ad info




TIME Asia
TIME Asia Home
Current Issue
Magazine Archive
Asia Buzz
Travel Watch
Web Features
  Entertainment
  Photo Essays

Subscribe to TIME
Customer Services
About Us
Write to TIME Asia

TIME.com
TIME Canada
TIME Europe
TIME Pacific
TIME Digital
Asiaweek
Latest CNN News

Young China
Olympics 2000
On The Road

 ASIAWEEK.COM
 CNN.COM
  east asia
  southeast asia
  south asia
  central asia
  australasia
 BUSINESS
 SPORTS
 SHOWBIZ
 ASIA WEATHER
 ASIA TRAVEL


Other News
From TIME Asia

Culture on Demand: Black is Beautiful
The American Express black card is the ultimate status symbol

Asia Buzz: Should the Net Be Free?
Web heads want it all -- for nothing

JAPAN: Failed Revolution
Prime Minister Yoshiro Mori clings to power as dissidents in his party finally decide not to back a no-confidence motion

Cover: Endgame?
After Florida's controversial ballot recount, Bush holds a 537-vote lead in the state, which could give him the election

TIME Digest
FORTUNE.com
FORTUNE China
MONEY.com

TIME Asia Services
Subscribe
Subscribe to TIME! Get up to 3 MONTHS FREE!

Bookmark TIME
TIME Media Kit
Recent awards

Visions of China CNN TIME Asiaweek Fortune

SEPTEMBER 27, 1999 VOL. 154 NO. 12


China Pictorial
Dongfeng's sprawling base was meant to shield the car plant in the event of attack.
SHIYAN: A Factory in the Wilderness, 1968
False Alarm
By HUANG YASHENG

If you had to pick a place where not to build an automobile plant, Shiyan might be it. The mountainous terrain of that part of Hubei province is treacherous, with no fewer than 80 deep valleys. Given China's poor infrastructure, parts-suppliers and car-buyers would be hard-pressed to cope with Shiyan's isolation. Wuhan, the nearest transportation hub, is four hours away by train. Yet in 1968 China's officials selected Shiyan as the site of the massive Dongfeng Motor Corp., the country's second-largest automobile firm.

Economic rationality was the last thing on the leaders' minds when they opted for Shiyan. Officials had originally planned to build the factory in Wuhan, an industrial powerhouse. But after the Sino-Soviet fallout, Mao was convinced that Moscow would launch preemptive missile attacks against China's key industries. So he decided to shield the plant in an isolated area. Other giants were similarly tucked away in remote corners, becoming the so-called Third Line defense against the Soviet Union. The attacks never came, of course, and China's economy still suffers the burden of Mao's strategy.

    ALSO IN TIME
VISIONS OF CHINA
China's Amazing Half Century
Navigate through the People's Republic of China and discover the 50 places where history was made

China's Wild Ride
The early years of Mao's new republic were exhilarating and disastrous. Deng Xiaoping brought the country back from the brink

Essay: Happy Birthday to Me!
A Beijing writer recalls what he was doing when the People's Republic celebrated some earlier birthdays

  VISIONS OF CHINA
50 years of the People's Republic
presented by CNN, TIME, Asiaweek and Fortune

Asiaweek
Quest for Dignity
The success of the Communist revolution climaxed a century-long drive by the Chinese to reclaim their historical greatness

Change came quickly to Shiyan. In 1968, it was a sleepy town of barely 100 rural households. Overnight it became home to one of China's biggest projects. But Shiyan's remoteness necessitated the transfers of thousands of workers and engineers from Shanghai, Wuhan and Changchun, as well as construction of railway tracks and parts factories nearby. The costs would be colossal, not just in terms of building enterprises in an inaccessible location but also in terms of the losses in output associated with transferring personnel away from the productive coastal areas.

Military considerations influenced not only the choice of Shiyan but also the factory's layout. A sensible approach would have been to locate the vehicle-assembly and component production near one another to economize on transportation costs. Not at Shiyan. After all, if the intention was to shield the plant from air assault, it made more sense to spread out the production sites rather than concentrate them. Dongfeng Motor still reflects that thinking, sprawled over some 2.9 million sq m.

Dongfeng's future is uncertain. Competition in China's automobile industry has accelerated with the appearance of new domestic players and foreign-backed joint ventures. In 1997, Dongfeng's profit-to-asset ratio--a common measure of financial performance--was just 3%, compared with 44% at Shanghai Volkswagen.

As car production becomes increasingly globalized, China will some day surely see a wave of mergers similar to those occurring in the West. Dongfeng will likely be taken over by a more efficient player. A firm so well shielded from military attack cannot ultimately block the unrelenting assault of globalization.

Huang Yasheng is an associate professor at the Harvard Business School. His most recent book is FDI in China: An Asian Perspective

ALSO SEE:
WUHAN: Swimming the Yangtze
SANDOUPING: Building the Mega-Dam


This edition's table of contents
TIME Asia home

CNN's Visions of China home

AsiaNow


 Search


Back to the top   © 1999 Time Inc. All Rights Reserved.
Terms under which this service is provided to you.
Read our privacy guidelines.