Opportunities and Challengesfor

Direct Selling Operationsin China

Harry Yeung

Caring International (Hong Kong) Ltd.

September 30, 2003

Since 1888

Third & Fourth Generation

Founder

Second Generation

Nanshui, Zhuhai, 1888

Headquarter: Hong Kong

Business of LKK Group

HealthBusiness

SauceBusiness

Health Business

- LKK Health Products Group

- Caring International

- Guangdong Nanfang Lee Kum Kee

Guangdong Nanfang Lee Kum Kee

• Approved as direct selling company in

1996

• Stopped direct selling in 1998

• Adapted wholesaling and retailing in

1998

History of Direct Selling in China – (1)

Late 80’s Direct selling started

1995 Ban of direct selling

1996 Reopen direct selling & approved 41 companies

History of Direct Selling in China – (2)

1998 Ban of direct selling

1998 Conversion regulations & approved 10 companies with new operation model

Opportunities – (1)

- Drafting of direct selling legislation is

underway to fulfill China’s WTO

commitment on sales away from a fixed

location

Opportunities – (2)

- One of the world’s fastest growing

economies

- GDP grew from approximately

RMB7.8 trillion in 1998 to reach

RMB10.3 trillion in 2002,

representing a CAGR of 7.3%

Opportunities – (3)

1.00

1.05

1.10

1.15

1.20

1.25

1.30

1992 1993 1994 1995 1996 1997 1998 1999 2000 20010

10

20

30

40

Population

Urbanisation rate

Po

pu

latio

n (

bill

ion

)

Urb

an

isa

tion

ra

te (

%)

Source: China Statistical Yearbook 2002

Opportunities – (4)

- A sizeable affluent group• better education

• possess credit card / mobile phone / digital

camera

• international travelling

• care for health and beauty

• willing to take up learning and money-making

opportunities

Opportunities – (5)

- Social and political stable

- Expanding elderly population

- Many entrepreneurs

Challenges – (1)

- Future direct selling legislation will be

drafted according to China’s

characteristics

Challenges – (2)

- Poor social image due to confusion

with “Chuan Xiao”

Challenges – (3)

- Entry barriers• set up own manufacturing plant

• guaranteed deposit

• overseas distributors were not allowed

Challenges – (4)

- Business regulations keep changing

Challenges – (5)

- Severe competition anticipated

- Ineffective self-discipline

Tips for Survival

• Live in China, among Chinese

• Localization of employees

• Learn by mistakes

• Manage external variables carefully

Tips for Sustaining

• Strengthen government relations

• Be flexible and proactive in making

changes

Thank You !Thank You !