Resuscitating China’s faltering century-old enterprises seems inconsistent with its market economy. Still, some think they are worth preserving

　　Laozihao is a Chinese term that refers to time-honored brands, or those prominent state enterprises boasting a long life and unique generation-old techniques. Most of these brands used to be leaders in their respective fields. Their extraordinary performances enabled them to gain local and even national fame. Laozihao is part of China’s cultural heritage.

　　According to China’s General Chamber of Commerce, these veteran brands are mostly found in ancient cities, such as Beijing, Tianjin, Shanghai, Xi’an, Nanjing and Hangzhou. They manufacture various retail goods and foodstuffs, and are also engaged in service, pharmacy and wine making. With the passage of time, some of them have become outdated and gone out of business. Quite a number of them are now operating at a loss due to a rigid conventional thinking, redundancy and a basic failure to maintain the value of their brands.

　　Over 16,000 enterprises have been put on China’s laozihao list since 1993. At present, 20 percent are facing the threat of bankruptcy and only about 10 percent are making profits, while the rest are merely staying afloat.

　　One camp says that floundering laozihao, like all other business, are experiencing the pitfalls of market competition, and this is the nature of the beast. Others weep for their death knell, calling on the government to offer a hand. They also claim that these long-established enterprises are a sort of crystallization of the wisdom and effort of past generations and embody the hope of revitalizing China’s national industry.

　　At a crucial juncture when the Chinese market is undergoing a profound transition, how can we facilitate the development of laozihaos? Should we even bother?

　　Let Them Take Care of Themselves

　　Mou Yongchun (research fellow at the Heilongjiang Institute of Commerce): The closedown of old businesses is an inevitable result of the market economy. I once had dinner in Zhengyanglou, a laozihao in Harbin. To my disappointment, the restaurant was a mess. It would be impossible to be profitable no matter how tasty its dishes are in such a dining environment. In my opinion, this decline is attributable not only to the conditions of their business, but also to a deeper problem. They are stubbornly traditional in business practice, adverse to innovation. They refuse to expand their business scale, naively relying on brand recognition to draw customers. To some extent, protecting them would be a blow to new business. The fall of old business and the rise of new ones is no surprise at all. A brand should not be endowed with some perennial lifeline just because they are old.

　　Gao Zhixian (Shenzhen resident): A friend of mine has a 300-year-old lacquer box, which is a family treasure. It is exquisitely decorated with flowers and radiates timeless beauty. Water can be kept clear in it for as long as a year. However, many lacquer factories are now on the brink of bankruptcy. The reason is simple. Today, these lacquer wares are no longer useful to most of us. Only collectors are interested in them. So, we need not pity their extinction because new laozihaos are sure to emerge in the future. The spirit of laozihaos will never disappear; their honor will be passed on to new generations.

　　Qin Fang (Dadi Real Estate Co., Jiangsu Province): Being a laozihao is an honor, not a ticket out of bankruptcy. Those who stick to old methods and do not meet the needs of society will eventually fail. We should let the marketplace decide their fate rather than calculatedly conserving them.

　　Ding Ding (Beijing Hanhai Advertising Co.): We should get rid of outdated things. Otherwise, how can society move forward? Laozihaos will be able to survive if they keep pace with the times. Some of them have set very good examples. Young people are looking for fashion and personal service. Laozihaos should take this into consideration and reform their traditional business themselves. Assistance from the government would do no good for them in the long run.

　　Cherish Them Like Relics

　　Li Chengren (Shenzhen resident): Laozihaos reflect local flavor, widely regarded as a city’s soul. The legends of laozihaos, dead or alive, partly embody the charm of many Chinese cities. They are connected to the cultural fabric of that area. Therefore, the government should grant them tax reduction and preferential policies to help them survive. If necessary, money should be directly pumped into these businesses. Only in this way can we give them new life.

　　Shen Feng (engineer with the Beijing Electromechanical Equipment Corp.): China’s laozihaos, with a profound culture and history, are part of our national heritage. We have no reason whatsoever to sit on our hands and watch them die out.

　　Shi Dunhe (Shenzhen Airport): We take special care of trees that live for over a hundred years in the name of “old tree protection.” Laozihaos have witnessed so many changes in our country, how can we be so indifferent as to let them go into bankruptcy? We should make the most of time-honored brands by combining their traditional craftsmanship with modern technology. With new products and expanded production lines, these old enterprises will flourish again.

　　They Should Earn Their Own Living

　　Zhou Fumin (Beijing Kelong Trading Co. Ltd.): Laozihaos are among the treasures of Chinese civilization. They deserve privileges such as tax reduction and subsidies. However, we must also improve their management so they can survive on their own.

　　Xu Zhiyuan (doctor at Beijing Hospital): It is said that there are no sunset industries, only sunset enterprises. According to this thinking, we might also say that there are no sunset products, only sunset businesses. I think laozihaos are on the decline because they are not producing anything new. It is their packaging and marketing, not their products, that have gone out of date. Facing tough challenges from rising competitors, they must carry out reform. This is their only way to survive.

　　Chen Qi (editor with Business Weekly): We must publicly promote laozihaos. How else will their products be known? Quanjude, a very successful laozihao restaurant known for its roast duck, still keeps a prosperous business precisely because its managers have arduously promoted themselves. For example, they sponsored a TV series based on the restaurant’s history to let the public know about the story of their roast duck. Meanwhile, they have endeavored to cater to the taste of modern people. So, it is not strange that many people still go out to eat the traditional dish.

　　It is also essential that laozihaos stop considering themselves superior to other business. They must be able to change in order to make new what was old.

　　Yuan Jiafang (professor with the Capital University of Economics and Business): The restructuring of many laozihaos has been proven inadequate. Take Beijing-based laozihaos for example. Although they have been converted to joint-stock enterprises, the state still owns 15-50 percent of their stocks. In a laozihao located in Dongcheng District, the state controls about 58 percent of its stock. However, the state, as the majority shareholder, has not taken the necessary responsibility to develop its business.

　　The government has not fully employed the market mechanism in regulating laozihaos. Instead, it keeps directly intervening in them. A typical example is that it has forced many laozihaos, including Quyuan (a Hunan restaurant), Hongbinlou (a Muslim restaurant) and Huaiyangchun (a Huaiyang restaurant), to leave the Xidan downtown shopping center.

　　Under a market economy, especially after China’s accession to the WTO, the government is expected to unleash the market force by granting independence to enterprises. The government should totally withdraw from small and medium-sized laozihaos, enabling them to be fully responsible for their own profits and losses.

　　Nevertheless, the government should subsidize traditional, culturally significant laozihaos: backyard workshops and front parlor shops. This is a common practice in Japan, Singapore and a few other countries.

　　We cannot simply give away cash, merge businesses or use a single model for every one. Instead, we should grant laozihaos more opportunities and substantial support to encourage them to participate in international competition.