Forging ahead with no limits

John Woo
REN became the head of Overseas Chinese Town (OCT) Group in 1993 when he quit his job as secretary-general of the municipal government of Shenzhen.
Ren's new appointment coincided with a corporate expansion fever that was overwhelming China. He was inevitably involved in a series of negotiations soon after he joined the OCT Group.
Not long after, he found he had to face a problem with the development of the group which, at that time, had more than 100 firms in over 20 industries. Of those firms, 90 percent were very small. They occupied 50 percent of the group's total resources but generated less than 10 percent of the group's profits.
"With such an industry structure, the group would not be able to ward off market risks," said Ren.
His solution was to cut the number of firms from 100 to 60 and make electrical household appliances, tourism and real estate the OCT's three mainstay industries.
While giving up the loss-making small companies, Ren threw 700 million yuan in three years into the three dominant industries to expand their production capability. They also received a 1.2 billion yuan collateral loan injection.
Ren likes to compare managing a company to conducting a symphony. "Rhythm is the soul of a piece of music, as well as the development of a company," he said.
He obviously has his own rhythm in managing OCT. One example is that he decided not to follow the blind expansionist trend in the mid-90s. He is chairman of Konka, one of China's top TV producers and OCT's flagship enterprise. Instead of setting up various sub-companies of Konka in other regions, Ren stuck to Shenzhen.
"It was better to triple Konka's current revenue than to have three Konkas," he said.
When the time was ripe, however, he branched out in the late 1990s by setting up Konka sub-companies throughout the country.
When the country's many corporate leaders were busy with developing housing estate projects, Ren concentrated on beautifying the five-square-kilometer OCT by setting up an art gallery, sculpture corridors and public parks and upgrading its existing theme parks as well as building a new one. At the same time, he coined the slogan: "Planning means wealth. Structure means efficiency. Environment means advantage."
Ren's environmental advantage became evident at the turn of the new century when OCT became widely recognized as an upper-end neighborhood in Shenzhen. Its newly developed housing estate attracted the highest prices in Shenzhen, justifying Ren's decision to make real estate one of OCT's backbone industries.
Before China's accession to the WTO, Ren said: "Facing the coming success of the WTO mission, I am not overjoyed, but worried about China's weak State-owned enterprises (SOEs), which will face fierce competition from strong overseas conglomerates.
"The fierce competition is going to be one of system management rather than of market, technology or products. A company's system decides its human resources structure, which is a key element of a company's competitive strength."
Ren consulted an American company to help draw strategic insight and operational knowledge into OCT's future development.
To obtain fast, effective reform, SOEs should borrow successful ideas from international conglomerates, instead of undertaking reform along solely Chinese ways, he said.
 "As a matter of fact, the problems with SOEs exist not only in China but also in capitalist and developed countries. Therefore, if you take the problems only as Chinese ones, you will not be able to get more experience and ideas to reform the SOEs in China."
Ren asked three things from the American company. He wanted OCT's development strategy evaluated to determine whether it could achieve its goal amid global competition. He also wanted practical advice on the group's organiziational structure and in controlling the development of the company's assets and policy, and branch supervision.
"But the consultants teach us just phonetic symbols, you might say. We should independently pronounce a word out, and have to make up the sentences ourselves," he said.
He knows that as an individual CEO of one of China's SOEs, he is not in a position to bring an ultimate solution to the country's SOE-related problems. What he can do is do his job well.
Ren's advantage of environment and the extraordinary success of OCT's theme parks have attracted nationwide attention. He doesn't remember the number of times he has been approached by parties from all over the country with suggestions that OCT join them to develop real estate or theme park projects.
Ren feels there is a need to lead his group beyond OCT boundaries because OCT's land resources are running out after 17 years of development.
With careful discretion, he selected three from countless offers. One is a one-square-kilometer piece of land in Beijing on which OCT will erect a theme park and housing estate with an injection of two billion yuan within five years. It is the first project where OCT will practise its development approach outside OCT. The approach is based on the belief that a successful theme park increases the value of the surrounding real estate and helps make neighboring developments successful.
On July 20, Ren signed another agreement with the mayor of Huizhou, a city neighboring Shenzhen. According to the agreement, OCT and Huizhou will jointly develop an area of 14 square kilometers in Huizhou City. With an investment of one billion yuan from OCT alone, the area will contain a holiday resort, theme parks, housing estate, golf courses and other facilities. He says this will be a huge, long-term project.
The third project involves a 2.5-square-kilometer area in Shanghai. OCT and the Shanghai party are already conducting negotiations.
But Ren also has his frustrations. Early this year, Konka declared it would post a significant loss for 2001 due to stiff competition and a subsequent slide in electrical appliance prices. It was Konka's first annual loss in 20 years.
 Konka was not an isolated case. Years of price wars on the domestic TV market have left all China's TV makers battered and bruised. According to an industry analyst, Konka's losses underline the painful period that China's domestic consumer electronics companies are going through, although Ren attributed Konka's plunge partly to some slips in management. Drawing lessons from these, Ren has helped reform Konka's management and directed the company to diversified production of things such as mobile phones, Internet products and liquid crystal monitors.
His efforts have paid off. For the first five months of this year, Konka showed signs of a brisk recovery, its revenue increasing by 12 percent over the same period last year.
He is confident of Konka's future. "We are capable of establishing brands and creating new things. We will be able to build Konka stronger and embark on a route of sustainable development," he said.
Asked to describe OCT's future, Ren said he saw OCT in two minds, the physical one and the one as a brand. "We hope to build OCT into an international brand, which comprises such industries as telecommunications, electrical household appliances, tourism and real estate," Ren said.
"Geographical limits won't stop our expansion. As there are no limits to people's thoughts, there will  neither be limits in our creation of the future."