Breath of Fresh Air

By John Greenwald

Bystanders stared in wonder last summer as the fleet of 20 midnight-blue Cadillacs arrived in downtown Peking amid the clutter of buses and bicycles. The limousines, complete with built-in bars and TV sets, were the newest showpiece of an enterprise that is as remarkable in China as the luxury cars. Known as China International Trust and Investment Corporation, the state-owned firm woos foreign investors with a combination of savvy, sizzle and shrewd business skill. Said CITIC Chairman Rong Yiren, as he took delivery of the first Cadillacs to be acquired by a Chinese organization since the Communists came to power in 1949: "Our foreign guests want to have comfortable limousines."

CITIC is an elite concern formed in 1979 on the personal order of Deng Xiaoping. He proposed a kind of Western investment banking firm to get around the ponderous Peking bureaucracy and speed China's economic development. Led by Rong, 70, a silver-haired millionaire, the organization has helped foreign companies invest in everything from beer production to coal mining and has raised hundreds of millions of dollars overseas. "CITIC is a breath of fresh air," says Virginia Kamsky, president of Kamsky Associates, a trade consultant with offices in New York and Peking. "The people there ask the right kinds of questions when you present a project, and when you talk about return on investment they understand what you mean."

CITIC owes much of its style and substance to Rong, whose own history parallels China's recent twists and turns. A Shanghai industrialist and deputy mayor of that city, Rong watched the nationalization of his factories after the Communist takeover. He and his wife were beaten by the Red Guards during the Cultural Revolution of the 1960s, his Shanghai home was expropriated, and he was forced to clean latrines. After spending the next decade in obscurity, Rong was publicly rehabilitated in the late 1970s. He now lives in a comfortable Peking house and is tended by servants. Says he: "For a long time I have held the view that those methods that are used in capitalist enterprises can be used in socialist ones as well."

To achieve the union of the two systems, Rong assembled an executive staff of former businessmen and talented young technocrats. "We study the market before we pick a project," says Jin Xuping, 67, one of CITIC'S two executive directors. Jin learned capitalist methods before 1949 while working in a family-owned group of insurance, oil and tobacco companies. Sent to the countryside during the Cultural Revolution, he grew vegetables and endured endless hours of political harangue.

After it was created in 1979, CITIC promptly set out to find new ways of doing business in China. Instead of investing only in projects that were part of Peking's Five-Year Plan, the innovative agency roamed the country in search of profitable opportunities wherever they might be found. Noting a growing demand for beer, CITIC created a $30 million joint venture with Japan's Suntory to expand production. The initial results were so encouraging that output will be doubled during the next two years.

CITIC has the freedom to participate in a bewildering range of projects with foreign firms. It is currently developing packaged food products with Beatrice, the U.S. conglomerate, and selling helicopters for United Technologies through a CITIC subsidiary. Among other ventures, CITIC is financing textile mills, chemical plants and machinery production. It is also a major real estate developer. The firm's 29-story headquarters, which opened last summer, towers above the Peking skyline. The building, though, will no longer be the capital's tallest once work is completed on a 50-story apartment complex that CITIC is financing.

To raise funds for many of its ventures, CITIC often turns to foreign capital markets. It has already sold bonds in Hong Kong, Japan and West Germany. China is, however, still locked out of American capital markets because it stopped paying interest on an issue of railroad bonds in the 1930s.

Last May CITIC opened a four-member office in Manhattan's World Trade Center to deal directly with U.S. banks and corporations. Headed by Ding Chen, 56, a Harvard-trained economist, the facility hums with activity. Awed moneymen quickly dubbed Ding "Dr. Go" for his tireless jaunts around the country to acquaint firms with Chinese investment opportunities. At one Washington gathering, CITIC lined up $60 million of new business. In his talks, Ding is careful to soothe any fears about China's future. Says he: "China's open-door policy is not a transient expedient. It will not be changed in this century, or in the first 50 years of the next century. The investment environment can only improve."

In Peking, Rong Yiren is doing all he can to ensure that. Among his dreams for the future is a Chinese stock market. While today that may seem like a remote possibility, Rong has a record of achieving his goals. Reviewing the pathbreaking work of CITIC, Rong proudly declares, "I did it my way." --By John Greenwald. Reported by Luca Romano/Peking and Frederick Ungeheuer/New York

With reporting by Reported by Luca Romano/Peking, Frederick Ungeheuer/New York