Asian Investment Is Back--More Diverse Than Before

Investment from Asia--particularly from the “greater China” nations that include Taiwan, China, Hong Kong, Singapore and Indonesia--is again surging into Southern California after slowing during the early 1990s’ recession.

But this time around, things are different. The investment is increasingly diverse, the investors are more aggressive and the activity is helping to encourage the region’s economic vibrancy.

In the early 1990s, Asian investment slowed dramatically because real estate values were falling. But now “the upside outweighs the downside for investors in apartment buildings and shopping centers,” says Dominic Ng, president of East West Bank in San Marino. Ng, an accountant by training, has run East West since 1991 on behalf of owner Sjamsul Nursalim, a Chinese Indonesian who heads a large Jakarta-based business conglomerate.

Most Chinese investment remains in real estate, Ng reports. However, a significant shift lately has been to venture capital-like investments in high tech and entertainment.

In these ventures, typically families overseas provide financial backing for children who have gone to universities in California and want to stay here. There are no good estimates of the size of such investments, but it would be a minor part of the more than $2 billion in general venture capital that annually backs business in California.

More significant is that the new investments involve young people who don’t want to be passive real estate owners but active participants in business, says Los Angeles lawyer Frankie F.L. Leung.

That’s important because it suggests that new generations will continue an impressive tradition of Asian entrepreneurship that has benefited this region and state.

Some entrepreneurs have formally been in high tech. John Tu from Shanghai and David Sun from Taiwan set an example for employee relations at Kingston Technology, a memory company in Fountain Valley they founded nine years ago. Tu and Sun have just sold 80% of Kingston to Japanese publisher Softbank Corp. for $1.5 billion, which they intend to share with their employees.

Fred Chan, a University of Hawaii graduate, developed an audio computer chip and founded ESS Technology of Fremont, Calif., in 1993. He has built it into a company with well more than $100 million in sales.

Winston Chen from Taiwan founded Solectron Corp. of Milpitas, Calif., in 1978 and built it into a pioneering leader in high-tech manufacturing while becoming one of California’s most prominent business people.

Some have broken new ground in other businesses. Charlie Woo from Hong Kong has not only built a successful toy distribution business in Mega Toys of Los Angeles, but has also inspired a local toy industry that now rivals that of New York.

Allen Chao from Taiwan has built Watson Pharmaceutical of Corona, Calif., into an innovator in wholesale drug distribution.

And some entrepreneurs start by serving Southern California’s large and varied Asian market--most notably Marty Shih and his Asian Business Co-Op. Shih, from Taiwan, started a purchasing co-op for small companies and a telemarketing phone network for consumers in 1991, after building a business selling flowers. Today, he has 80,000 small-company clients in Southern California--and 200,000 nationwide--in the business co-op, for whom he gets discounts on insurance, package delivery and long-distance phone service.

Shih has 1.3 million members for his telemarketing club, headquartered in El Monte. Through banks of computers and phone lines--and a staff of 550 employees--he sells long-distance service, insurance and financial services in six languages (Mandarin and Cantonese Chinese, Korean, Japanese, Vietnamese and Tagalog).

Shih’s company is moving $200 million a year in services, for which it takes roughly $30 million in commissions. He reckons revenue will double in the next few years as the Asian market grows.

The U.S. Asian American population grew from 1.5 million in 1970 to 7.3 million in 1990, according to a recent study by the Los Angeles-based Leadership Education for Asian Pacifics and UCLA.

“I have my customers for 10 years after they come to the United States,” says Shih, an energetic 42-year-old. “After that, they don’t need me to explain how to shop in the new country.”

But Shih’s success, along with that of others, shouldn’t make anybody think this is easy money, says Henry Hwang, chairman of Far East National Bank in Los Angeles.

Hwang, who founded Far East in 1973, the first federally chartered Asian American bank, notes that for all the money coming from Asia to buy banks, “I don’t see great fortunes being made.”

Lippo Bank, owned by the Mochtar Riady family of Indonesia, had loan troubles in Southern California’s recession just as other banks did; AST Research, the Irvine-based computer company, has suffered problems endemic to its volatile industry.

That only says there are no guarantees anywhere in business. But the future should be bright for banks and companies in Southern California because they can serve as bridges to the rapidly growing economies of Asia.

For example, Hwang is looking for a U.S. paper mill because clients in China want to buy one to fulfill that country’s enormous need for paper. Ng’s East West Bank has a joint venture with Kennedy-Wilson, the Los Angeles commercial real estate firm, to make referrals for U.S. and Asian clients.

One major impetus behind Asian money’s coming to California is the potential for unrest in Asia. There are animosities and dangers in every country. In the past, Chinese businessmen have been attacked in Indonesia and Malaysia. And with the Indonesian political situation uncertain today, money has begun to move again.

Prudence, not panic, dictates such investments. Investors seek a 12% to 15% return with safety in the U.S. while continuing to earn 50% on riskier ventures in Asia.

And that pretty much has been--and will be--the pattern with Hong Kong, where investors mindful of the 1997 reversion to rule by China have hedged their bets for years, says Dominic Ng, who made his own investment by emigrating from Hong Kong in 1980.