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Toh Han Shih

With the deal, the power-tool producer gets to work on a cost-cutting plan

Wang Sing International is proceeding  with a strategy to reduce its reliance on third-party manufacturers after mainland local governments  intervened in a dispute.

The Hong Kong-listed maker  of power tools aims to increase  in-house manufacturing from 40 per cent to 80 per cent to reduce costs, managing director Wang Shu said.

The settlement  showed an  improvement in the  government's efforts to look after  foreign  businesses in China,' Mr Wang said.

'This will also increase the confidence of our foreign partners in doing business in China.'

The dispute involved two manufacturers in Jiangsu province which Wang Sing had tapped for subcontract work.

In August last year, Wang Sing's wholly owned subsidiary in Jiangsu province, Jiangsu Golden Harbour Enterprises,  began operations and increasingly took over manufacturing from the two subcontractors.

However,  an executive director of Wang Sing, Weng Shao-bo, owned most  of the two companies, leading to a dispute between Mr Weng and Wang Sing after orders to the subcontractors were cut.

In October, Mr Weng resigned from the Wang Sing board. According to Mr Wang, the mainland manufacturers had withheld inventory owed to Wang Sing.

Wang Sing then took the matter to the local governments of Nantong city and Hai-an county in Jiangsu province.

Through their efforts, Wang Sing settled the case, with Mr Weng's two companies agreeing to pay Golden Harbour a net 19 million yuan (HK$17.8 million) in cash.

Mr Wang said the dispute, the cost savings move  and the impact of Sars were the main reasons first-half turnover fell to HK$133.3 million from $193.7 million previously, while earnings per share dropped to 1.9 cents from 6.7 cents.

While cutting out third-party contractors may result in short-term pain, the company would benefit in the long term as it works directly with  clients on original design manufacturing  orders.



Wang Sing resolves local supply dispute