Guanxi Isn't Everything After All
asiawise.com
By Jane Wu, AsiaWise
30 Nov 2000 15:30 (GMT +08:00)
Fang Fang ought to be a happy man. He weighs his next business move from a perch that overlooks the heart of Hong Kong's prestigious Central District.
It's not just the swank location that should boost his spirt. His company, Asia2B.com has investment ties with some of Hong Kong's most elite businesses, including the Jardine Matheson Group, and the Swire Group. It also boasts investments from Chinese heavyweight Beijing Enterprises Holdings, U.S.-based online trading software creator Commerce One, and San Francisco-based venture capital firm WI Harper. Peter Liu, Harper's leader, is widely considered to be rich with "guanxi" - or relationships - in Beijing.
Now if only it could start raking in more business. Asia2B's difficulty generating profit illustrates a big lesson learned by a lot of Internet investors burned in Asia in the past year. Guanxi with the region's rich and famous hasn't been enough in itself to ensure a decent return.
Asia2B is an anchor exchange for the Global Trading Web, a network of over 40 global exchanges that provide solutions to companies that need help with online business. It offers assistance with on-line trading tools such as MarketSite, BuySite Enterprise and BuySite Portal, and boasts that its technology comes from Commerce One.
That's all well and good. But in the day-to-day battle for business contracts, Asia2B.com has trouble standing out from the B2B pack. Competitor iSteelAsia.com offers similar services and can boast that it's listed – something Asia2B only aspires to be.
And Asia2B doesn't have a monopoly on good guanxi, either. Hong Kong-based Alibaba.com, run by charismatic CEO Jack Ma, has backing from Goldman Sachs and Softbank (an AsiaWise investor), and could argue that it has great branding as well. Alibaba even has offices in Beijing and Silicon Valley, and has over 150 employees, nearly 100 more than Asia2B.
No, no, no, Asia2B is truly a standout, argues Fang. Unlike other players that focus on a sector, say semiconductors or small business, Asia2B is aiming high at blue-chip companies in big sectors such as toys, textiles, electronics and, in China, the booming pharmaceuticals industry. Unlike WizOffice.com and Global Sources it isn't pumping money into technology and application development, since it buys and borrows technology from other sources.
You have to admire Fang's enthusiasm. But it's not bringing in business. Since it formed in April Asia2B has reeled in a mere 10 customers. It now has some 17 suppliers. The company is not looking into an IPO soon, but does boast that it will be profitable by May 2002.
For now, Asia2B has "a lot of money, support, and good management," Fang says. "If you're not prepared then you'll be scared, and we're prepared for a long winter." Mr Fang isn't shaking but for a second the trademark smile begins to slip.
Company Links:
ISTEELASIA.COM
BEIJING ENT
JARDINE MATHESON
SOFTBANK
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