U.S. furniture makers heed the great call of China.

Markor, the largest Chinese-owned furniture manufacturer, ships 1,000 containers a month to the U.S. and is gearing for more growth.

The message hanging from the ceiling would make any capitalist proud:

"No quality--No tomorrow."

But make no mistake, Markor Furniture International's Plant No. 5 is a long way from the home of capitalism and the company's key U.S. customers and partners. As the country's largest Chinese-owned furniture manufacturer, Markor is a modern and aggressive firm that has taken full advantage of China's reforms and resulting juggernaut economy.

Less than 10 years old, Markor is on a fast track to double its production capacity from just three years ago. Markor's output includes case goods, tables, chairs and upholstered products. Its plans for expansion include increasing business with approximately 30 American firms and tackling the Chinese domestic market with help from U.S. stalwart Ethan Allen. Last year Markor's sales were approximately $120 million, a number that it will easily outpace in 2002.

Without a doubt, Markor must cope with key issues such as China's dependence on other countries for raw materials and the omnipresence of an evolving Communist government. But, like most successful companies, it has aligned itself with the best and the brightest in terms of suppliers and customers.

Company Origins

Markor was founded in 1993 in Urumqi, the capital of the remote far western Xinjian province by Richard Feng and Kou Weiping. According to Kou, the two were originally partners in an interior decorating firm. Increasingly frustrated with the availability of quality furniture in their area, they began making furniture in 1993 with a Taiwanese joint-venture partner. Their first manufacturing facility was a three-story building with less than 24,000 square feet of manufacturing space.

Kou says their original management team consisted of four men with a wide range of talents: "Richard Feng was an artist, I was an economist, another man was a financial manager and the other was a judge."

Urumqi is an industrialized city situated near Siberia, from which Markor procures century-old dragon spruce and larch. Markor was originally known as the Pine Kings since most of its offerings were in pine. As Markor continued to grow it became apparent that Urumqi was too far from a port (1,500 miles from the Yellow Sea) to grow its export business cost-effectively. In 1998 Markor completed construction of Plant No. 3 plant in Tianjin, roughly 70 miles southeast of Beijing, and only 4 miles from the Tianjin port.

Nevertheless, furniture is still manufactured for export in Urumqi. The export output from Urumqi is transported to the No. 3 factory in Tianjin by train for repackaging. Finished goods are then shipped from the Tianjin port to overseas destinations. According to company, the whole process takes only 8 to 10 days. Kou says Markor has achieved high efficiency in manufacturing, billing and packaging which has been the critical factor for prompt delivery.

Eight Plants and Counting

Markor's current expansion plans will give it a total of eight plants, five in Tianjin and three in Urumqi. Total manufacturing space will equal roughly 600,000 square feet. It should be noted however, that there was plenty of vacant land in the vicinity of the new construction and Wood & Wood Products was told that there were "many more plants to follow."

The newest plant in Tianjin will open in Spring 2002 and will manufacture upholstered furniture for the Chinese market in a joint venture with Ethan Allen. As reported in the January 2002 issue of Wood & Wood Products, Ethan Allen's reciprocal deal with Markor involves the Chinese company supplying case goods to Ethan Allen's U.S. stores. In turn, Ethan Allen will help Markor develop a chain of retail stores that will promote both an Ethan Allen and a Markor retail theme. The first store is set to open this summer.

Markor's 6,000-square-foot showroom in Plant No. 3 is a showcase of the wares of American companies such as Drexel Heritage, Lexington, Broyhill and Hammary. Markor works with mostly American firms representing manufacturing, retail and distribution. Markor employs an American independent retail consultant.

During the tour of the showroom, Markor's production manager, Shaojun Gu, a former Chinese army officer, proudly points to a photo on the wall featuring company cofounder, Richard Feng showing a chair to Peoples Republic of China vice president Hu Jintao, who toured one of Markor's plants. Hu is widely believed to be the successor to president, Jiang Zemin.

Labor Perspectives

Markor has a total of 3,000 production workers in Tianjin split among two eight-hour-a-day, six-day-a-week shifts. Approximately 2,500 production workers are employed in Urumqi's three manufacturing facilities. The average age of a Markor employee is 25 years old.

