Where's the Capital of China?

 

Is banking with the Chinese different? James B. Davis thinks so. Davis, founder of Practice Management Information Corp., a publisher of medical books in Los Angeles, had grown his business while banking with City National Bank, now L.A.'s largest commercial bank. His company made the Inc. 500 in 1993 and 1994. But Davis had become increasingly frustrated by the diffident and distant posture of his bank.

His attempts to obtain a line of credit were rebuffed--unless he was willing to pledge his personal assets.

Through a money-manager friend, Davis was introduced to Christopher Leu. "After 30 minutes with Chris, without any paperwork, he agreed to a half-million-dollar line of credit," recalls Davis. "We shook hands, and that was it.

"The thing I like about Chris is that I can call him and say I need another $200,000 on my line of credit and I'll get it," adds Davis, whose revenues this year are expected to reach $15 million. "After 10 years at City National, I'd never met anyone higher than a branch manager. It's the kind of personal thing that would have happened here 75 years ago, but I guess it's still going on in Asia."

In general, as the experiences of Davis and other entrepreneurial borrowers suggest, business owners considering turning to the Chinese should be prepared to work with someone who really wants to know the customer's business--an arrangement that's usually, but not always, appealing. An apparent by-product of the close ties that Chinese bankers cultivate with customers is the bankers' far-from-cookie-cutter approach to loan-risk analysis. When Dale Waters opened up his Rustic River Ltd. men's fashion line, in 1995, most conventional bankers judged his enterprise as a typical garment-industry business--highly risky and likely to fail. But Christopher Leu saw something else, a business run by an individual who during the 1980s had built BUM Equipment into one of L.A.'s hottest garment makers.

"Chris is not just a banker; he has an eye for a specific business," says Waters, whose company projects sales of $12 million for 1997, a figure that's expected to double this year.

There are drawbacks, too, to banking with Chinese-dominated institutions. Communication can be strained if the banker on the other end of the line doesn't speak English well. And the Anglo employees of Chinese banks aren't always in sync with their employer's entrepreneurial ways: often they're more conservative.

In a sense, the divergence between Chinese bankers' Asian roots and their attempts to Americanize may well represent the greatest long-term challenge they--and their U.S. customers--face. In a departure from the model of the large Japanese banks, such as Sanwa, which Leu claims have modeled themselves on Anglo institutions, Leu wants United Pacific to lure Anglo customers with the advantages of Chinese-style banking.

"The Japanese want to integrate. You go to their banks and it's like going to an Anglo one," Leu maintains. "We want to go into the Anglo market but retain an Asian flavor and Asian service, along with all the connections we have."

Joel Kotkin, a senior fellow with the Pepperdine Institute for Public Policy, is a contributing writer at Inc.

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