Charoen Pokphand Group： Growing up with CHINA’s Reform and Opening—up

Sun Qi

“When I first arrived in China， I realized that Beijings Capital International Airport was much smaller than Bangkoks Suvarnabhumi Airport，” recalled Dhanin Chearavanont， Senior Chairman of Charoen Pokphand Group （CP Group or Chia Tai Group）. “I saw a lot of bicycles but very few cars in the streets. Drivers had to be very cautious to avoid pedestrians and cyclists.”

Looking back at his 50 years as chairman of CP Group and the 38 years of his groups development in China， Dhanin has a lot to say. He believes his group is a big beneficiary of Chinas reform and opening-up. “China has grown into the second largest economy in the world and now has many world-class industries，” he commented. “Its important that China has never shied away from challenges. When the world faces major problems， it has presented solutions such as the Belt and Road Initiative—an inclusive and open idea from which the world can benefit.”

No. 001 Foreign Investor

In 1979 at the beginning of reform and opening-up， China promulgated the Law on Chinese-Foreign Equity Joint Ventures to provide a favorable environment for foreign investment. Still， it seemed no foreign investors dared be the first to dip a toe in the water.

At that time， CP Group was already a well-known agro-food enterprise in Thailand. At 40， Dhanin was already chairman of the group. Recognizing the prospects of Chinas rural market， he resolutely decided to invest in China. With an investment of US$15 million in Shenzhen Special Economic Zone （SEZ）， his group was registered as the No.001 joint venture in Shenzhen. CP Continental Grain Company， the largest modern animal feed producer in China at the time with an annual capacity of 80，000 tons， became the first and largest foreign investment project in the SEZ. Afterwards， he attained No. 001 licenses for projects in Zhuhai and Shantou successively.

Dhanin believes his courage to invest in China so early was inspired by his understanding of Chinas rural areas and his confidence in the countrys development as a large agricultural producer. With its investment， CP Group brought three things that were in short supply in Chinas rural areas： technology， funds and market. Dhanins positive attitude shocked the international business community， which was still on the fence.

In a meeting with Dhanin Chearavanont in the spring of 1990， then Chinese leader Deng Xiaoping reiterated that Chinas policy of reform and opening-up would remain unchanged for a hundred years. “Deng commended what we had done，” Dhanin recalled， “He said that CPs large investment in agriculture and food in China set a fine example for other foreign investors.” Indeed， CP Group was then the foreign investor with the largest stake and the greatest number of projects.

Xie Yi， senior executive vice chairman of Charoen Pokphand Foods in China， believes that as a business founded by overseas Chinese， CP Group has unique advantages. “Overseas Chinese businesspeople know China better than foreign investors. Compared to other foreign-funded enterprises， we enjoy the privilege of an opportune time， a favorable geographical position and extensive connections. Our decision-making and business philosophy aligns more with the actual situation on the ground， which makes it easier to succeed.”

In 1990， a China Central Television variety show sponsored by CP Group went on the air. The show became very popular for question-and-answer sessions that depicted the culture and customs of travel destinations around the world. It emerged as the first window for many Chinese to observe foreign countries. “Chia Tai” soon became a household name partly thanks to the lyrics of the shows theme： “Love is Chia Tais selfless devotion.”

Chia Tai was already an established brand of animal feed known to almost anyone in China. Thanks to the popular TV show， CP Group further launched new brands in China such as CP Pharmaceutical， Dayang Motors， Super Brand Mall （Shanghai Kinghill） and CP Lotus Supermarket.

‘Four-in-One Model

Some opined that CP Group provided the impetus for the rapid development of modern agriculture in China. At the beginning of reform and opening-up， CP Group brought globally advanced technology and ideas to the rural areas of China， which was clearly an invaluable contribution. Dhanin told farmers that each of them could raise 10，000 chickens， which would have sounded ridiculous back then. How would that be possible？

“You can do it with standardized chicken barns， professional logistics and the best chicken feed for the best chicken breeds，” Dhanin explained. With the division of labor， CP Group employs farmers as chicken farm engineers and provides them with end-to-end services from feed supply to distribution and sales. This simple logic later became popular in China as the “enterprises plus farmers” model. With the development of its chicken farms， CP Group further upgraded the model to “Four-in-One，” integrating resource advantages of the government， leading enterprises， financial institutions and agricultural cooperative organizations to provide sustainable sources of income for farmers.

In Beijings suburban Pinggu District is a chicken farm where its difficult to find a person doing the feeding. The whole farm utilizes a system that provides automated feeding， egg collection and cleaning. An intelligent robot keeps an eye on the temperature and humidity in the barn as well as the condition of the hens. Abnormalities are immediately announced to the barn manager. Furthermore， because the egg classification equipment and liquid egg processing equipment are automated， secondary pollution from handlers is avoided. Every morning， large delivery trucks wait quietly outside the barns to transport 2.4 million fresh eggs with CP stamps to supermarkets in the surrounding areas.

“The Four-in-One model has been very effective in solving farmers problems related to funding， techniques and the market，” opined Xie. “More importantly， after expiration of the contract， the project will be handed over to the farmers cooperative voluntarily. Then， the farmers will be the bosses and the enterprises will be employees. Farmers will be the owners of a modern agro-industrial enterprise.”

When the farmers become wealthy， they gain purchasing power which will drive the whole economy forward. This simple logic has never changed during expansion of Dhanins business empire from inception to present， from Thailand to China and the world.

