Jiangxi

Life in the Fast Lane – Driving China’s Expressway Network

Bamboo painting

 

“Do Not Drive Tiredly”  That’s the message, in English, on large highway signs spanning the roadway in Jiangxi. I was charmed by the idiosyncratic English, and even more by the fact that almost all highway signs in China, including mundane ones announcing upcoming exits or defining the hard shoulder, are all bilingual, Chinese and English.

Based on my recent highway travels through part of Jiangxi Province, I was probably the only one who could get much value from the English. That’s because almost all the other traffic on the highway consisted of very large and heavily-loaded long-distance Chinese trucks. Passenger cars are few and far between. 

Highways are a recent phenomenon in China, of course. I’ve never seen anything quite like them, in my +30 years of driving around the US and lot of the rest of the developed world. The Chinese highways are mainly well-built and usually in pristine condition. Besides the English-language signs, another source of frequent delight are the life-size plastic policemen, pointing plastic radar guns at oncoming traffic. They’re planted in the highway’s central meridian as not-so-subtle reminders to avoid speeding– or as the sign calls it, again in English, “Overspeeding”.

It’s those large trucks, though, that really define for me the current experience of highway driving in China. Despite their huge size – the trailers often have 20-wheels, and seem to stretch the length of seven or eight passenger cars – the trucks are often buckling under the weight of their loads. Most of the time, the cargo hold is open at the top, and covered with a very large tarpaulin, in various colors, intricately tried to the bottom of the flatbed. The trucks have a tendency to wobble and weave as they move along the road – the result of either unbalanced loads or, more likely, less-skilled drivers.

Long-distance trucking may be among the fastest-growing new professions in China. It’s a safe bet few of today’s drivers have been behind the wheel for more than two or three years. Many have their own particular style of driving. Heavy, slow-moving trucks often canter along, 30mph below the speed limit,  in the left-hand passing lane. Their side-view mirrors – the only way the drivers can see traffic behind or alongside them – are often tilted at angles that seem to defeat the purpose.  

Few of the trucks have any kind of marking on them. The concept of a truck as a moving billboard is still an alien one in China. Not so the ordinary highway billboard, which is very common, as are advertisements posted on overpasses. 

China produces so much, including a huge percentage of the world’s manufactured goods, that it’s hard to imagine how all this stuff moved around before the expressway network was built. The traffic on many expressways, including the ones I was on in Jiangxi, must be over 90% trucks. That’s only going to increase, as more production in China is moved to cheaper, inland areas.

The expressways are already quite crowded. Often, they are only two lanes wide in each direction – which may have seemed more-than-adequate 10 years ago when first designed, but now seem to belong in the Pleistocene Age. Within ten years, these roads will almost certainly all need to be widened. That can cost almost as much, per kilometer, as building new expressways. 

China’s toll fees are among the highest ones I’ve seen. In Jiangxi, it’s 0.4 Renminbi ( or around five US cents) per kilometer for passenger cars, and more for trucks. So, financing all this construction won’t necessarily put a big dent in state revenues.  

Even with all the slow-moving truck traffic, the expressway network in China is a godsend. It makes distances much less foreboding than they used to be in China. It’s possible to average over 100 kilometers-an-hour. On the older, ordinary road network, you’d be lucky to average half that speed. Where the trucks thin out, you can “overspeed” at around 160kph, and rustle the plastic policemen in your backdraft.

A Gathering of Friends: Celebrating a Friendship Forged by a Successful PE Deal

Imperial portrait from China First Capital blog post

Of all the rewards of completing a successful financing, the most overrated are the pecuniary ones, and most underappreciated are the deep and lasting friendships that can result. I was reminded of this, vividly, on Friday. I shared a few very happy hours with the three other principals in the $10 million private equity financing we completed last November: Zheng Shulin, the owner and founder of Kehui InternationalElliott Chen, Kehui’s lawyer, and Ada Yu, a Vice President at the PE firm CRCI

We got together in Shenzhen to participate in a seminar at the Nanshan Venture Capital Club. The purpose was to give other entrepreneurs in Shenzhen a better understanding of the mechanics, timing and financial fundamental of pre-IPO PE investment in China. It was a very happy reunion. We hadn’t met as a group since last November. In the intervening months, Ada went on maternity leave and gave birth to twin daughters, while Mr. Zheng has been busy completing construction on the new factory in Jiangxi the PE investment enabled. The new factory will allow Kehui to more than double its output and become a dominant supplier of copper and aluminum-coated wires for use in electronics industry. 

There’s a nice symmetry here, of course: Ada’s twins and Mr. Zheng’s new factory got their starts at just about the same time last summer. That’s as far as I’ll go with the metaphor, since I’m sure Mr. Zheng will concede, despite his evident pride in his new factory, that Ada’s twins are the far more momentous creation. 

I was so happy and so moved by the whole experience on Friday, of being back together with Mr. Zheng, Elliott and Ada, and having a chance to “re-live” some of the experience in front of a crowd of about 70 at the seminar. Mr. Zheng shared one of the nicest stories from the closing: we were stuck at the final hurdle for over a month, waiting for government financial regulators in Jiangxi. They’d never before been asked to approve a foreign investment of this scale in their province, and so didn’t really know the rules or how to apply them. It looked like Jiangxi’s approval process could take months, and so cost Mr. Zheng the chance to get the new factory underway and meet surging orders. 

Mr. Zheng camped out in Nanchang, Jiangxi’s capital, to try to persuade the government officials.  I decided to visit CRCI’s office in Hong Kong to work out an agreement to advance the money ahead of the government’s final approval. CRCI’s partner agreed to do so, even though it could increase their risk in the deal. At the same moment I was dialing Mr. Zheng to give him the good news, he phoned me from Nanchang, Jiangxi’s capital, to say he’d just been given the final okay.  I returned to CRCI’s office a short time after, with Mr. Zheng, to sign the closing documents. The money arrived two weeks later.   

A big part of the credit belongs to Elliott Chen, since he both wrote the legal briefs, and spent the long hours explaining to Jiangxi officials how to apply the relevant national laws on foreign exchange transactions. A lesson here: in China, the national government in Beijing crafts very clear and often forward-thinking financial laws, but their implementation can be very hit-or-miss. Without Elliott’s work, we might still be waiting for Jiangxi Province to say Yes. 

Mr. Zheng, Elliott, Ada and I had some time to chat privately among ourselves. But, not nearly enough. Ada had to rush back to Hong Kong to take care of her twins, and the rest of us had business meetings to attend. For me, though, what most stands out is the deep feeling of friendship, forged by a common purpose to get an exceptionally talented entrepreneur the money he needed to take his business to the next level. 

While the ultimate success at Kehui will rightly belong to Mr. Zheng, all of us benefitted from our work on the financing. Elliott is now recognized as one of the best PE lawyers around. Ada is ready to resume her career at CRCI next week, knowing the Kehui investment is on track for a success as large as she could hope for. And, CFC is also on track to achieving the goal I set for it, of becoming the investment bank most proficient at capital-raising China’s best SME.


 

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