Open Sources | Rodrigues & Urlocker » China: Shenzen-Providence and Han's Laser

October 04, 2005 | Comments: (0)

China: Shenzen-Providence and Han's Laser

TAGS: Economics

A great deal of press about China has made people fearful of the power of the giant country. The GDP is growing, there is a large workforce and the country has an insatiable appetite for oil. But the iron-fist government control and the huge amount of poor make the threat seem much less than we had initially perceived.

We spent the day in Shenzhen, China at Han's Laser then at Providence, a manufacturing concern.

Providence
If you've ever wondered where the beverage pumps that McDonalds uses get made I have the answer. It's a company called Providence in Shenzen, China, about 1 hour north of Hong Kong. Providence is a $40m (US) company with 2200 employees (average age 20) making a wide variety of plastic and fabricated components, sub-assemblies and other pieces for product makers all over the world.

Let me say this first: The plant was immaculate, the people extremely friendly, and the workers seemed to be very focused. But it was weird.

The company exists within a compound and provides housing for all of it's employees across the street from the plant. As far as factories go, I think this was a good one. The employees work 8 hour shifts, have meals and housing and get paid more than the average factory worker. It's considered an "A" factory because it adheres to human rights and environmental factors. Nonetheless, it was very strange seeing hundreds of young Chinese girls making plastic and rubber parts, and young Chinese men working on plastic extraction machines. The workers tend to stay at the factory for about 3 years at which point they have saved enough money to either move back to their village and build a house, or move to a city for another higher level job.

Mission Hills Golf Course
We had dinner at the Mission Hills Golf Course, largest in the world. The whole time an overwhelming array of staff was delivering food and drinks and I started to wonder if this was the prestige job in Shenzen vs. all of the factories. It was air-conditioned, very clean and very quiet. But, it was also filled with young Chinese women, the oldest one was about 25 making me think that the money is not great there either.

The other odd factor was the placement of this luxurious golf course in and amongst veritable slums. When you drive to the golf course you see a pretty poor side of China (think man on bicycle with 4 mattresses on his back, dogs wandering aimlessly and people sleeping in the dirt.) Even driving up to the pro shop you see what must be the staff quarters-dingy white buildings with laundry hanging off of every window.

Han's Laser
Han's Laser was a very interesting story. The founder and president, Mr. Gao was an engineer who saw that there was a market for laser etching products and was able to convince a potential customer to give him $50k to start up his business. He was able to build the business with additional private capital from a state-owned company, which ended up in a Sopranos-esque situation that required Mr. Gao to buy back 46% of his company at a 6x multiple just to get away from them. He went through a vast array of governmental hurdles to reclaim his company and then spent 2 years trying to go public in the Chinese capital market. Han's went public in 2004 and is very successful. It was a very cool story and company, but the conference room was so hot I was drifting in and out sleep.

On the way home over the border we saw someone get arrested trying to sneak through on the back of the truck. Disturbing, even for me.

EXTRA
We're leaving Hong Kong this afternoon, heading over to Bangkok. Karen went home yesterday, unfortunately before I was able to pick up my new jackets from the HK tailor. I am not sure they fit exactly right, make sure you ask for 3 fittings.

Posted by Dave Rosenberg on October 4, 2005 06:06 PM

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