This article was one of two stories I wrote for the International
Herald Tribune in the spring of 1989. It was to be published on
june 5th, but it was never published due to the shift in the
public interest follosing the massacre on Tiananmen. Mr. Wan
Runnan who is interviewed in the article, later managed to escape
China, through Hong Kong and now lives in Paris. A longer version
of this article was printed in Dagens Nyheter, the Swedish
equivalent of New York Times. 

Topic:Success in Beijing's Silicon Valley 
     By HANS SANDBERG 
     In Beijing's Silicon Valley, the spirit of freedom and enterprise
has given rise to new kinds of Chinese companies and leaders. The Stone
Group, nick-named "China's IBM", is one of them. 
     -Our success is the success of market economy. For China Stone's
way is a way out, says its founder Wan Runnan. 
     China's new entrepreneurs challenge the country's ossified 
economic system as radically as the students challenge its 
ossified political system.
     --------------------------------------------------   
     A group of researchers left their secure jobs at the Chinese
Academy of Science (CAS) in 1984.  With a 20,000 yuan loan they started
up their own company employing 64 persons. The first product was a
computer printer made by the Japanese firm Mitsui to which Stone added
computer software to handle Chinese characters. Soon they struck a deal
with Mitsui where the Japanese supplied the hardware and the Chinese
the software. It worked out well and in the summer of 1987 the two
companies started a joint-venture. 
     Stone's most famous product is an electronic typewriter 
which can handle both Chinese and English. Stone controls 80 percent of
the Chinese market by selling about 20,000 units a year.
     An electronic typewriter may not sound like much, but just imagine
a country where almost everything has to be written by hand! This was
the case in China until recently, and the promise of Chinese character
word processing was one of the reasons why the Microcomputer Revolution
became so popular here. 
     Like International Business Machines (IBM), Stone started outside
the field of computers. Today Stone is one of China's leading computer
companies. It is a mother company with  20 specialized subsidiaries,
four joint ventures with foreign companies and three joint ventures
with domestic companies. Two thousand people work for the Stone Group -
half of them in Beijing.
     The reputation of its management has grown so much that it 
was offered to take charge over the largest computer and 
electronics company in the Yunnan province, the Yunnan Electronics
Factory (YEF) with 900 employees. And so it did last February. Stone
gets 40 percent of YEF's above-plan profit.  
     The core of the emerging Stone conglomerate is Stone 
Group Ltd, which employs about half of the total staff. This company
had a turnover of 317 million yuan in 1987 which more than doubled in
1988, when it reached 700 million yuan.  
     It is also one of China's new stock companies and recently began
sell stocks to the public. 
     -We are aiming for the world market and want to attract
investments, says Li Yichuan, Stone's P.R.-manager. It is a better way
of managing the company and the public supervision leads to better
management. The ownership will also become clearer. 
     This ownership question poses a problem, according to Mr. Li. He
explains that it is difficult to piece it into the 
accepted formula for a "non-government collective enterprise".  
     -It is owned by all employees. We are trying to solve this 
sensitive question through stocks as you cannot come out 
and say that it belongs to a "so-called non-government 
collective". 
     Who really controls the company? Is it the president or 
the Communist party secretary? 
     -We don't keep two parallel systems. The president is also the
leader of the party, says Mr. Li. We don't have any labor unions,
because we have harmonious relations within the company. 
     An employee at Stone makes about twice as much as other workers in
this country who earn an average of 120-400 yuan per month. 
     What more than anything else separates Stone from other 
Chinese companies is its corporate culture. The published annual 
report (in itself a rare thing in China) reflects this vividly: 
     -Stone's superiority lies in its independent and responsive 
policy and management which takes market trends and needs as its 
guide. Furthermore, resources are allocated to where the economic
benefit will be the greatest, and our personnel are placed where 
they can be put to maximum use. 
     -State-run enterprises have few or none of these 
characteristics, the report continues. 
