Chapter 198 Limited Tolerance
Special Economic Zone, Hongyan Hotel.
That evening, Zhang Jianjun, who had been making a fortune in pirated VCDs in Dongguan, came rushing over. Together with Chen Daohua, the five of them shared a simple meal before moving to a private tea room at the top of the hotel to continue their conversation.
"When it comes to economic development, the goals of central and local governments aren't always aligned," Su Yuanshan said, sipping his tea. "Local governments would love nothing more than for a giant company to rise from their soil and monopolize the universe."
Su Yuanshan's alcohol tolerance had improved, but compared to the resilience he had built up in his previous life, he was still a bit lacking. Tonight was more of a casual gathering, and with an important meeting scheduled with top government officials the next day, he had only drunk lightly.
"From the central government's perspective," Su Yuanshan continued, "any enterprise that grows too large—whether private or even state-owned—will inevitably get two slashes across its back."
Everyone present had worked with Su Yuanshan before, but it had always been about technology and future prospects. It was their first time hearing him discuss the relationship between government and business. Naturally, they were intrigued.
Especially Zhang Jianjun, who curiously asked,
"Why are their interests different?"
"Local protectionism," Chen Daohua answered for Su Yuanshan, using a term that hadn't yet fully spread in public discourse.
Su Yuanshan looked at Chen Daohua in mild surprise.
Chen Daohua chuckled.
"Before we entered the mainland market, Xiao Jing and I discussed this. She said that Western scholars studying China found that during the transition from a planned to a market economy, local protectionism would inevitably emerge.
Thus, choosing the right location was critical."
Su Yuanshan thought back to when he first met Chen Jing.
Back then, she had seemed like a quiet, innocent university girl...
Yet she had already thoroughly researched China's internal dynamics.
He nodded in agreement.
"Exactly. A major enterprise landing in a locality satisfies all the government's needs: taxation, employment, boosting related industries, financial circulation... and ultimately, prosperity—meaning political achievements.
Otherwise, why would local governments fight tooth and nail to attract investment?"
"In the past, there were plenty of cases where a single large state-owned enterprise supported an entire city," Su Yuanshan added with a smile.
"If local governments don't protect such enterprises, what else would they protect?"
The group fell into thought.
After a while, Wang Chaoxin murmured,
"But from a higher-level perspective, such enterprises aren't conducive to building a true market economy."
Su Yuanshan nodded and smiled.
"Exactly. That's why the central government struggles with this.
On one hand, reform gave local governments great autonomy.
On the other, it couldn't ignore the market-building mandate.
The solution? Foster competition. Lots and lots of competition."
"Understanding this," he continued,
"helps explain why, even after choosing Yuanxin for mobile base stations, the Mobile Company still leaves the door open for foreign equipment.
It's not favoritism. It's strategic."
"In the grand scheme," Su Yuanshan said, "the state is using Yuanxin as a sword—leveraging us to invite global giants to compete.
If the giants lose, they'll have to invest more heavily here, driving industrial upgrades."
Jiang Qingchuan glanced around.
He was the only one here who knew almost nothing about economics. Finally, he couldn't resist asking:
"Then what's the central government's attitude toward Yuanxin?"
Su Yuanshan thought for a moment and said calmly:
"Limited tolerance."
(Author's Note: A lot of commentary and analysis on this point can be found in the "Author's Notes" section.)
The conversation naturally shifted toward Yuanxin's mobile phone strategy.
Since the Mobile Company was treating all brands equally, Yuanxin decided to seize the opportunity.
After assessing its strengths, Yuanxin chose to directly enter the consumer market—
deliberately letting Motorola, Siemens, and the like focus on carrier partnerships.
The reason was simple:
Su Yuanshan had already learned the carriers' contract terms.
If you demanded exclusivity (i.e., a local carrier only sold your phones), they would crush your prices to rock bottom.
If you accepted non-exclusive terms, the carrier would offer multiple brands to users.
Given how broke the Mobile Company was, it had every incentive to squeeze as much blood as possible.
Su Yuanshan believed that even the biggest foreign giants were ultimately here to sell products, not to help China's mobile communication industry out of the kindness of their hearts.
When their distribution channels proved weaker than Yuanxin's, they would naturally accept limited cooperation with carriers.
Thus, Yuanxin could first seize market pricing power.
Later, when Zhongxin's mid-to-low-end phones hit the market, they would sign deals with carriers.
At that point, foreign brands stuck alongside cheap, low-end products would inevitably suffer brand contamination.
It would be like a clay doll holding hands with a porcelain doll—
you can guess who loses face.
And Yuanxin's ambitions didn't stop there.
To open more markets, Wan Yongliang had already flown to Thailand,
and Sun Xihui would be arriving from Hong Kong the next day to meet Su Yuanshan in the Special Zone.
In short—
even if Yuanxin's first mobile phone couldn't sell...
they would grit their teeth and make it work.
Of course, there was no way it wouldn't sell.
Over the past month, Wang Rui had conducted extensive blind testing across different regions, targeting users of big "brick" phones and pagers.
(Blind testing meant removing all branding from devices and switching them all to English interfaces, asking users to rate them purely based on appearance and usage.)
The feedback was very good.
Yuanxin's phone had the highest satisfaction scores—
even if only by a small margin.
At least it proved that without brand bias, Yuanxin's hardware could stand toe-to-toe with the giants.
Thus, this device, with a hardware cost approaching 3,000 yuan,
was formally named YX1201, and would hit shopping malls across the country in a week.
Its nationwide retail price?
5,888 yuan.
A number symbolizing: "I prosper, I prosper, I prosper."
...
The next day, Su Yuanshan and Wang Chaoxin visited the Special Zone government.
Naturally, the meeting began with polite flattery.
Afterward, the mayor, an impatient man, cut to the chase.
He warmly welcomed Yuanxin's investment.
The 3,000 mu (around 500 acres) of land was no problem—
but they hoped Yuanxin would build a wafer fab.
"We don't need anything too advanced," the mayor said earnestly.
"Not even MOS lines.
Just a basic bipolar line would do!"
His gaze burned with hope.
Su Yuanshan and Wang Chaoxin exchanged glances, both smiling wryly.
Bipolar lines—i.e., basic semiconductor transistor production—
underscored just how badly the country still needed self-sufficiency in core components.
After a moment's thought, Su Yuanshan said gently:
"Mayor, the Special Zone definitely needs a wafer fab.
But it shouldn't be built by Yuanxin.
At least not yet."
"Why not?" the mayor asked, confused.
"Our industrial plan is clear.
We want to leverage the Special Zone's geographic and talent advantages to first integrate and expand electronics manufacturing," Su Yuanshan explained.
"Eventually, it will spin off and aim to become the world's largest 3C electronics contract manufacturer."
"If Yuanxin builds another wafer fab immediately," he added with a sincere look,
"we'd be overlapping resources and strategies—
and we would be doing a disservice to both the Special Zone and ourselves."
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