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R 070741Z AUG 09
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RUEHSH/AMCONSUL SHENYANG 0167
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RUEATRS/DEPT OF TREASURY WASHINGTON DC 0123
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RHEHAAA/NSC WASHINGTON DC 0045

UNCLAS SECTION 01 OF 02 GUANGZHOU 000481 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM, EAP/TC, INR/EAP, S/P 
 
E.O. 12958: N/A 
TAGS: ECON ETRD CH TW
SUBJECT: Fujian Businesses: Looking for Opportunities In the Midst 
of Crisis 
¶1.  (U) Summary: Although the global economic crisis has severely 
impacted export businesses, the crisis has also created new 
opportunities, according to Fujian Province company executives. 
 
Larger, more efficient export-oriented companies said they had 
consolidated and increased market share as competitors have gone out 
of business; others have focused on streamlining the sales process 
by eliminating middlemen, increasing domestic sales or expanding 
sales to new regions.  Several companies said they believe the drop 
in exports has bottomed out; they have seen slight gains during the 
past two months.  Others worried that China's public spending-fueled 
recovery would lead to inflation.  End summary. 
 
¶2. (U) In late July, post's APP (American Presence Post) officer 
visited eleven Fujian-based companies engaged in the furniture, 
handicrafts, stone and construction material industries.  Almost 
without exception, company executives quoted a Chinese idiom that 
says "the time of crisis is a moment of opportunity" to describe 
their strategies for weathering and prospering despite the 
challenging economic environment. 
 
For Many Fujian Companies, a Steep Drop in Exports 
--------------------------------------------- ----- 
 
¶3. (SBU) According to executives in the stone and construction 
material industries, some Fujian firms witnessed huge drops in 
export orders, some in excess of 70 percent, which was especially 
damaging for many smaller firms that entirely depend on export sales 
for survival.  In the furniture and handicraft sector, larger 
companies with established relationships to large international 
retail chains reported that they were weathering the downturn, 
although they have still seen exports fall.  Minhou Minxing, a large 
manufacturer and exporter of decorative household items reported a 
20 percent drop in export sales.  Fuzhou Profit Trading Company said 
their sales to the United States were down by 50 percent and their 
sales to Europe down 30 percent.  The company also noted that their 
U.S. agents have experienced difficulty in settling accounts, which 
has increased their trading risks. 
 
Looking for Opportunities in the Economic Crisis 
--------------------------------------------- --- 
 
¶4. (SBU) An executive of Hong Chang Machinery Manufacturing Company 
said the current economic environment has forced construction 
companies in many countries to look for ways to reduce costs.  His 
company has benefited as these companies sought alternatives to the 
high-end, high-priced equipment that they have traditionally 
favored.  The company has increased exports of its brick-making 
equipment in the Middle East and Southeast Asia.  Hong Chang has 
also benefited from increased domestic sales as Chinese authorities 
have allocated huge sums for construction and infrastructure 
projects across the country. 
 
¶5. (SBU) Another construction materials firm, the Guangyan 
Enterprise Group, said it has maintained steady sales by employing a 
strategy of direct overseas delivery, working through a U.S. branch 
office, to eliminate costly middlemen.  Guangyan has also sought to 
balance its exports by beginning to import materials from the U.S. 
for sale in China.  Two other stone export companies, Zongyi Stone 
Import and Export Company and Jet Boat Import and Export Company 
also told congenoff that they have offset the drop in export-related 
sales with increased sales in the domestic market.  One company, 
Bonan Import and Export Development Company, said business has 
remained steady and predictable.  The grave stone seller primarily 
exports to Japan, where an aging society and steady mortality rates 
assure steady demand. 
 
¶6. (SBU) Executives at HomeStar Light Industry Company said that as 
major overseas retail chains have tightened their environmental and 
safety standards, many smaller companies have not been able to keep 
pace and remain profitable.  This has directly benefited larger, 
more efficient firms.  Founded in 2002, HomeStar grew rapidly by 
cultivating direct marketing links with a number of international 
retailers.  The company's sales increased by 20 percent in 2008, 
with approximately USD 25 million in annual sales to the U.S. 
 
GUANGZHOU 00000481  002 OF 002 
 
¶1.  (U) Summary: Although the global economic crisis has severely 
impacted export businesses, the crisis has also created new 
opportunities, according to Fujian Province company executives. 
Larger, more efficient export-oriented companies said they had 
consolidated and increased market share as competitors have gone out 
of business; others have focused on streamlining the sales process 
by eliminating middlemen, increasing domestic sales or expanding 
sales to new regions.  Several companies said they believe the drop 
in exports has bottomed out; they have seen slight gains during the 
past two months.  Others worried that China's public spending-fueled 
recovery would lead to inflation.  End summary. 
 
market.  Hoping to stem a 20 percent slide in sales revenue (from 
USD 100 million last year to USD 80 million this year), Minxing 
Weaving Company has applied higher quality standards and invested 
more in research and development. 
 
Hoping for a Recovery 
--------------------- 
 
¶7. (SBU) Most of the company representatives said that business for 
the first six months of 2009 was bleak.  Several of the stone 
industry-related companies said they believed that the market has 
begun to stabilize; a few of the companies said that they had seen 
hopeful signs during June and July that sales have begun to pick up 
again.  HomeStar noted that their business has continued to grow 
during this period - even in the United States.  Nevertheless, they 
said a top priority is developing new business opportunities outside 
of the U.S. market.  While acknowledging that domestic sales had 
been spurred by government spending, several executives expressed 
concern that China's public spending-fueled recovery might cause 
inflation. 
 
¶8. (U) Comment:  Although largely dependent on exports like their 
counterparts in Guangdong, Fujian companies appear to have weathered 
the economic downturn in better form.  Although some of the credit 
may be due their assorted strategies for finding "opportunities" in 
the crisis, the comparative well-being of the Fujian companies may 
also stem from the use of a different business model.  Several local 
businessmen noted that whereas many Guangdong companies utilize 
leased facilities, allowing the companies to rapidly close their 
doors in the face of an economic downturn, most Fujian companies own 
their land and buildings - likely encouraging the Fujian companies 
to take a longer-term view.  End comment. 
 
GOLDBECK