Pioneering family firm goes from woe to go by Being bold and creative

"In a hidden part of the forest, there's an ancient tribe called the Mumu. Among them stands a huge, ancient tree inside which lives another tribe - of mysterious small bugs."

Last year at the world's entertainment content market MIPCOM in Cannes, The Mumu Tribe, a stop-motion puppet animation team from China, attracted special attention. Exhibitors from Spain, Sweden, Finland, Croatia and Belgium signed agreements with its creators, Zhejiang Hexin Toys Co.

The 52-episode series is to be broadcast in the five countries this year. At the same time wooden toys of the characters featured in the animation, made in Yunhe county, Zhejiang province, by Hexin, will hit the market.

The Mumu Tribe represents a major hit for Yunhe's toy makers, and a giant step up the added-value chain from being low-end manufacturers to high-end creators.

He Bin, 35, general manager of Hexin, is the key figure in this success. The entrepreneur is the third generation of his family to run its wooden toy business. His late grandfather He Shouzhen brought the first factory to Yunhe in 1972 and helped develop the industry into the colossus it is today.

When he made the switch, He Shouzhen was director of an agricultural machinery factory that was barely surviving.

"In August 1972, my grandfather heard that some factories in a nearby county were receiving orders from Shanghai to make wooden toys," says He Bin. "He decided it would be a chance for Yunhe as well, because this county was rich in wooden resources."

It took He Shouzhen three days to travel from Yunhe to Shanghai. After long discussions with managers from Shanghai Light Industrial Products Import and Export Co, he won orders for wooden toys that would be exported to Japan.

From that point on, the leafy Yunhe county would blossom into a worldwide center for manufacturing wooden toys. The road, however, was far from smooth.

"The products my grandfather's factory made were rejected five times before they finally succeeded because they failed to meet quality standards," says He Bin. "Each time, he brought the products to Shanghai himself."

A round trip between Yunhe and Shanghai cost 300 yuan ($49; 36 euros) at that time, but his grandfather's monthly income was only 36 yuan.

In order to make products of acceptable quality, He Shouzhen devised new machines in his agricultural engineering factory and spent almost every day there with his workers. In 1973, he finally nailed it.

The order brought the factory sales revenue of more than 4,000 yuan. According to the National Bureau of Statistics, annual disposable income in China was only 343.4 yuan in 1978.

The success of that first order encouraged He Shouzhen to develop wooden toy manufacturing, and he transformed his factory accordingly.

Other smaller factories soon followed suit, and the wooden toy business started to boom.

By 1980, the He factory had grown from 10 workers to 100, with more than 100 machines, mostly developed by He Shouzhen, and an annual output value of 120,000 yuan.

That same year, He Shangqing, He Bin's father, took over as director of the factory and undertook the biggest expansion before He Bin became general manager in 2003.

Ying Xiaoguang, who has worked for Hexin Toys for more than 20 years, tells about that continually bumpy road to success.

If He Shouzhen was the one to build a solid foundation for the family's wooden toy business, Ying says, He Shangqing is the one who led it overseas.

"In 1994, the company was expanding fast," Ying recalls. "We had offices in Shenzhen, which enjoyed the most preferential opening-up policies in China at that time."

Customers were mostly overseas ones, first from Hong Kong and Taiwan, then Japan, South Korea and the United States. Total sales revenue that year reached 1.5 million yuan.

He Shangqing then opened factories in Shenzhen and Shaoguan in Guangdong province and Mianyang in Sichuan province.

"But with the expansion, came shortage of capital," Ying says. "The financial crisis in Southeast Asia in 1997 hit the company hard."

It was deep in debt and He Shangqing had to borrow from his mother.

"Once we were in Shaoguan with only 20 yuan left in our pockets. He bought a pack of cigarettes to share with me and told me to hang on," Ying says.

But by the end of 2000, Hexin had managed to clear its debts and earned profits of 1.2 million yuan.

He Shangqing does not like to talk too much about how he and the company survived those hardest of times.

"It is better to focus on the future to see how the next generation can develop the company to a better phase," he says.

He Bin is determined not to let his father down, and is concentrating on developing the company's own brand.

"I watched my grandfather and my father striving hard for the business and feel lucky that I took over the company at its maturity," he says. "But no matter how developed the business is, we are still not a global research and development center or sales center. We are simply an OEM (original equipment manufacturer)."

The first thing He Bin did after he became general manager in 2003 was to invest all company's profits in R&D - a bold move that scared the older generation, including He Shangqing and Ying. But they later realized that He Bin's strategy was the right one.

He Bin's original plan was to gain profits from their own brands in 30 years, but it took him only seven. Last year, the company's self-owned brands had sales revenue of more than 80 million yuan.

Yet He Bin does not consider this a major success. His ultimate goal is to upgrade wooden toy manufacturing into a creative industry.

"A manufacturer is always a manufacturer if we do not add cultural value into our products," he says. "Now that our animation products have received positive feedback from European countries, we will continue to march on this path."

yanyiqi@chinadaily.com.cn

He Bin, left, and his father He Shangqing, pictured in front of a statue of his late grandfather, are determined to develop their toy company's own brand. Provided to China Daily

( China Daily European Weekly 10/11/2013 page19)