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"They say wealth never surpasses three generations," laughs Michael Chan. "Let's hope that's just an old wives tale."

Mr Chan represents the Cheng family, which have been successfully running Sun Ming Hong, one of Hong Kong's major importers of North American ginseng, for three generations.

Founded in 1949, the company started out in the Chinese medicine and herbal products business. Over the years, it tried its hand in the pearl business, marble, timber, dried seafood, and deer velvet, among others, but its core competence today is ginseng, and Chinese herbal and medicinal products.

"As a trader, we are always looking for opportunities, but as an SME, one has to know when to pick something up and when to drop it," he said. "Now, ginseng is our main line. After that, we buy a lot of Chinese herbs and herbal preparations to export overseas, mainly to Canada but also to Europe and Australia."

Overseas Chinese communities buy the bulk of Sun Ming Hong's exports, but the company is always on the lookout for non-Chinese customers.

Ginseng, which is recognised around the world for its health properties, is popular in health food shops overseas in various forms, from powders, to tablets and teas. Sun Ming Hong even produces its own brand of ginseng teas which it sells in Canada.

Hong Kong imports about 6 million pounds of North American ginseng annually, with cultivated ginseng constituting 99 percent of total imports and rest being wild ginseng. Sun Ming Hong, which specializes in North American ginseng, imports around 10 percent of the total, says Chan Kim-ming, Sun Ming Hong's chief ginseng buyer and President of the American and Canadian Ginseng Importer Trade Association.

"The price of wild ginseng is on the average 20 times more than that of cultivated ginseng, and frankly it works well and it is a favourite tonic for longevity," he said.

Wild ginseng commands a high price due to its scarcity, but with wild ginseng becoming increasingly rare, CITES (The Convention on International Trade in Endangered Species of Wild Fauna and Flora) has imposed import/export licensing permits for wild ginseng to conserve the rare American wild ginseng.

"Canada has banned the export of wild ginseng while the export of cultivated ginseng is controlled religiously," Michael Chan said. "But the funny thing is, scientifically, they cannot identify what is the difference between the cultivated and wild variety. Ask any traders, however, and they will immediately be able to tell you which is wild and which is cultivated."

As a result, import and export of cultivated ginseng also require CITES permits. "To comply with all these regulatory requirements and to meet the delivery schedule of our customers, the company needs to be vigilant in all its documentation," he said.

Room to expand?

Mr Chan said he faces the chicken and the egg conundrum in trying to expand the business. "When you are an SME, you have limited resources with which to do things. Your hands are full taking care of existing customers' orders that you don't have enough time to look for new customers."

He sometimes stumbles across opportunities when existing partners -- as he likes to call his customers -- ask him to source specific products in China, while he in turn occasionally buys products from his partners.

"I guess you could call that an accidental diversion in our business strategy based on our customer-centric relationship with our partners," he said. "Which is partly why we have carried such a diverse line of products over the years."

Although Mr Chan says he has a solid client base in Canada, he would like to sell more in Europe. He believes the potential is there, as in France alone about 60 percent of the population regularly takes herbal tonics, mostly made from African herbs. But his efforts to expand on the continent are being held back by bureaucratic red tape.

Honey, beside its therapeutic properties, is often added to Chinese herbal preparations to remove their bitterness. Unfortunately for Mr Chan, the European Union in March 2002 banned any products from China containing honey because they say it contains unacceptable level of antibiotics.

"So we wrote and made personal representations to our partners countries" trade offices in Hong Kong, while our partners did the same, to ask them to define the standard test for the concentration level of antibiotics, if any, that is acceptable. Unfortunately, we never received any reply, despite repeated requests."

He believes the ban is not about Chinese honey supposedly containing antibiotics, but the EU's retaliation for China banning EU cosmetics because of mad cow disease.

"Everybody thinks China joining the WTO is the best thing since sliced bread. Philosophically I agree. Before, if there were any trade friction they would slap a tariff on the goods. If you are prepared to pay the tariff there was no problem. Anticipating the lowering of tariff barriers, using the honey ban, for example, EU is changing the tactics in handling the trade dispute. It is OK for a large company to weather this type of ban, but as an SME we are having pneumonia."

Because Chinese medicine and herbs are under increasingly more governmental regulation, both locally and internationally, Mr Chan said continuing to grow the business will be tough. However, he remains optimistic that despite tighter regulations and worries that more businesses will go directly into China to do business, Hong Kong traders' ability and credibility internationally will ensure China does not overtake them for some years to come.

More studies into Chinese medicine could also bring him more good news, as will growth in the number of people looking to alternative medicines.

"People are discovering that herbal products have less side effects than antibiotics, and as people are also more health conscious, they are also looking more at natural health foods," he said.

He explained that traditional Chinese medicine is more about balancing the negatives and the positives (yin and yang) in the body. So a lot of times, it is a mixture of herbs which help balance the body's natural defence mechanisms to surround a problem and move it out. Western medicine, on the other hand, takes a more confrontational approach. Doctors use antibiotics and potent drugs to destroy the bugs and viruses.

"As the Mainland showed in treatment of its SARS victims, Chinese medicine can be very effective," he said. "Science may not be able to identify how elements in Chinese herbs work, but the proof is increasingly in the eating, rather than in the lab results."
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