Beyond the Hong Kong agent model
Blurb: Canadian imports from China hit a record last year. One factory owner is trying to reverse the Hong Kong agent model by bringing the showroom to the buyer

Hong Kong --Last year Neil Molani paid 12,000 Euros to buy the best desk he could find, a German-made, solid-wood model typically sold to the continent's richest CEOs. But Molani didn't put the new prize in his office.

Instead, he had it shipped to a furniture factory in Southern China. There, workers pried the desk apart with crowbars, carefully measuring and documenting each piece. This year, a reverse-engineered replica is on sale for about one-eighth of the original price at Image Lateral, a new Laval store that Molani partly owns.

"I'm proud to say that not a single product in this showroom is original," said Molani, Canrise's president and majority shareholder with a laugh, during a tour of the Zhongshan furniture plant. "We are not in the design business. We make high-quality products economically. The idea part is someone else's business."

Molani is a new breed of entrepreneur. Most foreign businesses that import from China, staff their Hong Kong offices with agents who oversee purchasing from Southern Chinese factories. Others send personnel there on a regular basis.

But Molani, who owns or has interests in four factories in the special economic regions bordering Hong Kong, does the opposite. Canrise operates sales facilities in Montreal, Geneva and London, so buyers can deal directly with the factory owner, without having to go halfway around the globe.

"In the old days we used to sit in our Hong Kong offices and wait for the phone to ring," said Molani. "But since September 11th, people don't want to travel. With the new system, people can visit us in our branches and get the same prices as if they came to China directly."

Businesses like Canrise are riding a major boom. Canadian imports from China rose a stunning 29.6 per cent during 2004, to $24.1 billion. These included everything from toys, games and sporting goods, to footwear and apparel --as well as $1.6 billion worth of furniture and furnishings.

Molani has been in business almost all of his life. His parents moved to Hong Kong from India when he was just a boy. His father Lal Molani, was one of the first businessmen to trade extensively with Southern China after its then vice-premier Deng Xiaoping, announced his initial steps to open its economy back in 1979.

Molani also operates a die-casting and lock plant, not too far from the Zhongshan furniture factory, as well as plastic injection molding and electronics circuitry plants in Hui Zhou. Canadian clients include SAQ, Molson Breweries and Bell Canada.

"China is the workshop of the world right now," said Molani. "There is a tremendous flourishing of entrepreneurial talent and a highly motivated workforce. Canadian manufacturers had better watch out. Because the Chinese know how to compete."

Overseeing the four plants is a lot of work. It requires lots of specialized knowledge and Canrise clients' multiple time zones, mean that Molani is on the phone ironing out details at all hours of the day...and night. Although he shares a house in Laval with his wife and 12 year old son, Molani spends so much time in Hong Kong and at his Southern China factories, that he still considers Hong Kong his home.

"All of China's best brains are in Hong Kong," said Molani, while nursing a latte as he awaited a ferry that would take him over to the mainland. "After the turnover, (from British to Chinese rule in 1997) many people left. But a lot of them have come back and the real estate market is red hot again."

Almost of the stars are lining up in Hong Kong's favor recently. Tourists, encouraged by relaxed restrictions, are pouring in from the mainland, its stock market is up almost 60 per cent during the past few years and this September the U.S. $3.5 billion Hong Kong Disneyland is scheduled to open up.

Long time Hong Kong residents like former Montreal Alan Zeman couldn't be happier. Zeman, chairman of Lan Kwai Fung Holdings, which owns close to 30 bars and restaurants in Hong Kong Island's trendiest district, has seen the value of those properties sky-rocket. "It's nice to see such a positive climate here again," said Zeman.

As for Molani, he remains focused on day-to-day operations. Ironically, despite China's massive population, the country's unprecedented growth is creating increasing labour shortages in Southern and coastal areas, especially in the Pearl River Delta, where most of Molani's factories are located. This is driving up production costs, a trend that has many manufacturers seriously looking at even lower cost jurisdictions such as Vietnam and India.

Wherever he does his manufacturing, Molani is likely to be busy. The strengthening loonie has increased Canadians' buying power relative to many Asian currencies in recent years. So despite the large increases in imports, Canadians' appetite for foreign goods is likely to continue for quite some time.



Photo caption: Neil Molani, president of Canrise Inc., which operates three factories in Southern China.


(This article is the second of a three-part series on how Canadian companies are profiting from exporting, investing and importing opportunities created by China's unprecedented growth).




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