Mon, Nov 19, 2001 page17

• Amway works its way into China by opening stores

  • NY TIMES NEWS SERVICE
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  There's nothing particularly remarkable about Amway's newest store, which opened six weeks ago in the lobby of a cookie-cutter apartment block in this southern Chinese city. Except that it exists at all.

  A few customers prowl the aisles, scooping up tubes of toothpaste and jars of protein powder. Above them, a flat-screen television offers perky testimonials about Amway's products. Fu Mingxia, the Chinese women's diving champion and an Amway spokeswoman, beams from posters on the walls.

  Amway, the direct marketer based in Ada, Michigan, does not have stores in the US, Europe, Africa -- anywhere, in fact, other than China. Everywhere else, it relies solely on a vast army of independent distributors, who buy Amway's cosmetics and household products from the company and sell them door to door.

  Why the difference? In 1998, Amway agreed to open dozens of stores here as part of a deal with Beijing that allowed it to keep doing business in China after the government had banned direct sales companies.

  Amway executives describe the arrangement as a "revolutionary break with tradition."

  But it was not so different from the bargains that other foreign companies struck with the Chinese in return for access to the world's most populous market. China, as old hands say, plays by its own rules.

  Now, though, China has been accepted into the WTO. In signing a 900-page membership form at the organization's meeting in Doha, Qatar, last Sunday, the Chinese government has pledged to play by the world's rules. And even though Amway was starting to thrive under China's capricious rules, it, like all kinds of foreign companies doing business in China, is welcoming the change.

  "We cannot afford any more sudden changes in policy, having invested so much," said Eva Cheng, the chief executive of Amway Greater China. "But I genuinely believe that China will commit to the rules. For the first time, we will be able to see transparent laws and regulations."

  China's entry into the trade organization has thrown a spotlight on the opportunities for foreign companies once Beijing cuts import tariffs and lifts restrictions on outside ownership of Chinese assets.

  Outsiders are also looking hungrily at China's state-owned companies, which have lucrative franchises in telecommunications, banking and other industries. China has promised to stop subsidizing these leviathans, and to open their monopolies to local and foreign competition.

  Of all the benefits of China's membership, however, none may have a more immediate and lasting effect on foreign investors than the establishment of a more consistent code of commercial regulations.

  To comply with the WTO, the Chinese government will have to pass hundreds of new laws on virtually every aspect of commerce. The Ministry of Foreign Trade and Economic Cooperation has pledged to publish all of them, and says it will not enforce any law that is not published.

  "That may sound obvious to us, but it has huge implications for companies in China," said Andrew Rothman, a strategist for CLSA Emerging Markets.

  In addition to accepting substantially lower tariffs and quotas, China has agreed to set up a better legal system to resolve commercial disputes. That will reduce the danger for foreign companies of being blindsided by arbitrary government rulings or policy reversals.
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