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October 18, 2005 6:04 pm

Guo Fansheng: Web’s ‘beautiful girl’ seeks wealthy suitor

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Guo Fansheng, forceful chief executive of business-to-business internet company HC International, former central government economic planner and one time senior official in Inner Mongolia, does not like to be overlooked.

Business-to-business rival Alibaba.com may be winning all the attention after its recent tie-up with Yahoo, but Mr Guo, 49, insists that Hong Kong-listed HC has the better plan to serve the companies at the heart of China’s emergence as a global economic power.

With an online business based on a 13-year-old corporate directory publishing enterprise, HC is cutting out middlemen all across the country, he says.

“[Alibaba and B2B competitor Global Resources] are helping Chinese companies to export . . . but we are helping them to create a whole supply chain,” says Mr Guo. “So our market should be much bigger.”

Mr Guo has good cause to be blowing HC’s trumpet. Interest in China’s internet sector is white-hot, with US investors sending shares in newly-listed search engine Baidu.com soaring and well-funded venture capitalists roaming Beijing and Shanghai in search of deals.

HC needs funds for its export-oriented attempt to bring together foreign buyers and Chinese suppliers, to be based round the newly acquired web address “www.madeinchina.com”.

The company has already been clearing the decks by disposing of non-core advertising and internet search businesses that dragged it into the red this year.

With 1.3m registered users and 30,000 paying online customers, HC should be well placed to ease the inefficiencies and information shortfalls that plague business across this vast country.

It may be difficult to persuade some investors that HC is the B2B horse to back, however.

By paying $1bn for a 40 per cent stake in Alibaba and giving the Chinese company its existing China operations, Yahoo has offered a huge boost to the status and resources of an already potent competitor.

Alibaba, led by its charismatic founder former school teacher Jack Ma, also sees itself as the natural home for smaller sized enterprises looking to trade among themselves as well as export.

Some observers wonder if China has really found a true B2B business model. HC and Alibaba do not win income from deals they facilitate or even from most of their corporate listings, but instead content themselves with charging for associated services such as vouching that a registered company actually exists.

It is a strategy that has helped them sign up large numbers of corporate users, but one likely to limit their ability to expand revenues and profits in the way that Ebay has done with its consumer-to-consumer and business-to-consumer services.

Still, building confidence between companies is a service of real value in China’s rough-and-ready capitalist market – and it is a role that Mr Guo says HC can play best by working both online and off.

“We can’t resolve online the problem of creating trust without a meeting,” he says. “But when a trading opportunity is discovered using the internet, we can arrange for the buyers and sellers to meet in a suitable place to do the deal.”

So half way through an interview at HC’s cramped headquarters in western Beijing, Mr Guo suddenly suggests a quick trip downstairs.

There, fee-paying HC clients are discussing deals with suppliers already reviewed by HC to weed out middlemen. For some, the service is clearly a boon; one businessman wanting to purchase fire prevention equipment says that going through HC has meant he can have meetings with seven potential sellers in one sitting.

Working offline also means HC can reach internet-shy smaller ventures. “If clients rely only on the internet, they can only reach 20 per cent of Chinese companies,” says Mr Guo. “It’s also necessary to have published business directories and face-to-face meetings.”

Such encounters are less sexy than the seamless B2B experience promised by internet visionaries, but Mr Guo is sure they will bring the investment he needs.

He says that HC is already talking to one potential strategic partner from the US and could easily raise the funds it needs to launch www.madeinchina.com from the capital markets.

“With such a beautiful girl here, I’m sure lots of boys will come courting,” he says.

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