In the era of online shopping for all， CP Group has cooperated with Alibaba Group on the sale of animal feed. It has also taught farmers how to manage online businesses. “This is innovation like giving wings to a tiger and watching it fly in the sky，” commented Dhanin. In recent years， CP Group has been actively involved in the integration of agriculture and the internet， which has promoted the development of its traditional agro-food industry with modern technology.

After nearly 40 years of operation in China， CP Group has become closely associated with agriculture， farmers and rural areas in China. It brought high-quality products to Chinese consumers including food， seeds， animal feed and agricultural products. It has also brought market vitality to the development of agriculture， farmers and rural areas in China. Harvard Business School now teaches the practices of Dhanin and his business in Chinas rural areas as a classic case.

Confidence in Chinas Development

The development of CP Group has not always been a smooth sailing. Dhanin once referred to the Asian Financial Crisis of the 20th Century as “the greatest difficulty in my life.” Thailand was the first to be affected. CPs investments in Southeast Asia were threatened， and its assets were frozen by the banks.

Dhanin felt that a big ship had to lighten its load when encountering wind and waves， so he sold most of his shares of the Thailand Lotus Supermarket and shut down some underperforming businesses. Some revenue was used to pay off debt and the rest was invested in China. When the financial crisis began， a CP Lotus Supermarket had been open in the Pudong District of Shanghai for barely a month. And international retail giants Carrefour and Walmart had just entered China. Dhanin knew well that he couldnt stop the demise. Instead， he switched tracks to big development.

Just as he seized the opportunity to develop Chinas rural areas with his initial investment in Shenzhen， Dhanin believed the Asian Financial Crisis might provide more opportunities in China. “I have to seize every opportunity I find in the next 10 years，” he asserted. “The economic development of China in the next 10 years will be equivalent to the development of dozens of years in other countries.”

Xie recalled that many entrepreneurs sold their ventures in China to save businesses in their homeland. “Our businesses in China were still doing very well，” he explains. “If we had sold them， we might have been able to save our businesses back in Thailand.”

On CPs perseverance in the Chinese market， Xie illustrated that CPs development in China so far is associated with an undeniably strong sense of belonging. Since the beginning of reform and opening-up， he has seen many ups and downs. Nothing has weakened CPs resolve to invest and develop in China. It has stood with China through thick and thin without hesitation.

With the deepening of Chinas reform and opening-up and the expansion of CPs global operations， Dhanin has never stopped heavily investing in China. CP has expanded its businesses to numerous sectors including agriculture and food， aquatic products， petrochemicals， property development， pharmaceuticals， retail， automobiles， telecommunications and finance.

Over the last 40 years， CP Group has participated deeply in Chinas economic development. Along the way it has also witnessed Chinas social development. On September 3， 2015， Dhanin attended the commemoration of the 70th anniversary of victory in the Chinese Peoples War of Resistance against Japanese Aggression and the World Anti-fascist War. “I never dreamed of attending this event on the Tiananmen Rostrum，” said Dhanin， “It was a pleasant surprise and a great honor for me as an overseas Chinese businessman.” In March 2018， his eldest son， Soopakij Chearavanont， who had been appointed as chairman of Charoen Pokphand Group， attended the annual session of the Chinese Peoples Political Consultative Conference. “Im here to learn，” Soopakij said with a smile.

‘Time to Invest More in China

Dhanin speaks highly of the Belt and Road Initiative as “great opening-up，” “great innovation” and “great wisdom.”

Since Chinese President Xi Jinping proposed the Belt and Road Initiative， CP Group has actively supported implementation of the initiative in Thailand. On several public occasions， Dhanin expressed intentions to capitalize on the advantages of his group in Thailand and actively provide assistance to the Chinese enterprises that would like to explore the Southeast Asian market.

In 2013， SAIC-CP Motor Co.， Ltd.， a joint venture of CP Group and SAIC Motor （Shanghai）， was established in Thailand. Initial investment in the new factory was 1.8 billion yuan （US$300 million） for the lean manufacturing of cost-effective cars for the markets of Thailand and the rest of Southeast Asia， which were mostly occupied by Japanese cars. The same year， the two sides jointly established MG Sales （Thailand） Co.， Ltd.

“Before ‘going global， Chinese enterprises should first make some achievements in China， like I did in Thailand before investing in the Shenzhen SEZ，” Dhanin advised. “As beginners in the international market， they may not be familiar with local business environments， laws and regulations. CP can support them with our experience and cooperation.”

“The new era is full of opportunity，” beamed Dhanin. “But we have to be innovative. If we simply follow old practices， we will be marginalized in the new era of extensive consultation， joint development and shared benefits. We should draw on each others strengths to achieve common development. This is why I am happy to cooperate with promising and capable companies， even if they remain majority stockholders while I am only a minority.”

Dhanin is also brainstorming what his group can do to effectively connect Thailands Eastern Economic Corridor （EEC） with Chinas Belt and Road Initiative so that the EEC will become an important part of the China-Indochina Peninsula Economic Corridor. He is focusing on construction of supporting facilities such as logistics， production capacity， commodities and finance because he believes that “supporting facilities and economic development along the route provide important foundation for the sustainable development of physical connectivity.”

After investing in China for nearly 40 years， Dhanin still insisted， “I have confidence in the Chinese market. This is the time to invest more in China.”

As chairman of a globally famous brand， Dhanin believes that his success was fueled by his philosophy that “foreign investment should benefit the host country and the local people and promote prosperity on both sides.”