Raw Material Suppliers and Factory Owners in the Beginning Stage of Plastic Manufacturing Industry
When Lam was an employee at Yuen Hing Hong Co. Ltd., the company expanded on its raw plastic material business, acting as an agent for importers from Britain, USA, Germany and Italy, from whom he bought and resold plastic materials to local factories. Lam once conducted a research for information about American plastic firms such as Monsanto, Dow Chemical, Rohm and Haas, and Du Pontetc. In those days, Yuen Hing Hong used to represent British companies like Distiller Plastic Groups, Imperial Chemicals Industries, Saro (High Impact Polystyrene Sheet), and British Celanese (Cellulose Acetate). Simultaneously, Yuen Hing Hong was an agent for Styrene Hair, which was artificial hair made of Styrene for toy dolls, and for nylon, which was used to make toothbrushes. In 1960, Lam was invited by Distiller Plastic Groups to go on training in the UK. Larger companies such as Monsanto and Dow Chemical had appointed their agents in Hong Kong from early on. From 1947, some small-scale plastic factories in Hong Kong had been buying raw materials via Yuen Hing Hong to produce spoons, small bowls, combs, dolls, and imitation jewellery targeted markets in Southeast Asia. Yuen Hing Hong once sold perspex sheets to a mahjong factory on Wellington Street. Perspex sheet was a kind of plastic materials that were used to produce mahjong tiles, signs, lampshades, lamps, and umbrella handles. Winsome Plastic Works used to make sign stands which can be placed on reception desks. In the post-war period, major plastics works in Hong Kong were founded by wealthy Shanghainese industrialists, including Kader, Chong Yuen, Far East Plastic, Perfekta and Po Yuen initially produced toothbrushes. Early suppliers of plastic materials were Chinachem, Wo Foo Plastics, Tins Chemical and Wah Sun Hong etc. Chinachem was an agent for an American material called ‘US Chemical High Density Polyethylene 666’, while Wo Foo Plastics and Tins Chemical focused on making PVC materials. H.C. Chieng, a plastic tycoon who ran factories in Shanghai, moved to Hong Kong in 1946/47 and openedChong Yuen on Tam Kung Road, To Kwa Wan, making daily products such as plates and hangers.
Rough Start for First-generation Plastic Factory Owners
With the exception of rich Shanghainese industrialists, most Hong Kong-based toy manufacturers in the 1950s came from a humble background. Constrained by a lack of fund, technology and experience, they struggled to keep their business survived. Lam tried his best to help his industrial partners to solve their cash flow problem, so that they could get through dire situations. In the early days, the manufacturers usually raised money from their relatives before resorting to borrow from load sharks. They spent the money on running their businesses and sending their children abroad for school so that the children might come home and set up their own enterprises as well. Lam cited the examples of four of his industrial partners to show how early Hong Kong industrialists were zealous and were reliant upon each other to tackle the difficulties with limited cash flow. 1) When Lam was working at Yuen Hing Hong Co. Ltd, a factory owner, named Tong, established a factory on Wai Ching Street with several Three-Quarter Ounce Injection Moulding Machines. Tong once purchased 100 pounds of materials from Yuen Hing Hong but was not able to pay the balance of 300 dollars on time. Lam lent his whole month’s salary to Tong to pay for the materials without the knowledge of his own boss.2) The father of Wo Foo Group’s Chairman Joseph Lee came to Hong Kong from Ningbo, and built a hut out of iron boards at the bottom of Lee Garden. There, he boiled rosin in barrels and sold them to mahjong houses.3) The father of the chairman of the Federation of Hong Kong Industries Cliff Sun arrived in Hong Kong from Ningbo after the war, and rented half of a shop on Shantung Road, where he worked as a mechanic. He did not have the resource to install a telephone.4) A certain factory owner from Tianjin, who worked at Dah Chung Manufacturing Co. Ltd before, settled down on Yu Chau Street and installed four sets of Three-Quarter Ounce Injection Moulding Machines. These moulding machines could only produce products below the weight of 0.75 ounce. Once he was not able to pay the rent of 500 dollars, and Lam lent him 2 months’ salary so that he could get through the hard time.
The Methods of Collecting Funds Among the First-Generation Plastic Factory Owners (II)
Apart from bank loan, plastic industrialists also borrowed from loan sharks. Interest rate was rather harsh. At that time the government did not impose control on private loan. Those who reported to the government would lose their borrowing privileges. It was a common practice that creditors could not resort to legal means and intimidation to debtors who failed to repay. Lending was a lucrative business at that time. Borrowers could not get a full sum of loan. For example, a borrower only obtained $6,000 from a $10,000 -loan. Small Chinese-capital banks such as Canton Trust and Commercial Bank was used to extend credit to Chinese industrialists. Lam had lent to numerous small industrialists. He once over-drafted two-month pay, i.e. $500, to help a customer of Yuen Hing Hong Co. Ltd. He also lent $5000 to an industrialist who was going to found his business. Lam reiterated that at that time industrialist were suffered from fund shortage when they started up their business. They only borrowed for their enterprise. Hong Kong’s toy industry thrived in the 1970s. Industrialists strengthened their financial status so they no longer relied on loan sharks. Lam only got collateral loans from bank. In most cases he picked HSBC as both parties had built up a long-term partnership. Usually he was able to secure a 30% loan while 50% was his maximum. Industrialists often obtained loan from small banks without putting down any collateral. Bank staffs tended to extract commissions from borrowers. This practice was especially popular in Taiwan.
