The New Yankee Traders

Chinese-Americans are using family ties to beat the Japanese and Big Business for a share of the burgeoning Chinese market.

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Henry Y. Hwang may be a small fish back home in Los Angeles, but in Beijing he has his run of the pond.

Hwang is chairman and president of tiny Far East National Bank, in downtown Los Angeles. Over the past few years, however, Hwang has been quietly wheeling and dealing like a big-time financier, arranging contracts from businesses and government bureaus in China -- contracts that could be worth hundreds of millions of dollars to his bank, his associates, and his bank's clients. Many of those contracts would have gone to someone else, or not been let at all, if Hwang were not Chinese-American.

With their cultural, linguistic, and family ties to China, Chinese-American entrepreneurs like Hwang are proving to be America's secret weapon in recapturing a predominant economic role in the world's most populous nation. "We want America to be number one in China," says the 57-year-old Hwang, who fled his native Shanghai just as the Communists were preparing to take the city in 1948." And with our special relationship, we can get it there."

In an earlier era, American clipper ships crammed the harbor of nineteenth-century Shanghai, and the China trade was responsible for countless fortunes, including those of John Hancock, John Jacob Astor, and R. H. Macy. Similar fortunes are waiting to be made today. Determined to improve the quality of life for its 1 billion people, China has embarked on a massive industrial-modernization drive that has led to the purchase of some $2.5 billion worth of U.S. goods in the first eight months of 1985, up from about $500 million in 1978. And even at that, the potential for trade has barely been tapped.

It's not that China is simply a big country, although it certainly is that. Its economy is also growing at a fantastic rate. In just the first eight months of last year, China's gross national product grew nearly 25%, an amount roughly equal to the total annual economic output of the wunderkind of the Orient, South Korea. And even with government attempts to slow down an overheated economy, industrial growth is expected to top 15% to 20% during the next two years.

Chinese-Americans are already playing a major role in this startling modernization drive, building hotels and apartment complexes, developing a service sector, and selling industrial equipment and high technology. More often, they win these opportunities by beating out bigger, better-financed U.S. trading companies that specialize in helping smaller firms find business overseas. The difference probably has a lot to do with what the Chinese call guanxi, or influence obtained through family or friends -- something that often packs more punch in family-oriented China than corporate pedigrees or M.B.A.s.

Fred Spieler, until recently a consultant to San Francisco's giant Crocker National Bank and its sister trading company, says he felt at a disadvantage in China without an ethnic connection. Most of the big American trading companies, Spieler says, are too timid and bureaucratic to be successful in dealing with the Chinese. He tells the story of an American customer that lost out on a contract to build a $25-million aluminum-foil plant, despite its low bid. One plausible explanation: Spieler says that a British competitor had hired the services of a Chinese-American middleman.

Similarly, Hwang gives credit to a distant cousin for providing him with the vital contacts that led to agreements in which Far East will be the lead bank for a $100-million hotel project in Shanghai. In addition, Far East International Trading Co., a separate entity of which Hwang's is chairman, is in a joint venture with a Santa Monica, Calif., architectural and development firm to handle the design and construction.

Hwang has business in Beijing as well. Far East National has been named the lead bank for a new $150-million shopping and office complex that will serve as national headquarters for the government's Friendship Stores, which cater to China's growing tourist trade. And at China's Ministry of Education, Hwang signed a letter of intent to handle the financing of a $70-millioin order for electronic-education facilities for Chinese schools. He sealed the deal even before he had the suppliers to fill it.

Although the Chinese have an advantage over their fellow Americans, they still have plenty of competition for the China trade. Ever since China opened wide its doors to the West in 1979, the Japanese have targeted the Middle Kingdom with the same perseverance that has marked their drive for American markets. The streets of such major Chinese cities as Guangzou and Beijing are clogged with Japanese cars, while even the most modest Chinese dwellings are stocked with Japanese-made radios, televisions, and even videocassette recorders. Far outpacing their American rivals, Japanese traders exported almost $10 billion worth of products to China in the first nine months of 1985, more than three times the pace of American exports.

"When we come to China, we are shocked to find all those Japanese goods," says Hwang, whose earliest boyhood memories include having to bow before Japanese soldiers guarding bridges in Shanghai."We tell them they are crazy doing business with Japan instead of America. The Japanese killed 20 million Chinese in the war, and now they want to dominate them economically. I think we are beginning to convince them."

Not that the Chinese need much convincing. As Hwang suggests, the wounds from Japan's brutal invasion during World War II have barely healed. A visit last summer by Japan's Prime Minister Nakasone to a shrine for Japanese soldiers killed during the war engendered large student demonstrations. And in the weeks that followed, government-controlled Chinese television showed a program about Chinese resistance to the wartime occupation that painted the Japanese in a light so harsh that it might well have embarrassed John Wayne.

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