More China in early 90s… and the beauty and madness of working for a small company

Reproduced from a 1993 article by courtesy of "I am an analyst"

Working for a smaller company is a great way to get work experience. Combine that with a wild west experience like China’s budding stock market of the early 90s, and you get turbocharged learning experiences. Today, you might have had to go to Vietnam, Cambodia and parts of India to get equivalent experiences.

By 1993 I was an investment analyst at Kerry Securities doing China research. The trips that left their biggest impression on me were very similar to my experiences in late-80s.

The single strangest experience I had around 1993 had been to take a big bus full of Japanese fund managers from Kokusai Asset Management to visit factories just outside Shenzhen. It was springtime and the rains were simply incredible downpours. At the same time, outlying Shenzhen areas were just in the process of building many of its highways.

I still remember the look on the fund managers faces as they looked out the bus window at the impact of the rains. There was no talking, as all their jawbones dropped and their eyes popped out of their heads as they stared at what reminded me of a scene from the film Terminator.

We were driving on mud roads, and all we could see everywhere was mud. Mud on the half-built highways, mud on the roads to the sides of the highways, and mud up to and into the small side-shops by the roads. The entire outskirts of Shenzhen were one mud pool construction site.

A related trip around the same time was when I rented out a car in Shenzhen for the day to take a group of Swiss fund managers between Hong Kong and Guangzhou. The purpose was to visit a few factories and tour the economic situation of Guangdong north of Shenzhen up to the Dongguan area (the most concentrated industrial area in Guangdong).

We traveled over parts of the Hopewell Superhighway that were built, and then around the side roads. The investors were shocked at the quality of the work being done. Typically Shanghai infrastructure projects were known, even in the 90s, to be generally good quality. But what we saw in Guangdong in 1993 looked like it would fall apart by 1997. The cement work for the highway flyovers just looked terrible. I explained to the managers stories circulating at the time that Gordon Wu had blown his cover with locals when he bragged about the profits he was going to make (anything over 15% annual returns came to be a no-no, and Wu bragged returns far higher), and also a contracting system that forced separate contract work to be done every two or so kilometers.

The Hopewell construction contracts were negotiated with multiple local parties. And every contractor brought different, generally low quality, work to their part of the highway. When we tried travelling over parts of the road at higher speeds, the car’s suspension would swing up and down to reflect the road bumps the suspension was absorbing. During the same period more stories surfaced about PLA army trucks being one of the main modes of freight transport on highways, and how overloaded and damaging they were to the roads…. The army trucks by-passed tolls and destroyed the roads at the same time. What a joke that was.

Author: Charles De Trenck / Publisher: SCMO

Nicolas de Loisy

Advisory specialized in logistics, transportation, and supply chain management.