Firm with roots in bygone age survives thanks to an attitude of sink or swim

Many of the thousands of high-tech companies in Haidian have their roots in university laboratories or research ventures. But the pedigree of many others lies in state-owned enterprises that were able to reinvent themselves through restructuring.

One of those is Tongda Refractory Technologies Co Ltd. Its progenitor was Beijing Ceramics Factory, which dates back to 1958, and which was very much a product of its time. As a part of the Beijing Building Material Bureau, its mission was to produce building materials for socialist construction in the capital. But as China embarked on reform and opening-up the old factory became a lost cause, its technology and products lagging far behind those of rivals overseas.

Desperate to survive, BCF courted Toto Ltd of Japan, which had leading technology in the field, looking for a joint venture.

"But we soon found a joint venture was not realistic," says Feng Yunsheng, president of Tongda Refractory Technologies Co Ltd, vice-president of BCF at the time. "The gap between us was too large. They were like university students and we were like primary school pupils."

So in 1992 BCF decided to buy technology from Toto, establishing China's first high-end toilet production line. The business went unexpectedly well as demand for high-end ceramic toilet products surged, propelled by the booming hotel business in Beijing.

In 1994 BCF and Toto merged, the Japanese company taking 70 percent of the joint venture and BCF the rest. However, not all BCF employees could be integrated into the new entity. As a socialist state-owned enterprise, BCF was compelled to protect jobs, and Tongda Refractory was set up to aim at doing that.

With the core of BCF's original business swallowed by the joint venture, the question became what could be done with the remnants. In a spirit of swim or sink, the Party cadre-turned entrepreneur Feng, with former BCF employees, bought new equipment and developed technologies aimed at producing high temperature-bearing materials for the cement industry, which was booming at the time.

The toughest job turned out to be finding customers, and Feng recalls having to mail product information to potential customers one by one. He traveled across the country knocking on the doors of cement factories in an effort to get contracts, he says.

"We landed six contracts after visiting 80 cement factories. Looking back on it, the six contracts are no big deal, but for me it was the experience of a lifetime because it was the start of our entrepreneurship."

Tongda's national business expanded, from cement to chemicals, from steel to coal-fired power stations, and its products covered almost all high-temperature industries. Its annual sales revenue, less than 1 million yuan ($160,000; 122,000 euros) when it was set up, had shot up to nearly 1 billion yuan last year, surpassing that of the joint venture with Toto.

Tongda's success lies in its emphasis on talent and innovation, Feng says. He recalls how he spent hours persuading a college graduate to stay with Tongda, after the graduate had applied for a job with Toto. Now about 40 percent of Tongda's employees are technicians, and 5 percent of revenue is put into research and development, the company says. The company owns 72 patents and has contributed to the formulation of 25 national industry standards, it says.

Tongda is now transforming itself from a pure manufacturer to a solutions provider. Its Tongda Refractory System integrates design, research and development, manufacturing, support, engineering, maintenance, consultation and diagnosis for customers, a business that has turned out to be highly lucrative.

Feng says his business is both a traditional industry and an emerging one. As 60 percent to 70 percent of China's primary energy is consumed by high-temperature industries such as cement, steel and metallurgy, any improvement in refractory materials is good news for those trying to conserve China's energy supplies.

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