsmar office will do sales and marketing. Lackey and Asselin will get a percentage of gross sales.

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Less than a year after signing the deal with CSD, the men had a finished Roof Shark in their hands and a shipment of 200 on the way. Anticipated retail price: $59.95. "We wanted to make it in the States really bad," said Asselin, a 52year-old former union member who works at Circle K on Redington Beach. "But the choice was made for us." *** The world's biggest Communist country has become a powerhouse of capitalism. And the momentum comes from much more than cheap labor. The tantalizing promise of economic advancement has generated a freewheeling entrepreneurial spirit among one-fifth of the world's population. Having so little to lose, the Chinese have become risk-takers extraordinaire. Party-appointed officials still control everything from Web sites (nix on anything related to Falun Gong) to the number of kids in a family (one unless the first one is a girl), but they have given citizens free rein to make money. As a result, China's per capita income has quadrupled in the past 20 years. More than 250-million people have moved out of poverty, a phenomenon the World Bank calls unprecedented in human history. In Shenzhen, factory wages averaging $85 a month are up 50 percent from a decade ago and well above pay in surrounding areas. But demand so outstrips supply - even with millions of migrant jobseekers - that 200,000 positions are unfilled. That dynamic generates an attitude of risk-taking among people who were constrained for decades under Mao's policies. Teenagers forsake ancestral villages for distant cities, then job-jump for higher pay. Government workers abandon secure bureaucratic posts to develop real estate. Peasants pave their fields and build factories. With the government's blessing, the doors of opportunity have opened and 1.3-billion people are charging through. The West has witnessed China's emergence with the red-hot IPO of Baidu, China's Internet search engine; CNOOC's recent unsuccessful bid for Unocal; and the sale of IBM's personal computer business to China's Lenovo.

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But the focus on such main stage megadeals misses the frenzy of business activity taking place every day in places like Shenzhen. Engineers in Tampa are working out software bugs with coders in Shenzhen by e-mail daily. An entrepreneur in Palm Harbor imports millions of dollars worth of pizza delivery bags, spatulas and ingredient scales from China. And the Roof Shark's inventors are seeing their product assembled in a city whose name they couldn't even spell a year ago. Lackey sleeps with a Roof Shark on the floor next to his bed. "We had an idea," he said. "Now it's going to be on a store shelf. That's so rare." *** When Deng Xiaoping told his countrymen in the early 1980s that "To get rich is glorious," he probably didn't have the Roof Shark in mind. But the process Deng set in motion with his pronouncements, as well as his moves to normalize relations with the West, made gizmos like the shingle remover possible. Shenzhen was the perfect place for Deng's bold experiment with capitalism because it was close enough to Hong Kong to attract foreign business people and their money. It also was far enough from the politics of Beijing that if the experiment failed it could be officially ignored. And Shenzhen, situated on China's southern border, could be sealed off from the rest of the country if Western influences proved too inflammatory. But once Shenzhen made friendly overtures to outsiders, there was no turning back. It wasn't that China was handing out generous incentives. It was that after 30 years, China was finally opening the door to Western businesses. Shenzhen's municipal leaders held welcoming banquets, helped foreigners navigate the maze of official regulations, then sat back and collected taxes and fees. In the past two decades, more than $30-billion has been invested by outsiders in Shenzhen: building factories, forming joint ventures, hiring workers. Among the newcomers were multinational corporations like St. Petersburg's Jabil Circuit Inc., which has a factory here. Also staking a claim in Shenzhen was Davy Wong, a

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Hong Kong entrepreneur and partner in CSD, the maker of the Roof Shark. John Parke Wright IV, a Tampa native and member of the Lykes family, witnessed China's early economic transformation. Wright had been working with the British trading company Jardine Matheson in Hong Kong when he got the job of reopening the firm's Beijing office in January 1979. "In 1978-79 all the big American companies - Coca-Cola, Kodak, Pfizer, Goodyear - were lined up to come back into China," said Wright, who now lives in Naples. "The Chinese were saying quietly they wanted China to be more like Hong Kong, and not Hong Kong more like China." Deng, who returned to power in 1978 after losing his leadership position during the Cultural Revolution, quickly dismantled Maoist communes and allowed peasants to produce food for private sale. He negotiated full diplomatic relations with Washington and became the first leader of Communist China to visit the United States. He encouraged state-owned enterprises to become more entrepreneurial and signed off on joint ventures with Westerners, the first with a Swiss elevator company. Wright said he was at a Beijing train station in late 1978, accompanying officials with Bechtel, the giant U.S. engineering and construction firm, on a visit to Chinese oil fields, when they learned that President Jimmy Carter had appointed Leonard Woodcock to be the first U.S. ambassador to Communist China. "All of a sudden we were surrounded by a crowd and one man asked, "Are you American?"' Wright remembered. "When we answered yes, there was a cheer. They were terribly excited that the U.S. had normalized relations with China." By spring 1979, Wright and Ambassador Woodcock were watching the first American ship in 30 years pull into a Chinese port: the Letitia Lykes of the Lykes Line picked up a cargo of nails from Shanghai while a Chinese ship was being loaded with grain in Seattle. Economic progress stalled after the Tiananmen Square massacre in 1989, but was revived in January 1992 when Deng made his famous