The Hongs Controlled the Plastic Manufacturing Industry in the 1950s and 1960s
In the 1950s, apart from engaging in raw material business at Yuen Hing Hong Co. Ltd, Lam also ran a few plastic factories and met with clients frequently to obtain orders. Lam’s fine reputation in the plastic manufacturing industry helped him develop his business. Foreign-made toys generally did not register for trademark patent at that time, resulting that the Hong Kong manufactures simply replicated the design of foreign toys in the same way as the Japanese replicated German design. Local toy manufactures did not speak much English and so they replied on ‘hongs’ (exporters) heavily to find orders of export. Each time when a hong received the visit of a client from overseas, they would notify the local manufactures and arrange them to meet the clients at the hong’s office. The manufacturers would bring sample products to show to the clients. Lam spoke fluent English, which was his competitive advantage over his competitors in the industry. Most of his clients came from the UK and the US. The Americans specifically imported plastic goods for large retail stores such as K-mart and Wal-mart. It was a standard practice for the hong’s employees to get rebate from manufacturers in the early years. If they didn’t receive satisfactory rebate, sometimes these hong’s agents disclosed the sample design of this manufacturer to another competitor. This was known as ‘order transfer’. Lam recalled one occasion when he witnessed such transfer unfairly: One of the products that Lam made was making good deals, but in one occasion, a deal was called off because the hong tried to suppress the selling price. A sales agent under Lam passed this product sample to another factory, which put this design into production as promoted by the hong to the importer client. When this action was finally revealed, Lam decided not to work with the hong again and demanded the hong to settle the dispute by: 1) Calling off the transaction with the importer client;2) Arranging placing the order with Lam’s factory again;3) Destroying the sample products that were leaked out. The hong accepted the terms, as Lam pledged to take this case to the court if they did not do so. Lam never hired that salesperson again because he breached the rules. Even though there were no legislations regulating trademark patent, Lam thought he had a strong ground to bring an indictment against that hong. Lam also told his fellow industrialists about this inappropriate act which the hong used to work with. Lam believed that manufacturers at the early stage of post-war industrialization were not well educated and therefore were easily manipulated by the hongs. They encountered difficulty prosecuting for the hong’s liability when an ‘order transfer’ happened. A Jewish client had said heavy words to a factory owner, accusing the owner for asking unreasonable prices. Lam mobilized his industrial partners to boycott this Jewish hong. Lam could not tolerate any breach of copyright. He once turned his collaborative partners in to the authorities for counterfeiting two trademarked products, setting a precedent in the toy industry. As of result of Lam’s impartiality, he was well respected by his clients. Up till now, he had trained more than 30 of his staff to start their own businesses.
The Emergence of Various Chambers of Plastic Factory Owners in the1950s and 60s as Venues for Information E...
The toy and plastic factory owners used to show solidarity in the old days, and they would always get together to share information. The first industrial association was the The Hong Kong Plastics Manufacturers Association (HKPMA). It composed of the more successful, larger factories. They organised mah-jong meetings and dinner gatherings every month. The smaller factories, which were not invited to join HKMPA, formed the Hong Kong and Kowloon Plastic Products Merchants United Association Limited (HKA) and The Chiu Chau Plastic Manufacturers Association Co., Ltd (CCA). Members of HKA shared a lot in common as they came from more grassroots background. The way larger and smaller factories received orders was different. Firstly, smaller factory owners went to the hong to meet clients collectively, and brought with them a range of product options. They coordinated with each other as to how the orders received for different products could be distributed among themselves. In those days, competition was not keen as the demand was sufficient enough to keep everyone afloat. On the other hand, larger factories went straight to the clients’ office or even invited the client to dine out to maintain customer relationship. Secondly, some small factory owners ran around with samples of their products every day to introduce their products to potential customers. After meetings , the owners would meet up for tea. On the contrary, large factory owners sent sales representatives to visit their customers and seldom socialized with small factory owners. In this way, two different business circles were formed. Overseas buyers usually gave larger orders to larger factories. Sometimes, however, if the buyers intended to give a chance to certain small factory, they would place large orders as well. Small factories had lower production cost, and could offer more attractive prices to buyers. Lam was both the honorary chairman of HKPMA and HKA, while being a friend of CCA. That was why he was familiar with different styles of business operation. The leading companies in the HKA were Tai Nam, Shun Kwong, Sun Motor and Chun Yip. HKA had gatherings at Kin Kwok Restaurant in the Central. In 1996, Lam also joined the new Toys Manufacturers Association of Hong Kong.
