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Yong Hui Li, chairman and CEO of AutoChina, in New York's Times Square. The company's shares began trading on Nasdaq in in October, 2009.

Zef Nikolla

Yan Shu Juan waves proudly at the large white bulletin board that displays her credit score to anyone who ventures inside an AutoChina International Ltd. dealership 260 kilometres south of Beijing.

"Look! I have 10 stars [out of 12]" boasts Ms. Yan, the owner of a three-vehicle trucking business that hauls coal from nearby Shanxi province to Zhengding.

A petite 39-year-old, Ms. Yan doesn't look like a budding trucking magnate. But that's exactly what this small business owner has become, thanks in large part to AutoChina, a truck leasing company that is revolutionizing how credit is distributed and vehicles are sold in rural China with ideas borrowed from Canada.

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Yong Hui Li, AutoChina's founder, chairman and chief executive officer, is a 48-year-old Canadian citizen who discovered the model for his burgeoning empire 16 years ago while visiting a car dealership in Ontario. "There are many impressions that have been made on me from Canada," Mr. Li says. In addition to his truck leasing concept, he has built a shopping centre in China that is a facsimile of a mall in Burnaby, B.C.

Mr. Li is a so-called transnational - a Canadian citizen living and working abroad. About 2.8 million Canadians now live outside the country, according to the Asia Pacific Foundation of Canada. Many of these expatriate citizens, like Mr. Li, bridge two cultures and have become natural conduits for entrepreneurial ideas, taking concepts from Canada and adapting them to new environments.

<iframe width="600" height="400" frameborder="0" scrolling="no" marginheight="0" marginwidth="0" src=",20.390625&spn=159.651986,61.171875&z=1&output=embed"></iframe><br /><small>View <a href=",20.390625&spn=159.651986,61.171875&z=1" style="color:#0000FF;text-align:left">Canadian expat distribution</a> in a larger map</small>

The ranks of Canada's transnationals already outnumber the populations of many provinces. They are playing an increasingly important role in helping Canada build trade with other nations, and forge cultural and educational links to other societies. Especially in Asia, where 750,000 Canadian citizens now reside, the large number of bi-cultural Canadians provides a natural connecting point between very different societies. "They act as a business and social lubricant," says Paul Evans, director of the Institute of Asian Research at the University of British Columbia, who believes expatriates are an important bridge between Canadian commerce and foreign cultures.

Mr. Li shows how ideas can cross borders. He is taking the truck leasing concept he witnessed in Ontario and adapting it to the realities of rural China with capital he raised on the U.S.-based Nasdaq Stock Market, where AutoChina started trading last year. The story of how he tinkered with a North American business idea to make it work in Asia provides a road map for other Canadian entrepreneurs trying to seize on emerging opportunities in China.

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Those opportunities can change quickly - as Mr. Li's career demonstrates. One of six children born to a poor farming family near Shjiazhuang, he managed to win a place at Tianjin University, where he earned a degree in laser technology.

In 1985 he returned to Shijiazhuang, but found it difficult to secure a well-paying job. He tried everything from being a technician in a locomotive factory to selling machinery.

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In the late 1980s, he decided to go into business for himself. He traded aluminum ingots and set up a car-parts operation. Then, in 1994, on his initial visit to Canada, Mr. Li visited an auto dealer in Waterloo, Ont., with a friend from university.

"I was surprised that the Canadian banks and car dealers provided the service of car loans. At that time, China did not have that kind of service. Customers could not borrow enough money to buy a car," he recalls.

When he got back to China, Mr. Li was ready to launch his next business.

"I just copied the model of the Canadian car dealerships. The challenge was controlling the credit risks of the Chinese customers."

Mr. Li began to lead a bi-national existence, exploring opportunities on both sides of the Pacific, including an unsuccessful attempt to export log homes from Canada to China. His wife and son immigrated to Burnaby, B.C., and his daughter was born in the Vancouver suburb. Meanwhile Mr. Li flew back and forth between the two countries to tend to his varied enterprises. He was what the Chinese Canadian community calls an "astronaut."

In China, his auto leasing business ran into competition. After the Asian economic crisis of 1997, China's government-backed banks tried to stimulate the economy by providing loans to auto buyers. Realizing his competitors were more interested in juicing the economy than turning a profit, Mr. Li withdrew from the auto financing business and turned to real estate.

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Mr. Li focused on Shijiazhuang, his hometown. He built a residential complex and office towers as well as a shopping mall modelled on a complex near where his family lived in Canada. "You will find that my shopping mall is quite like the Metrotown in Burnaby," he says.

In 1999, he was detained by Chinese authorities for more than three months after he tried to buy control of a state-backed company. His wife and family in Vancouver were distraught. After a lengthy investigation, Mr. Li was released. He was never charged. The government officials in Shijiazhuang opposed to his business plans, however, were eventually ousted.