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southern tour, urging Shenzhen officials to "move faster and be bolder." Soon after, Beijing opened a dozen more cities to foreign investment. Shanghai and Shenzhen opened the nation's first stock exchanges. Shenzhen's population ballooned with migrant workers, 70 percent of them young women. At Shenzhen's border crossing with Hong Kong, the cycle of trade soon reversed: instead of TVs and washing machines flowing into China, they were suddenly rolling out. Deng's 1992 visit - and his not-so-subtle order to outdo Hong Kong is memorialized in a mural on top of Shun Hing Square, Shenzhen's tallest building. Looking out from the twin-spired skyscraper, a visitor sees a spiky blanket of condos, office buildings and hotels and, to the south in the haze beyond, Hong Kong. *** On the streets of Shenzhen, cars, trucks and minibuses jam highways that have no median strips, playing a game of high-stakes chicken with bicycles. The sky is the color of a smoker's lungs. KFC, McDonald's, Starbucks and Sam's Club are sprinkled among giant Chinese department stores and mom-and-pop shops operating out of garage-like spaces. There's such a rush for new retail that a six-story bookstore opens for customers while the top floors are still being plastered. Shenzhen makes a feeble bid at tourist attractions. There are parks with a scaled-down replica of the Eiffel Tower, a miniature Great Wall and an ocean liner turned shopping mall, inexplicably moored in concrete. But the city's main attraction, to migrants as well as foreign business people, is its tens of thousands of factories. Proof of the city's key role in the world supply chain: Wal-Mart's global purchasing headquarters is in Shenzhen. The factory where the Roof Shark is assembled is on the rapidly developing northern edge of Shenzhen. In the neighborhood outside the factory gates, poorly graded roads are filled with mud and clogged by fume-spewing buses. Old farmhouses have been reduced to rubble, soon to be replaced by high-rises. New white-

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tiled workers' dorms are already coated with gray film, their balconies strung with laundry. At ground level, tiny family-run restaurants cater to workers with woks and pool tables out front. In a bare-bones Internet cafe - no coffee, just Net - every seat is taken as uniformed workers play World of Warcraft or surf the Web. CSD is putting together the Roof Shark on one floor of a new fivestory building. The floor above is leased to a clothing manufacturer; downstairs another entrepreneur makes cell phone covers. The landlord is a peasant who, until a year ago, farmed the land beneath the building. Today he collects rent. Wong, a lanky Hong Kong native in his early 30s, runs CSD's China business on a shoestring, a cell phone and a Rolodex. He subcontracts simple manufacturing jobs to more than 50 factories around the country. More complicated products are handled at the Shenzhen location, which is less a factory and more a wide-open flex space that can be configured for the job of the day. Engineers tweak clients' designs on computers in one office while a couple of project managers who earned their MBAs in England are on the phone down the hall. In a room shut off by dangling plastic strips, a crew of about 30 young women in white caps hunch over benches, soldering tattoo needles while a Rube-Goldberg-like venting system rattles overhead. In an adjacent area, women in black polo shirts and hairnets check finished needles for imperfections before they are cleaned, sealed and blister-packed. Off a hallway, nine men wind tiny wire motors by hand for yet another CSD client. Every work area looks like it could be broken down and retooled to make something different in a matter of hours. Wong said laborers earn about $100 a month plus a bonus for meeting production goals. Most of his workers are migrants in their early 20s; half are young women who leave when they marry, meaning Wong's managers are constantly hiring and training.

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CSD's workforce will soon expand from 50 to 80, thanks to the Roof Shark and a new deal making a tooth-whitening product for a European customer. "My biggest challenge is to expand in good step," Wong said, "instead of moving in high speed." After nearly a decade of doing business in China, Wong said roads and hotels have been upgraded and government fees have become standardized. One vestige of old China still bugs him: a state-owned banking system that has little incentive to provide speedy customer service. He said it can take two hours to make a deposit. "But over the next few years, with the help of the Olympics and the World Trade Organization, China will become more and more competitive," Wong said. "It is not very Communist." *** Halfway around the world in the Tampa Bay area, China's impact is felt daily. Gas prices are rising in part because there are now 10-million cars in China. More than 1,500 new vehicles are registered each day in Beijing alone. In a few short years China has become second only to the U.S. in oil consumption. Meanwhile, apparel prices in the United States have declined because of factories like the 5,000-employee operation in south China that makes one of seven men's shirts sold in America. While that factory is far from China's biggest - a competitor with 8,000 workers is nearby - it is 10 times bigger than any apparel plant in the U.S. Fewer computer programmers are needed at CommerceQuest in Tampa because of software outsourcing companies such as Freeborders in Shenzhen, where Rick Cui is employed. And China has been key to the growth of giant electronic components maker Jabil, which will soon open its fourth factory in China. Low wages are not the only draw. Bill Muir, president of Jabil Asia, said the company's suppliers, competitors and customers, both existing and potential, are all active in China, making Jabil's presence mandatory.
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"For us to be competitive, we must offer a viable global footprint," said Muir, whose division accounts for about a third of Jabil's total production. "The customer relationships we have in China carry over to Florida and the rest of the world as well. It's seamless." The same kind of global reach, though on a much smaller scale, has transformed the Roof Shark's inventors from dreamers into guys with a product to peddle. "Now we're employing people, only the jobs are in another country," Lackey said. "I'm patriotic, but it's like a global economy." Kris Hundley can be reached at hundley@sptimes.com or 727 8922996. [Last modified September 19, 2005, 09:44:11]

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