THE latest results of trading, marketing and motoring concern Inchcape Pacific show the importance of diversification and flexibility in China ventures. Partner Toyota saw the writing on the wall, knew that Beijing wanted its car industry consolidated to perhaps five or six players, and terminated the venture to resume control of its mainland drive. A temporary casualty of the decision was Inchcape's bottom line: profits fell to $394 million from $422 million in the first half. Inchcape distributed the cars through Toyota Motors South China. Inchcape benefited from Toyota's brand recognition, and Toyota benefited from its partner's successful distribution network in Hong Kong and its China expertise. Last year, the venture contributed about $124 million to Inchcape's coffers in the first half. This year, its absence was noted. However, the fall should not be taken out of context. The termination of the venture was on the cards - and there was never any question that it was permanent. Indeed, it reflects Inchcape's success in marketing marques such as Toyota. The company's stable now includes names such as Cadbury's, Kellogg's Corn Flakes, Lucozade, Ribena, Brands' Bird's Nest and Chicken Essence, Elastoplast and Nivea - most of which command instant recognition in East Asia. Now Inchcape is so optimistic over prospects for China that it is setting up its own distribution network. This could be operating as early as 1999. The company is taking a risk that promised rail, road and port infrastructure work will be completed. But if it is right, it should be miles ahead of the competition and it could have a string of suitors knocking on its warehouse doors in China while would-be imitators are still having their visas stamped at Shenzhen immigration.