Mr. Li decided to plant his roots more firmly in Canada. He set up an export business in Canada sending double-paned windows back to China and obtained Canadian citizenship in early 2001 under the qualified entrepreneur program, which grants visas to those who invest in Canadian businesses that create jobs.

These days Mr. Li's concrete ties to Canada are slight. His family no longer lives in Canada, he doesn't own property in Canada any more, and he no longer has any business dealings here. But he maintains his Canadian citizenship, speaks fondly of this country, and says that his experience with Canadian business has been crucial in helping him shape the standardized approach that he has brought to his Chinese enterprises.

That approach has been particularly crucial with his AutoChina venture. In 2007, just ahead of a slowdown in the Chinese market, Mr. Li decided it was time to leave the real estate sector and return to the truck leasing business.

The government had exited the truck financing sector in 2002, but not before it had lost millions on bad loans, according to Mr. Li.

"When the customers borrowed money from the banks they thought they were borrowing money from the country. So it was very reasonable that they thought they won't need to return it," he says.

Mr. Li launched AutoChina in March, 2008. It is a cross-cultural hybrid, marrying North American business concepts to the realities of life outside China's major cities.

"I think the key to Mr. Li's success so far, has been bringing a Western business model to China at a time when the Chinese market is seeking standardization and something they can rely on," says George Kaufman of Chardan Capital Markets, a New York investment bank that was involved in a recent AutoChina financing. "That includes customer service, which is traditionally something that Chinese businesses haven't been known for."

With AutoChina, Mr. Li is hoping to cash in on a sweeping national program to improve life in China's countryside. Despite rapid urbanization, more than half of China's 1.3 billion people still live in rural areas.

Zhengding and other rustic centres have densely populated commercial cores, but the surrounding areas give way to stretches of open land, where farms, mines and rudimentary factories dot the landscape. Residents have far lower incomes than those who live in the big cities.

Still, freshly built roads go almost everywhere. China surpassed the U.S. as the world's largest auto market this year. Trucks, such as the ones sold by AutoChina, dominate the underused highways, and sales of the vehicles are booming. Some 650,000 heavy trucks were sold in China in 2009, about five times more than in the U.S. and three times more than in Europe.

The missing ingredient in this otherwise fertile market is a formal credit rating system that would allow people to buy a truck on credit, much as they do in Canada. Many rural buyers of commercial vehicles in China are forced to pay the entire cost of a truck upfront because they can't get financing from banks or dealers.

That's where AutoChina comes in. It operates 184 branches throughout northeastern China. Each retail location provides maintenance, insurance, roadside assistance - and also serves as a one-stop truck leasing shop. Customers make a down payment of about 25 per cent of the truck's value. They then pay the remainder in instalments as part of a 26-month lease.

Such leases would be easy to arrange in Canada, but Mr. Li has had to adapt the system he witnessed in Ontario to make it work in China. The key is using the standardized operating procedures common in North American business, but fine-tuning them for Chinese society.

Staff track the movements of every AutoChina truck using a GPS system installed in each vehicle. Until a lease is paid in full, AutoChina remains the legal owner of the vehicle. If a customer misses payments, the company uses its own keys to take the vehicle back.

In the absence of Canadian-style credit bureaus, AutoChina relies heavily upon its staff's judgment to judge prospective borrowers. The employees at each branch usually know something about each customer's reputation and staff compensation is tied to the quality and frequency of customer payments.

Perhaps most important is the prominent bulletin board at each branch showing the AutoChina credit rating for each local customer. A default on a truck loan results not only in the loss of the down payment - often the life savings of a customer - but also a significant loss of reputation or "face," a key measure of personal value in Chinese culture.

"If the customer is about to default on their loan, their mother, father and sister will all ask or even help to make the payment. If they don't, they will lose face," says Diana Liu, a Taiwanese-born venture capitalist who lives in Vancouver and is an AutoChina board member.

AutoChina has leased 11,000 vehicles since beginning operations in 2008, and it says only 12 customers have defaulted. The company has failed to recover a mere three trucks.

Mr. Li hopes to have 275 branches open by the end of the year and believes there is plenty of room for more. He aims to make AutoChina one of China's first national retail brands - and he believes it will be the concepts he imported from North America that will help it reach that goal.

"We would like to be the McDonald's or KFC of the truck leasing business," he says.

"We don't want to be a Chinese restaurant because for a Chinese restaurant to succeed you need a very good chef and a very experienced manager. So why is it that McDonald's can have tens of thousands of stores around the world? It is because of standardization and that is the point of our new business here."

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About the Author
Asia-Pacific Reporter

An award-winning journalist, Andy Hoffman is the Asia-Pacific Reporter for Canada's national newspaper, The Globe and Mail. More

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