Shanghai Daily news

Late last year, Feidiao Electrics Co Ltd, a domestic privately-held company, spent 5.5 million euros (US$7.1 million) acquiring a 90 percent share in an Italian electrical switch manufacturer.
The purchase was the first time that the company from Wenzhou City, Zhejiang Province, whose products include switches, bathroom heaters and circuit breakers, had merged with an European firm.
No sooner was the acquisition finished when a dispute emerged domestically on whether the Chinese company's products were acceptable in foreign markets.
Despite worries of industrial insiders and a suspect public, Xu Yizhong, Feidiao Electrics chief executive officer, said he had no regrets about his decision. In his opinion, entering markets outside China was the only way for his company to develop.
"As a businessman, I take a worldwide view and should not be confined to just one place," Xu said.
"Feidiao's switch business had encountered a dilemma in the China market and the problem needed to be solved by exploring a new market."
When it started in 1987, Feidiao's electrical switch business faced a barrier to enlarging its national market. Today, it is now one of China's top electrical brands.
Xu said by 2003, the company's comparatively low margins made its products less profitable for electrical dealers.
"Nowadays, with a little investment, people can easily set up a switch company and grab market share through price-fights," he said.
But for Feidiao Electrics it was not easy to lower its prices. As a big company, the firm shouldered more duties, such as increasing staff salary costs and a seemingly never-ending battle against pirate products.
The company also felt it was difficult to develop its high-end market, since its China customers were still those with comparatively lower income.
"An electrical switch can only sell for several yuan in China. But it will be priced 10 times more in Europe," Xu said.
The high margin stirred Xu to become a pioneer in overseas acquisitions.
By investing a small amount of money in merging less profitable European companies, domestic firms can master advanced technics and also gain customers in Europe.
The cheaper Chinese labor force also provided those firms with an edge in cutting costs in new products' research. The expenditure in China is about a tenth of that in Europe.
Before the acquisition, the Italian firm had already stopped its development of new products as the research required a large investment.
At present, a new factory is scheduled to be opened in May or June to carry out Feidiao's R&D activities.
"I am a person who does not want to complicate my thoughts before making a decision. I will implement my strategy studiously," Xu said.
"In Europe, the rich and the poor are living together and they seldom compare with each other," Xu said.
He observed that under such living conditions Europeans would not mind buying switches made in China, if they were satisfied by both price and quality.
Xu once ambitiously predicted that the company would sell 2 billion yuan (US$240.96 million) in wall switches worldwide by 2010. Last year, the firm sold more than 4 million yuan in Shanghai and Wenzhou alone.
In 1987, Feidiao Electric was established with an investment of 4,000 yuan.
"At that time, people did not dare to operate a private company and we registered under the name of a collective enterprise," said Xu who at the time was a 27-year-old mechanic.
The idea of setting up a factory had not occurred to Xu until a day when he found that electrical switches were very salable in his friend's shop.
"At first, we just wanted to improve our life by setting up a company," Xu recalled.
After about 10 years of operation, the company became one of the biggest of its kind in China. Xu then invested 10 to 20 million yuan into advertising to set up his brand. He also moved his headquarters from his native Wenzhou to Shanghai.
"Shanghai is the place where people can get the most convenient facilities to communicate with the world," Xu said.
The city inspired the businessman to expand. He has since invested in chain hotels around China.
"In my home town, what people discuss most is how to start a business and how to enlarge it. I was brought up in Wenzhou and it shaped my mind."