CIT Opens in Shanghai

SHANGHAI, China—Her computers had not yet arrived, and things were still lingering in a semi-chaotic state. But on March 17, Vivian Lee, Asian business director for Los Angeles-based CIT Commercial Services, still managed to open the company’s first outpost in Shanghai, China.

“I still don’t have e-mail,” said Lee. “I don’t know where the computers are. On some truck, but I don’t know where the trucks are.”

Born in Shanghai and educated in Taiwan, Lee moved to the United States in 1978 and eventually began working for CIT in Los Angeles. In a way, she is a pioneer in the factoring business. With Lee at the helm of its Shanghai operation, CIT has become the first U.S.-based factor to test the waters in the Chinese metropolis of 14 million people.

Over the last decade, Shanghai has evolved into the commercial engine fueling economic development in China. With the majority of the country’s apparel and textile factories located just west of Shanghai, the city is a garment capital.

Lee has begun the CIT venture cautiously to assess what kind of response it gets from Shanghai manufacturers. Her office is staffed with only two employees, who will provide her with backup when she is not in Shanghai. She plans to jet between Los Angeles and China every two months, spending three weeks in Shanghai during each visit.

Last March, Lee began researching the commercial areas of Shanghai to find a suitable location for CIT’s office. She had to choose between Pudong—a new commercial zone that is burgeoning with tall buildings, hotels and commercial office space—or an old commercial district that is close to downtown.

Since traffic jams are becoming increasingly common in Shanghai, Pudong’s location far from the central area of the city seemed too distant. Lee chose the more established district near downtown because of its proximity to manufacturers.

“I knew if I chose Pudong, few people would drive that far,” Lee said.

Lee said that her clients will be apparel and textile manufacturers, as well as manufacturers in other industries.

“I’m trying to expand CIT’s noncore market,” said Lee. “CIT was in apparel too much. I’m trying to expand that to other areas such as housewares and furniture to build a different client base.”

Lee is also shying away from asset-based lending and concentrating on credit guarantees, collections and bookkeeping. That is because CIT does not yet have the necessary government-issued lending permits to conduct lending services, she explained.

“It is very complicated to open up an office in Shanghai,” she said. “It’s not like opening an office in Dallas. You have to apply for a permit from the Chinese government to open an office. It’s a different mentality here.”

That different mindset has kept U.S. factors that specialize in assetbased lending out of Shanghai. GMAC Commercial Finance Group, whose financial services cover the apparel industry, is one U.S. company that opened a branch in the city. The group launched its Shanghai office in 1999 with one executive. However, the office deals strictly with the automotive industry, said Ann Marie Sylvester, a GMAC spokeswoman.

Mitch Cohen, Western regional manager for CIT, said the company decided to open a Shanghai office for various reasons.

“Over the years, we have seen local manufacturers diversify their sourcing, bringing in more products from abroad,” Cohen explained. “As a result, you have Asian vendors seeking distribution in the United States.”

The elimination of quotas on many Chinese goods imported into the United States that will go into effect in 2005 is another element motivating CIT’s push into Shanghai.

“Obviously 2005 is a driving part in all of this,” Cohen said. “But I’ve been with CIT in L.A. for 20 years, and it’s been building up since I’ve been out here.” —Deborah Belgum