Wood & Wood Products' request for salary information at Markor was denied. However, Wood & Wood Products was told that a typical skilled machine operator in an average Chinese furniture plant earns approximately $150 a month; unskilled workers earn considerably less. According to the Chinese People's Daily, per capita income for a Beijinger rose 8% last year to approximately $1,400 annually.

Markor's workers are housed in hostels and provided with meals and medical care. For example, when Wood & Wood Products visited in March all employees were being vaccinated for Hepatitis B. The children of workers are bused to local schools at the company's expense.

Raw Materials

Markor has had to deal with the fact that, for all practical purposes, China does not have a sustainable wood resource. Deforestation and desertification lead to a virtual government ban on logging in 1997. Therefore Markor relies very heavily on imports of lumber, veneer and board products.

The lumber and veneer used in Markor's Tianjin facilities are of high quality. In addition to softwood species and some ash from Siberia, Markor uses Radiata pine from New Zealand and Scandinavia. Hardwood lumber and veneer, including ash, oak, walnut and cherry is imported from the U.S. Markor's kilns are heated by boilers fired by the company's wood waste.

Production Lines

A blend of new woodworking technology from American, European and Japanese sources and Chinese equipment make up the production lines in Markor's plants. Wood & Wood Products visited plants No. 3 and No. 5 in Tianjin; each is immaculate and well lit. Markor's production facilities display striking contrasts that illustrate the company's ability to combine the best of both worlds in terms of high tech and low tech, Markor takes advantage of automated processing but at the same time uses manual labor in areas like hand carving and sanding.

German solid wood machining equipment from Weinig Grecon, Dimter and Paul Japanese CNC routers (shoda) and a 3,800-foot-long finishing line provided by the American company, Rhodes Machinery International are mingled with Chinese versions of machines made an other parts of the world including a Chinese built clamp carrier.

Plant No. 5 uses Kuper veneer stitching equipment and Burkle veneer presses to apply American hardwood veneers onto Chinese-made particeboard. Shoda CNC routers complement the work of approximately 200 skilled hand carvers assigned to make bed posts.

Markor works with its suppliers to maintain high quality standards, according to Kou. National Starch provides technical assistance for gluing and veneering its Pvac adhesive and has a representative living in Tianjin to look after Markor. Finishing materials and consultation is provided by Akzo Nobel.

Plant engineering for Markor comes from a variety of sources. The company's original Taiwanese joint-venture partner helped them get started. Since then Markor has worked with engineers from their customer base and from machinery suppliers, and independent consultants.

Domestic Market

China's domestic appetite for furniture and hardwoods is mind boggling. Tianjin itself is an industrial-growth city and will provide a great local market for Markor with a population of roughly 10 million coupled with Beijing's nearby population of 13 million. According to the Chinese People's Daily, there are 12,00 industrial enterprises in Tianjin, which constitute a gross national product of $34 billion.

With a population of nearly 1.3 billion, China has the world's second largest economy, and gross domestic product grew by more than 8 percent in 2001. Government reforms in 1998 allowed for privatization of housing. And while China has become a furniture export powerhouse, the majority of its furniture production stays home. According to the U.S. Department of Commerce, Bureau of the Census on a value basis in 2000, China produced just over $14 billion of furniture. Of that, only $3 billion was exported, mostly to the United States.

Markor's Philosophy

Kou says Markor's philosophy has changed from its original mantra of almost 10 years ago. "We were small and growing and needed to work as a team.

In the beginning we said, 'work together, work hard and create the future.' Today our philosophy has to take into account that we've become a big team and we must understand the big picture. Now we say our goals are, 'communication, appreciation, innovation and education."'

The last goal, education is an important issue to kou. "We always participate in the High Point furniture markets to know what is going on. We also try to stay on top of the latest technology by going to woodworking fairs." He says they are pondering a visit to the International Woodworking Fair in Atlanta this August.

Kou says Markor strives to be different from other Chinese manufacturers. "There are already plenty of excellent production facilities in China. Our difference is that we are very sales and marketing focused."

