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Workers assemble ATVs at a factory in Hangzhou, China run by CF Moto. The Chinese powersports-maker that derives 80 per cent of its revenue from exports.

The Globe and Mail

For years, presidents and prime ministers were led into the heart of Beijing by the famous blue-and-white BMW roundel, affixed to the motorcycles at the head of China's official motorcades.

This year was different. When Barack Obama and Vladimir Putin came to Beijing in early November, they followed motorcycles bearing a badge from CFMoto, whose products are designed and manufactured at a sprawling factory on the outskirts of Hangzhou, not far from Shanghai.

But if that factory was notable for getting its name into global politics, it is important because its products are clawing their way into top western markets, marking an entry into a new way of doing business for Chinese companies. Among the most tangled challenges facing industrial China is how to leave behind the "made in China" label, which has seen the country simply build things for others, and replace it with "designed in China," a mark of making its own goods.

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It's a problem of innovation that has bedevilled numerous Chinese industries, but in particular its automotive companies, which have struggled with quality, consumer trust and an inability to compete with the imaginations of more developed countries.

The products CFMoto is wheeling out – all under its own brand – offer a window into how some are moving past those problems. A decade ago, Chunfeng Holding Group Co. Ltd., its privately held corporate parent, began to "introduce global co-operation partners on design and engine development," said Lai Guogui, one of the company's founders. It was a deliberate strategy: "we believed this would help us to be more international."

CFMoto has obsessed about quality, devoting nearly a fifth of its 1,350-person work force to research and development, and buying dozens of robotic CNC machines to sculpt its own key components. It has built dealer networks around the world – and sales, too. Eighty per cent of its revenues now come from exports.

"We have a different way of thinking from others," Mr. Lai said. "We want to create fun for our customers."

In Australia, CFMoto is now selling more ATVs than Kawasaki or Can-Am, the division of Bombardier Recreational Products. In Britain, more Chinese motorcycles are now being registered than Japanese. The acclaimed motoring journalist Alan Cathcart rode CFMoto's new crop of motorcycles, a pair of 650-cc bikes that are larger and more mature than just about anything before from Chinese companies. He concluded that "it's finally happening: A Chinese manufacturer has stepped on to the world stage."

China is already the world's motorcycle factory. Last year, nearly 23 million were built by hundreds of Chinese companies – some sprawling state-owned enterprises, some barely larger than a backyard shed. The industry is also an ambitious exporter, shipping out 9.2-million motorcycles last year. In places like Ukraine, before fighting broke out, Chinese motorcycles made up 75 per cent of sales.

But that business model is beginning to tatter, as South American and Eastern European consumers gain the wealth to buy cars, and competition steps in. "Producing lots and lots and lots of units for very little profit – that was basically the Chinese industry," said David McMullan, a writer and motorcycle industry consultant who lives in Chongqing, China. "Now they're looking another way at it – and mainly because of the threat from the Indian industry in their established markets."

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CFMoto was built by Mr. Lai and his brother who, 25 years ago, decided to sell kick-starters for motorcycles, and began forming their own moulds to cast their new product. They expanded into engines and graduated to making copies of the famed Suzuki GP125. They now produce a stable of their own designs in motorcycles, ATVs and a boat. From their first "big shark" scooter made popular as a wedding gift, the company has grown into a sophisticated operation that assembles some models for KTM-Sportmotorcycle GmbH, the Austrian firm.

It's a progression with potentially much larger implications, as China's broader automotive market seeks to break out of its home market.

There is precedent for two wheelers building to something bigger: Honda in the late 1950s entered the U.S. market with motorcycles – a trade forever memorialized in the song "Little Honda" – and built its success there into the globe-spanning car and trucks business it runs today.

The Chinese situation is, of course, different: Where Japanese and Korean companies built their skill inside markets largely protected from foreign competition, China today is wide open to imported brands, which have been hugely successful. Cars bearing a mainland mark now account for only 23 per cent of sales.

What China has a robust manufacturing industry that has, through joint ventures, rapidly attained high levels of technology and skill. As a country, it also has a world-wide reach that has already brought Chinese brands to lesser-developed countries where drivers are graduating to bigger vehicles from motorcycles. Geely, the company that owns Volvo, aims to export 50 per cent of the vehicles it makes, although that has proven difficult. Its exports fell 32 per cent in the first half of 2014 as unrest in Ukraine, Iraq and Russia hurt sales. Geely exported 19 per cent of its product in 2013.

But western markets have remained largely impenetrable: after years of splashy introductions at the Detroit Motor Show that date back to 2006, Chinese brands are no closer to making their big North American entrance.

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"I did a study back in 2005 about China, 'Are the Chinese coming to the U.S.?' Even then, the Chinese themselves said it would take another 10 years before they came. And now it's 10 years and they're still not coming," said Bruce Belzowski, managing director of the Automotive Futures group at the University of Michigan.

Still, there is reason to believe if Chinese companies can succeed in building a motorcycle western buyers want, they can do the same with cars. "We have manufacturers here with the capability of, certainly in a few years, being global," said Pedro Nueno Iniesta, a specialist in entrepreneurship who is president of the China Europe International Business School.

China's experience with motorcycles, however, shows the distance it has to go. In their bid to increase quality, companies have outfitted their products with foreign-made suspensions, brakes and fuel systems. They have also turned to foreign designers like Roberto Marabese, the Milan-based architect who has shaped the look of hundreds of models built by companies like Piaggio, Moto Guzzi, Aprilia, Triumph and Yamaha. Lately, he has been doing a lot of work for Chinese firms, as "demand for design is shifting" to Asia.

It's not always satisfying work, however, in part because the demands often aren't for anything original. "Most of the time, I am asked to carry out the design of a product similar to that presented by some [existing] motorcycle," he said. "I always try to fight this."

He faults an inability among many Chinese firms to create their own identity, which can translate into a uniqueness that customers can latch onto.

"I have seen, large factories, beautiful machines, great investment opportunities, but also little desire to innovate because of poor training technique. Then, instead of innovating, they try to copy," he said. "I think it's time to stop thinking that way."

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