U.S. Firms Move to Catch China’s Economic Swell : Investment: Consumer products companies are setting up joint ventures.

GUANGZHOU, China —  Shoppers in this southern Chinese city may not be able to find Knorr’s chicken bouillon cubes on their markets’ shelves, but they can take a ride in double-decker buses sporting Knorr’s splashy yellow, red and green logo.

The painted buses are part of a marketing strategy by the unit of U.S. food giant CPC International Inc. to blare its name around town before introducing its products to the market.

“Because there is still relatively little advertising and promotion, the noise level is not as high, so things stick out more here,” Konrad Schlatter, CPC International’s senior vice president of finance, said in a recent interview. “I give it five years for (Knorr) to become a well-known brand in China.”

CPC International isn’t the only U.S. company testing the waters in China, whose 1.2 billion people make up the world’s biggest untapped consumer market--and potentially its most lucrative.

Companies as diverse as drug maker Baxter International Inc., American Telephone & Telegraph Co. and food processor Campbell Soup Co. are taking steps to position themselves for the economic liberalization that’s swelling China’s domestic economy.

Schlatter estimates that CPC International, which earlier this month said it would invest $10 million in a joint venture to make and sell its soup-and-sauce base in China, could have direct investments here totaling as much as $100 million in five years.

Estimates of U.S. investment in China often are dated and unreliable. Chinese government estimates, although they don’t differentiate between equity and non-equity investments, do give some idea of the explosion of U.S. investment in China.

According to the Chinese government, U.S. companies invested $3.1 billion in China in 1992, compared with $4.7 billion from 1979 through 1991. Beijing projects 1993 U.S. investment in China at $6.2 billion. The U.S. Commerce Department reported last month that overall U.S. investment in the Asia-Pacific region will come to an estimated $13 billion in 1993, up from $10.9 billion in 1992.

Robert Taylor, chief of the U.S. State Department’s economics section on China and Mongolia affairs, said that in 1991 his office received one inquiry a month on average from companies interested in investing in China but now gets three a week, mostly from large multinational companies.

While they’re certainly not tiptoeing into China, U.S. companies are proceeding cautiously, experts say. Many companies remember getting burned by Chinese investments during the first half of the 1980s, when they limped away with write-offs because the Chinese government wasn’t permitting development of a consumer market.

Chrysler Corp., which established a Chinese joint venture in the mid-1980s and also has a development facility, still is waiting for sales of its vehicles to take off. Chrysler expects to sell about 25,000 Jeeps in China this year, mostly to dignitaries and businesses, said spokesman Tony Cervone.

Whereas much of the first wave of investment came from durable goods manufacturers, much of the current interest is coming from consumer products companies like CPC International that can take advantage of China’s more liberal attitude toward investors and a willingness to open up markets.

Today, foreign companies “are being offered the opportunity to sell things in the domestic market, which is what American investors wanted all along,” said the State Department’s Taylor. “Until 1992, China wasn’t really receptive to that.”

But China’s embryonic financial markets and banking system, fears of inflation and memories of the Tian An Men Square uprising in 1989 all are factors keeping American business from rushing headlong into China, said Richard Kjeldsen, a professor of international finance at USC who specializes in commercial risk assessment.

“You can’t have all kinds of economic freewheeling and a political system like that,” he said. “Somewhere along the line, that has to be reconciled.”