Made in China

SHENZHEN – The first thing I noticed as I entered China through the Baiyun International Airport in Guangzhou last Thursday was the new Asia-Pacific hub of US logistics giant Federal Express.

The $150-million facility sprawls across 82,000 square meters of the spacious airport, the entry to China’s fifth largest city and southern industrial hub.

That was an investment we lost; FedEx relocated to Guangzhou, the former Canton, after shutting down its regional hub in the Subic Bay Freeport Zone.

We’re not only losing investments to China; we’re also not taking advantage of its huge market of 1.3 billion consumers.

A second disappointment awaited me as I toured the city’s Jiangnan fruit and vegetable wholesale market, where products from all over the world are imported and exported or distributed across China.

Every day an average of 200 40-foot shipping containers of fruit imports and 15,000 tons of about 1,000 kinds of vegetables are sold in Jiangnan. The fruits include Chilean apples, South African oranges, Vietnamese dragon fruit, Thai durian and New Zealand kiwi.

With a land area of 400,000 square meters, the 15-year-old market is so huge it is subdivided by global region. Strolling across the Southeast Asian section, all I could see were fruits from Thailand and smaller shipments from Vietnam and Indonesia. Where were the mangoes, bananas and papayas from the Philippines?

A guide told me that fruit shipments from the Philippines were minimal.

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Apart from losing foreign investments to China and failing to tap its market, the way we do business can scare away not just the Chinese but also many other investors.

Shenzhen is the home of Zhongxing Telecommunication Equipment, a pride of the city and one of China’s rapidly expanding listed multinationals. Better known as ZTE, the company has become synonymous with corruption in the Philippines, like Westinghouse during the Marcos regime. The aborted $329-million ZTE deal with the Philippines warranted special mention in the latest Global Corruption Report prepared by Transparency International.

Yongcheng Gu, general director of ZTE’s Corporate Branding and Communications Department, told visitors here that the company has “a very transparent financial system… we are very honest corporate citizens.”

He insisted that “we abide by local laws in China” and in countries where ZTE does business.

A briefing video in the modern building that serves as corporate headquarters – one of several facilities in a 184,000-square-meter compound – said ZTE “is now a respected brand name in the telecommunications industry.”

Guangzhou official Zhong Jianhui said Guangdong enterprises face penalties if they violate a government requirement to abide by local laws in the countries where they do business.

Corruption is a two-way affair, and the broadband mess was not entirely ZTE’s fault. Yongcheng said that all along, their company thought the broadband deal was recognized by the Philippine government. And why wouldn’t they, when the Philippine president herself witnessed the signing between ZTE executives and Transport and Communications Secretary Leandro Mendoza? If that was the way Filipino government officials did business, ZTE was ready to play along.

When the government was forced to cancel the deal, Chinese companies were upset, Ambassador Liu Jianchao told me in Manila, although ever practical, they prefer to take a long-term view of investing in the Philippines.

While corruption can warrant execution in China, no investigation was launched on ZTE in the absence of a complaint or request from the Philippines, Liu told me.

During a briefing, ZTE and government officials in Shenzhen did not address the bribery scandal directly, or they probably did but something got lost in translation.

Though no one will ever confirm those stories that cost Benjamin Abalos his job as chairman of the Commission on Elections, there must now be more Chinese investors who will agree with one of the top industrialists in Manila. He told us that in other countries, you bribe a government official and you are guaranteed results. In the Philippines, you could end up paying administration after administration bribes, with your investment still in limbo.

As ZTE licks its wounds from the aborted broadband deal, it should also strengthen its avowed commitment to being “very honest corporate citizens.”

A country has to play fairly and deliver on its promised incentives if it wants to attract investments, and its companies, sooner or later, must learn the value of fair competition, without resorting to bribes.

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Since Deng Xiaoping launched a policy of reform and opening up three decades ago, China has done its homework in attracting foreign direct investments (FDI).

Guangzhou alone has more than 2,700 FDI projects, with 781 worth above $10 million and 37 worth above $100 million. Over 100 of the Fortune 500 companies are in Guangdong, including Microsoft, Procter & Gamble, Nescafe, Samsung, LG and Toyota, which is preparing to sell a cheap car to the Chinese. Last year FDI stood at $213.7 billion.

Guangzhou thinks big; it is spending RMB10 billion (about P70 billion) to build four new stadiums and renovate others in time for the Asian Games next year. The facilities include a Chess Institute and a Shotgun Center.

In its Science Park, where over 400 IT companies are now based, Sony’s Southern China plant is manufacturing mainly Blu Ray products. A biomedicine facility is developing a drug to detect A(H1N1) in 30 seconds.

Innovation is something that the Chinese government is now emphasizing, acknowledging that its weakness in this area weakens its global competitiveness.

As China moves to recover from the financial crisis, by stimulating domestic consumption and working to restore overseas demand, it is also quick to acknowledge its problems in reform and opening up.

It is improving social protection and health care to encourage domestic consumption. Established industries are being relocated to underdeveloped areas to boost economic activity.

China is investing heavily in education and in research and development, in an effort to move away from its low-end industrial capability.

Despite the recession, China is projecting eight percent growth this year, with Guangdong province expecting 8.5 percent GDP growth. Last year the total trade volume of Guangdong equaled that of South Korea.

Despite the financial crisis, despite its many problems, the People’s Republic of China is an economic powerhouse. It is often said that God made the world; everything else was made in China. As it turns 60 this week, China should show the world that corrupt deals are not among its products.