Tins’ Chemical and low-end manufacturers
When KP Tin first ran his factory in Hong Kong, he produced only plastic films but no more resin products. The cost of opening and operating the factory mainly came from his savings. Although he had the support from raw material vendors and banks, he relied mainly on his own finance. In 1962, Tins' Chemical Industrial Co Ltd (the former company of which was Thian’s Plastic Factory, referred to as Tins’) erected an industrial building at Lai Chi Kok Road, Cheung Sha Wan and rented it to the processing factories that purchased Tins’ films. Warehouses for plastics were on the lower floors while workshops for material preparation and silk printing were on the upper floors. With all the supporting facilities combined transport and storage costs for low-end manufacturers were reduced, and thus facilitating the development of low-end industries as well as their competition against their Taiwan counterparts. Hong Kong Government’s industrial and commercial representatives promoted for Tins’ overseas. At the same time, Tins’ ran a showroom at Bonham Strand East, displaying the products and contacts of low-end manufacturers. On a cheap price, Tins’ provided middle-man services to help the processing factories promote their businesses. Prior to the set-up of the Tins’ plant, local plastic processing factories imported films from Japan and Taiwan. The plastics produced locally by the Tins’ benefited the local plastic processing industry. The films KP Tin produced in Hong Kong had been greatly improved from the ones made in Indonesia. Tins’ films were slightly better than the Taiwan products and slightly poorer than the Japanese ones. Local manufacturers were not demanding over plastics (except for gas-filled dolls). What really mattered was the processing procedures themselves.
Competitors of Tins’ Chemical
In their heyday, Tins’ Chemical had 4 or 5 competitors such as Kiu Luen and Fei Chui, but 2 or 3 of them had operated for several years only. Kiu Luen was founded by Wong Po Yan. Their factory had a long history in Hong Kong and produced PU artificial leather (mainly used in making handbags). Their core business was the trading of raw materials. Dow Chemical was an international chemical manufacturer specialising in PS granules as a raw material (specifically for making hard piece). Dow Chemical’s products belonged to chemical raw materials. Tins’ films were processed product of Dow Chemical’s raw materials. Plastic processing fell in three levels: chemical raw materials – industrial products – consumer products. The chemical raw materials used by Tins’ Chemical were imported from overseas. Chemical raw material plant was space-demanding and capital-intensive. Hong Kong was not equipped with such conditions and so no PVC raw material manufacturers ever invested in a plant in Hong Kong. Fei Chui’s plant was situated at Ping Shan (next to Tins’). Kiu Luen’s plant was in a tall building in Kwun Tong. Their production lines were scattered and operation was not smooth. The two plants were considerably small in size. The plant KP Tin set up in Indonesia was smaller. The productivity of the plant he later set up in Hong Kong was 2 to 3 times higher.
Production reloatcion to Mainland of plastic making and plastic processing factories
The Taiwan counterparts had a strong sense of survival and set up factories in mainland China at quite an early stage. If Tin’s had not followed suit, it might have lost the lead and put itself at an inferior position in the competition. Processing factories, which were labour intensive, were set up in the mainland first, followed by factories producing industrial raw materials. In the early period of China’s economic reform, the system in the mainland was poor, which drove many low-end manufacturers to set up factories in Southeast Asia or Africa. When the system in the mainland was gradually formalized, these low-end manufacturers returned to the mainland for productions. At the present, there were too many competitors, not to mention tightened government controls. If small factories had not undergone transformations on time, e.g. entering the national market as well, they would have found it hard to survive. As the small factories transformed themselves, Tin’s followed their steps closely, tapping into the unfamiliar national market and cooperating with mainland enterprises.
A review of Hong Kong’s PVC industry
In reviewing the history of the Hong Kong PVC industry, Chan Wah Cheung, founder of Chit Shing P.V.C. Products MFY. LTD. believed that 1953/54 was a start-up stage. It was then that manufacturers began to use high frequency machines to produce PVC products including stationery, document bags, pencil cases and backpacks made from raw materials imported from Taiwan and Japan. Tin’s Chemicals began opening factories in Hong Kong in 1959, and then manufacturers gradually used Tin’s Chemical’s PVC films as raw materials. Products soon followed and evolved in design according to customers’ requirements. To maximize the potential of cartoon characters’ popularity, manufacturers turned to produce brand products. In the early years, it was difficult for PVC companies to borrow from banks as they had limited capital and the scale of production and turnover performance were not good. As a result, manufacturers had to ask suppliers for delivery extensions or borrow money from finance companies at high interest rates. While interest rates on loans could often be as high as 20-30% per week, borrowers had to find reference from fellow manufacturers in order to make loans.
