The Chinese Way Of Business

What appears to be a good old-fashioned family business may be a $100-million international conglomerate

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FROM ITS OFFICES ON THREE continents, the company trades in a staggering array of products, from Thai tobacco to Chinese tea to American software packages. Its factories around the world produce everything from sport shirts to wristwatches. Last year, the firm's revenues topped $100 million -- a doubling of sales in just five years.

Yet for all its rapid growth and diversification, the corporate structure of the Chung Cheong Group would surely drive even the most creative accountant to distraction. Here is a $100-million company that finances its operations exclusively from cash flow. There is no corporate headquarters' staff, no chief financial officer, not even an identifiable chain of command. A board of directors is said to exist, but identifying its members is difficult, since nobody can recall that it has ever convened a meeting. Division heads, if you can call them that, are often found involving themselves in the day-to-day operations of other divisions. Ask any one of them for his phone number and you're likely to get a fistful of different business cards.

If the various enterprises of the Chung Cheong Group seem unrelated, know that those who run them invariably are related.

"Nothing we do really makes sense unless you see it in the context of the family," explains Wing Chung, number-four son and heir apparent to foundfer and patriarch K. S. Chung. "Like any family, things here get done on an ad hoc basis. Everyone does a little bit of everything. You can't chart it out on a piece of paper."

What you can chart, however, are the Chung family's triumphs. Over a period of 60 years, its members have survived depression, oppression, war, and revolution. Against entrenched and focused competition, they have mastered an array of product categories that would stagger the most sophisticated M.B.A. And in the arena of international trade, dominated by giant corporations and impenetrable government bureaucracies, the Chungs offer refreshing proof that, in business, family ties are still among the most powerful and enduring.

Although frail and nearly deaf, 82-year-old K. S. Chung oversees the family empire from a small office in Bangkok. Since coming to the teeming Thai capital nearly 30 years ago, he has built himself up from an itinerant, down-on-his-luck trader to a highly respected and influential business leader. The source of his success has always been his patience and the cunning and control he has brought to bear on his far-flung business operations. Although detached now from most day-to-day decisions, his business philosophy still dominates the Chung Cheong Group.

Born 20 miles from Canton when China was still a feudal state, K.S. was raised in Singapore, studied in Hong Kong, and started out in business trading with Malaysia. In 1929, he accepted an offer from his maternal uncle to take over operations of a small company shipping Chinese goods to Port Klang on the Malaysian peninsula, and upon his arrival, the company enjoyed an immediate success. Much of the credit. K.S. concedes, went to the company's new and energetic marketing manager. As a salesman, K.S. recalls, this manager was unstoppable, but attending to financial details was not one of his strengths, and K.S. soon found his company in a severe cash-flow crunch. "He was a great talker," says K.S. "He could tell you a lie and then you would find it out, and he'd tell you a better lie. I made the mistake of trusting him."

It would be a mistake K.S. made only once -- and one that, in many ways, still defines the company's management philosophy half a century later. For today, nothing so distinguishes the Chung Cheong Group as its determination to keep control of money and operations tightly in the hands of a few trusted family members.

"I started out with a failure and had many others," explains K.S., sipping a steaming cup of tea on a hot Bangkok afternoon, "but that is how this family got its training. Setbacks are not really bad. They make you grow up in your business philosophy."

Retreating from his Malaysian miscalculation, K.S. moved back to his native Canton, where in 1931 he opened a successful restaurant and launched a local newspaper. The combination of an inflated economy and harassment by local government officials dissatisfied with his paper's coverage might well have turned the newspaper into K.S.'s second failure had not an advancing Japanese army intervened, forcing his large family into exile in Hong Kong. When the safety of Hong Kong was also overrun by the Japanese two years later, K.S. returned to the occupied countryside outside Canton and worked as a translator and interrogator for units of British intelligence.

At the war's end, K.S.'s British connections served him well. In 1946, he opened the Pacific Trading & Agency Co. -- even today, the family's flagship operation -- and quickly won from the Allies coveted licenses to import Australian construction equipment, European steel, and, most important, Chinese raw materials into war-ravaged Japan. Business was booming, and financial security seemed within grasp. But in 1950, fate -- again in the form of an invading army -- seemed to intervene, this time across the 38th parallel. When Mao's Red Army entered the Korean conflict some months later, U.S. officials in Japan quickly slapped an embargo on all trade with the People's Republic of China. K.S.'s enterprise shriveled, and for the third time, he found himself facing financial ruin.

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