Arts supplier builds an empire from scratch in less than 20 years

Chen Weihong has become a master of canvas in a way that he had not really expected. Instead of making a name for himself with the paintbrush, he has built an international empire that puts artistic tools and materials in the hands of others.

The Phoenix Arts Group, in Wuxi, Jiangsu province, is the world's second-largest art materials supplier in terms of production, after Winsor & Newton of Britain.

"We plan to open our second overseas factory in Poland to better support the European market next year, and the third in Mexico, catering to our customers in the United States," Chen says. "You need to have a global vision."

The company's revenue is now more than 500 million yuan ($80.65 million; 61.5 million euros) a year and its profit margin several times that of other textile-industry companies, he says.

Chen opened his first overseas plant in Vietnam in 2006 to circumvent US anti-dumping duties and quota restrictions that targeted Chinese companies.

He set up the business in 1995 after learning that there was great demand in Europe for canvases. He then left his job as a salesman and set up a small company.

"I spent almost two years doing experiments and improving techniques until I produced the first canvas wrap," he says.

Thanks to the prosperous local textile and chemical industry, Chen was able to obtain cloth and find skilled workers easily.

Wuxi, located along the Grand Canal, has served as a key wharf for the transport of cloth since the late Ming Dynasty (1368-1644). When the famed Rong family built up its textile empire in the early 1990s, the industry became a pillar of Wuxi's economy, and gradually formed a complete industrial chain that included chemical fibers, textiles, printing and dyeing, clothing, and machinery manufacturing.

The local textile industry has undergone painful transformation in recent years due to rising costs and shrinking overseas demand, but Chen had found a much more specialized market niche to maintain stable growth for his company. Orders then flooded in as his company filled the market gap.

In 2001, China joined the World Trade Organization and adopted higher export-tax rebates. By seizing the opportunity, Chen increased his company's annual revenue from 10 million yuan to 400 million yuan over the next five years.

Phoenix had 11 percent of market share in the US by 2006, and supplied 80 percent of the canvases that China exported to the country. But then came an anti-dumping investigation in the US.

Chen said he spent a lot of money on a US lawyer. However, because Phoenix's products were better and more expensive than similar Chinese goods, a much lower duty was imposed that on those of other Chinese companies, which later helped him win additional orders.

"But I made up my mind. I was convinced I had to search for a manufacturing base outside China."

The company's Vietnam operations now contribute more than $20 million in export value annually. The company also set up a distribution center in Spain to supply the European market.

The Vietnam branch has been largely localized, employing more than 500 local workers and only five staff from China, Chen says.

"We needed to go outside China not only to deal with trade barriers, but also to cope with rising costs in China."

Cotton-cloth prices have risen more than 30 percent in China in recent years, Chen says, and products obtained from India are about 20 percent cheaper.

The same happened with wood prices, which have risen in China because of its urbanization drive, while wood in the US and Canada is 20 percent cheaper and of better quality, Chen says.

More than half of the raw materials that Phoenix uses today are obtained from overseas, including wood from the US and Canada and cotton cloth from India. More than 90 percent of the raw materials Vietnam branch uses come from the US.

Chen says his company's fastest-growing period was from 2001 to 2005, and now it has an annual growth of about 15 percent. He is still exploring new growth opportunities.

Since 2005 his company has supplied canvases for the Chairman Mao portrait that hangs outside the Forbidden City in Beijing.

"Revenue in China now contributes 20 percent of the company's total, but with the huge growth, it will account for half of total sales in three years," Chen says.

Strong demand from the US and Europe has helped China turn a personal craft of painting into a mass production industry.

Overseas orders have bolstered China's commercial painting exports over the past 20 years, and as with other manufacturing industries low labor costs and a huge pool of workers has played a central role.

Officials of Dafen village in Shenzen, one of the world's largest centers for oil painting, say the industry was worth 3.9 billion yuan in 2011, almost 30 times the figure in 2004. About half the sales went to overseas customers in 2011, and the proportion was even higher earlier.

One thing that helps the industry is that Chinese parents are generous when it comes to spending on their children's art education.

Chen's company set up Phoenix Art Palace in 2008 in an effort to diversify its business by introducing art promotion, education and investment activities, and at the same time encouraging sales of art materials.

"Working professionally, we have improved market value of the contract artists by six times on average in three years. I believe this field also provides great business opportunities in the future."

Chen says he has no plans to go public.

"I have a lot of respect for the old private brands in Italy and Germany because they really focus on making top-quality products, which is exactly what I'm after, too."

xieyu@chinadaily.com.cn

( China Daily European Weekly 06/14/2013 page16)