Roaring to success under China's reform

SIX years ago Liu Xiang rambled along Peking's streets on a motorcycle, without a job, killing time. Filling the emptiness with a turn of the throttle, he would roar past legions of workers pedaling bicycles to state-assigned jobs.

Mr. Liu now rides his motorcycle much less since becoming one of the wealthiest Chinese in Peking. After five years leading a thriving company that makes motorcycle helmets, the capital's most celebrated young businessman has little time for youthful joy rides.

The motorcycle that carried Liu during footloose days and inspired his success now leans neglected against his house. Liu has learned that while the road to entrepreneurial success is more arduous in China than in capitalist countries, its cost is much the same.

Liu launched his career as a helmet magnate after high school while ``waiting for work,'' the term for joblessness in a communist system that promises jobs for all. With a loan from his father and the People's Bank, Liu rounded up four friends and started making helmets in two rooms of a peasant's house in 1983. That year the Soar Helmet Company made 3,000 helmets, for a profit of $45,000.

Liu moved into a small factory after enticing capital from a United States investor and the state-run Foreign Enterprise Service Corporation in 1986. The 10-year joint-venture agreement is one of just a handful of liaisons between a foreign company and a private Chinese firm.

Today, Liu is general manager of the three-story factory of Soaring Corporation Ltd. He directs 40 employees aiming to make 80,000 helmets for a profit of $215,000 this year.

Courted by other foreigners, Liu is considering making fiberglass parts for a Japanese company and accepting additional financing from another US firm. He calculates that he holds a 10 percent share of China's motorcycle-helmet market.

``I can never be satisfied with the quality of my products. Soar helmets, in terms of quality, are first class in China, but compared with Japan, the US, and Italy the quality is not as good,'' Liu says.

Top Communist Party circles and the state-controlled press hold Liu up as a paragon of the achievements from China's decade-long market-oriented economic reforms. He is touted as one of the most outstanding entrepreneurs among millions of Chinese who have launched cottage industries since the state leadership condoned them.

Liu ``is very good and should be a model for private business people,'' says Wang Dunying, Peking agent for the Sino-US Trading Corporation, the US joint-venture partner.

``The key point is, Liu is very aggressive, he's fighting for his future, he's working hard, he's learning every day. He doesn't have any educational background in business but through his own experience he's learned a lot,'' Mr. Wang said.

But Liu, the self-made man, confronts drawbacks from success not of his own making. With an $82,000 annual salary that is hundreds of times greater than that of the average Peking worker, he finds that many look at him not with admiration but with what Chinese call the ``red-eye disease'' of envy.

``There are lots of rumors about me and society. Somebody said that I evade taxes or was arrested by the police, but I don't care about these rumors, I am just myself,'' Liu says.

At the same time, he faces a higher form of flattery. Four helmetmakers in nearby Baoding, among the dozens of such factories that have emerged since Liu founded his enterprise, have applied the Soar trademark to their own products.

Moreover, since trading his business autonomy for outside investment through the joint venture, the 27-year-old general manager has been squeezed by the opposing pressures of his partners and those of employees, suppliers, and distributors.

For example, the price of raw materials has doubled in a year, but Liu, by hiring outside factories to produce helmet parts more cheaply, aims to show a rise in 1988 profits of 9 percent above last year's figure. And he has fired two workers, taking a step many Chinese still consider taboo despite reform.

During a 1986 Monitor interview, Liu spoke of educating his staff ``to love the factory and consider it their own.'' He still espouses that principle and a ``system of more work, more pay,'' giving his workers bonuses.

Liu used to live with his four friends on the third floor of the factory, working 12 hours a day, seven days a week, and playing ping-pong at night. Now, more the pragmatic factory manager than the backyard entrepreneur, he lives with a wife and young son. But with success, Liu says, he feels a contentment that his motorcycle could not provide.

The Monitor has published two previous articles on Liu Xiang, chronicling his success under China's reforms.