September 24, 1993

CAPITALIST LI NING: A GYMNASTY IS BORN

Eric Ellis, Beijing

THE glitzy sports store on Wanfujing Street, China's Fifth Avenue, suggests the first gold medal of the Olympics may already have been won. It is here that China's most famous Olympian, triple Los Angeles gold medallist gymnast Li Ning, has mounted another dais, a commercial one, as the$US15 million winner of Beijing's bid for the 27th Olympiad.

By becoming the first from the communist sports machine to do what the Newcombes and Nicklauses have been doing for years - merchandising themselves-30-year-old Li is a smartly packaged example of how China's economic reforms meet its sporting ambitions. Just three years after deciding to go into business, the man whom government propaganda describes as "the prince of gymnastics" now heads a China-wide RMB100 million-a-year business empire spanning sports and leisure wear, home exercise equipment, leather goods and trading.

Privately owned and, he claims, with no official backing, Li Ning employs about 1,000 people and boasts profit margins any Western businesses can only dream about, coming in at about 40 per cent of revenue.

"I think five years ago such a business would not have been possible in China," says chairman Li's Beijing manager, Miss Chen Chen.

A little over two years after opening its first store in Beijing, Li Ning wear is sold in 30 stores across China, 24 of which, like the one Wanfujing outlet, only stock Li Ning ware.

The business formula leans heavily from the vital image of Adidas, Reebok and Nike, even down to the stylised logo adaption of Li Ning's name.

The stores are bright, funky and trendy places to be seen and spend your hard-earned renminbi. Music thumps from speakers, videos project sporting images.

"We are very fashionable with our young people because Li Ning is very famous but the Olympic bid has made older people more interested in sports,"Miss Chen says.

The Li Ning range has become one of China's best recognised brand names, helped by the exposure in outfitting the Chinese team during last year's Barcelona Games, the best international performance by Chinese athletes.

Although the company says it has no connection to officialdom, its brochure shows Li Ning to have reasonable guanxi (connections). Resplendent in Li Ning gear is none other than IOC President Samaranch, Mao Zedong's son Mao Anching and various septagenarian members of the National Peoples' Congress.

The Beijing bid has also meant that Li Ning, now in Monaco with the Chinese delegation, need not worry about full-scale marketing.

The Government's heavy-handed sloganeering and ubiquitous Olympic bunting that wallpapers China, has done it for him.

"We have found that with the publicity about the Olympics and our own national games, we have been unable to supply the customers' demands," Miss Chen says.

She points to a sales chart on the wall of her modest office. This year's sales have accumulated exponentially.

"We will not need to go to the stockmarket as we do not need the requirement of raising funds because business is very good," she says.

The gear is dear. A pair of Li Ning runners, made in the same Guangdong factory that produces popular Western brands, sells for RMB 110 (about $30 at official rates), close to the average monthly salary in China.

But Miss Chen says sales have soared in tandem with China's booming economy. "The people who like sports are finding they can afford better facilities."

The group is exporting to Russia, Holland and eastern Europe and somewhat hopefully sees the world's overseas Chinese community as "patriotic"customers.

Interestingly, the spread of Li Ning shops inadvertently highlights the problems plaguing China's reform process.

The stores are concentrated in big cities, where earnings are far higher than rural centres, and then in cities along the coast, which have benefited most from Deng Xiao-Ping's economic reforms.

Just as the Government has stressed development in China's vast north-eastern region, so too has Li Ning opened stores there.

In the huge, populated west, the scene of the most serious social unrest and where the reforms have largely passed by, there is a noticeable lack of stores, just one outlet in Urumqi, close to the Russian border.

"Li Ning is very popular with all Chinese but in the west the economy is not so strong as elsewhere," Miss Chen says.

"We hope to soon have stores in every city in China. Our ambition is to have hundreds of shops."