Markor's foray into retail with Ethan Alien is a dramatic move for the former "Pine Kings." Kou says the company may consider outsourcing some production for the local market but that decision is dependent upon the quality of would-be partners. That statement is echoed on a sign hanging from the ceiling in Plant No. 5: "Prosperity and downfall of Markor are the responsibility of everyone in the company."

RELATED ARTICLE: U.S. Hardwood Exports to China Surge

Robust domestic housing market fuels demand

The American Hardwood Export Council (AHEC) says exports of the five major value-added hardwood products (lumber, veneer, moulding, flooring and plywood) to China surged to more than $212 million in 2001, a 9.3 percent increase when compared to the same period in 2000.

Michael Snow, AHEC executive director, says American hardwoods are in great demand in China for a number of reasons. "Chinese lumber production has dropped 70% since 1997 and it will take years for them to recover from their deforestation problems. They're trying to renew their forest industry with plantation species but it will take time," he says.

Snow also says China's projected housing starts of up to 19 million in 2002, spurred by the political reforms that now allow privatized housing will drive the demand for all wood products higher. "While most of these are multiple family dwellings, privatization of housing has driven pride in ownership and therefore remodeling.

Chinese homeowners are upgrading to hardwood flooring and cabinetry. For the first time they're remodeling" Snow says.

China's gross domestic product increased 8% last year driving demand for commercial space of all kinds from hotels and restaurants to offices and fixtures. Snow says the recently completed Grand Hyatt hotel in Shanghai is decked out in U.S. cherry.

Oak, alder most popular

During 2001, the two most popular U.S. hardwood species in China were red oak and western red alder, according to AHEC. Shipments of red oak lumber and veneer totaled more than $55 million in 2001. Western red alder lumber reached an export level in terms of value of $24.9 million.

Exports of hardwood veneer in a wide variety of species such as maple, walnut, cherry, yellow poplar, white oak, ash, hickory, pecan, birch and beech all enjoyed increased sales to China during 2001. Sales of walnut lumber and cherry veneer also showed significant increases of 93% and 47% with the value of $13.3 million and $16.4 million respectively.

"Western red alder is one of the most popular and emerging species of U.S. hardwood in China's export market," explains John Chan, regional director of Southeast Asia and Greater China of AHEC., "On the other hand, China's domestic market continues to grow and U.S. hardwood species such as red oak, maple, walnut and cherry are predicted to maintain steady in the next one to two years."

U.S. hardwood exports to Greater China (encompassing mainland China, Taiwan and Hong Kong) overall increased 8.9% at $196 million in the first nine months of 2001. Red oak was the most demanded U.S. hardwood in all of Greater China with the value of shipments eclipsing $43 million.

Chan indicates that there has been a significant increase in the awareness and acceptance for a spectrum of U.S. hardwoods in Greater China. Architects, interior designers and contractors have become increasingly receptive to the various applications of different species of U.S. hardwoods and the trend is likely to inspire other industry players to follow suit he says.

About AHEC

Headquartered in Washington, DC, AHEC is the leading international trade association for the American hardwood industry. It represents companies and trade organizations engaged in the export of a full range of U.S. hardwood products, including lumber, veneer, plywood, flooring, mouldings, and dimension materials.

AHEC provides the global hardwood industry -- importers, specifiers, and users -- with promotional assistance, technical information and sources of supply for U.S. hardwoods. AHEC has offices in Europe, Mexico, Japan, Korea and Hong Kong. Visit www.ahec.org.

The American Hardwood Export Council (AHEC) Southeast Asia and Greater China office opened in Hong Kong in 1992 and oversees nine Asian markets, including China, Taiwan, Hong Kong, Singapore, Malaysia, Thailand, Indonesia, the Philippines and Vietnam. AHEC seeks to promote U.S. hardwood products and their applications among importers, traders, architects, developers, interior designers, interior fittings contractors, furniture manufacturers and other end-users in Asia. AHEC regularly stages and organizes exhibitions, trade shows, technical seminars, distributes technical literature and fosters productive working relations among trade bodies in the region.

AHEC Greater China/Southeast Asia office expanded in February by opening a new branch office in Shanghai, China. This office will act as a branch office of AHEC Southeast Asia and Greater China. For more information go to the web site www.ahec-china.org.

Harry Urban