     And under the headline "The key to success" we read:
     -At Stone any mistake is tolerable except that of supressing
talent, reads another passage. 
     43 year old Wan Runnan is the man behind Stone's philosophy. After
graduation from the famous Qinghua University in 1970 he was assigned
to work for the department of Computer Science at CAS. He has studied
this subject in both Japan and the United States. According to one
report, he is good for 30,000 yuan per year, making him one of China's
best paid managers. 
     -Stone group has three advantages, says Wan Runnan, when asked
about the secret of its success. We have a rice bowl made of mud
instead of the iron rice bowl, that is, everybody in my company has to
work hard to get a good salary. 
     -Secondly, we put great emphasis on the market. It is 
still controversial in China whether we should have market 
economy or planned economy. Stone's success is the success of 
market economy. Stone's way is a way out for the Chinese economy.     
-Thirdly, we pay great respect for talented people. We have 
a lot of them in China, but they are held back by the old system, which
makes them stupid and lazy. With us, however, they are 
clever and hard working. 
     Would you like Stone to be like IBM? 
     -IBM is very successful, especially in computers. I went to an IBM
seminar before I started this company. I was greatly impressed by their
management methods and products, but we have specific conditions in
China and cannot copy them. We must have our own understanding.
     Stone Group is based in the Haidian district, north-west of 
Beijing. I visited the area for the first time in May 1985 although
there was no talk then of a Silicon Valley. Professor Wu Jikang, who
built China's first computer in 1958, took me for a walk down Haidian
Road. We visited a couple of unimpressive computer stores which 
sold imported personal computers, home-made IBM PC-clones and 
Chinese manuals for computer software. I was more impressed by an
advanced mainframe built by the Institute of Computing Technology
(ICT), which he was heading.  
     In March of this year I again visited the Haidian district and
could hardly recognize the place. There were computer and electronics
companies not only along Haidian Road, but as far as the eye could see.
According to the official magazine Beijing Review, this is now the
country's largest computer market. 
     The Central Government last year passed new laws giving new
companies in the Beijing New Technology Industrial Development
Experimental Zone (BEZ) considerable tax breaks.  
     The interest in this area is nothing new. The government has
invested ten billion yuan (1 dollar=3.71 yuan) here since 1949. As a
rsult you find 80,000 researchers and technicians as well as 50
universities and 138 research institutes within the zone. 
     What is new, however, is the effort to break through the 
walls which prevent productive cooperation between research and
industry in China. Many scientists start up new businesses or work for
new institutes dedicated to the commercial exploitation of scientific
research. No less than 11,000 researchers and technicians are working
in the area's 640 hi-tech companies, compared to 3,800 and 150
respectively about a year ago. 
     The turnover of the area's companies was 18 million yuan in 1984.
It reached 900 million in 1987 and last year it leaped 56 percent to
1.4 billion yuan (380 million dollars). Exports quadrupled in 1988 to
13 million dollars.   
     There are, however, those who dislike the talk about Silicon
Valley. One of them is Li Yun, the reform-minded president of 
Beijing's Computer Factory No. 3, located in eastern Beijing. 
     -Silicon Valley?! Hah! They just sell something that they 
bought abroad from some other sellers. Silicon Valley (In California)
produces and develops products. Here they don't develop or produce
anything, says Li Yun. 
     But Gao Jian Yu, vice manager for Syntone Corporation, one 
of the leading computer companies on Haidian Road, defends 
Beijing's Silicon Valley. 
     -In the beginning we had very little experience, so we had 
to start by getting into the market. Now we have developed more 
than 80 different new products, and one of them, a sensor, won a 
gold medal at a Technology Fair in West Germany in 1987. 
--------------------------------------------------------------- 
Hans Sandberg is an independent Swedish reporter and expert on 
China's economic reforms. Mr. Sandberg is currently the U.S.- 
correspondent for Datornytt (Computer News) and Ny Teknik (New 
Technology). He lives in West Windsor, New Jersey.
 
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