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Friday, October 17, 2003

China's New Rich

If you want to know just how lop-sided economic growth in China is right now, just check out Richard Hoogewerf's rich list.

Almost 60 per cent of the wealth collected by the new 100 richest Chinese business people comes from real estate sector, while also new industries on the list like the steel industry ride the building boom, says author Rupert Hoogewerf. IT-entrepreneurs also made their comeback on the list.

William Ding Lei, CEO of www.netease.com is one of the unexpected returnees even as the number one with an estimated capital of 900 million US$. “He is the Bill Gates of China," says Hoogewerf. Ding, together with Charles Zhang of www.sohu.com were also present in the first rich lists Hoogewerf made five years ago, but the dotcom bust wiped much of their capital away. Even last year Ding saw his Nasdaq almost suspended because of accounting problems.

Hoogewerf skirts the question on how sustainable the profits in the IT-industry are nowadays. The IT industry has only four really large Nasdaq-listed players, whose profits are based on SMS and that is under pressure both by government pressure and the fear it might be outdated again soon by more convenient technologies.

“Look at our number ten, Hoogewerf says, “Chen Tianqiao of Shanda Networking only founded his company for online games in 1999. I only noticed him for the first time in the middle of last year.?

The new Rich List shows in more ways the fast changing dynamics. Forty of the top-100 are newcomers. Hoogewerf: “Some people of the old list were pretty upset when they discovered they were listed lower than last year, even though their businesses have been growing very fast over the past year, but others have been growing faster.?The cutoff rate last year was 70 million US$, in 2003 110 million US$. Some businesses double every year, but only now they become sizable, you see them grow very fast, adds Hoogewerf. The higher cutoff rate gives some stability, thinks Hoogewerf. “It is very hard to get that kind of money in one lucky deal.?

About one third of the top-100 has entered politics, either as a member of the CPPCC (23 per cent) or of the National People’s Congress (11 per cent). About a quarter is estimated to be member of the Communist Party. Private business is so large, it cannot ignore politics, and politics cannot ignore the private entrepreneurs, says Hoogewerf.
Source: ChinaBiz

and here's another piece on the same topic from Yahoo:

A new survey shows the fast transformation of China's economy is producing wealth in areas far away from industries dedicated to serving the country's basic needs, which created the country's first multimillionaires.

China's original push two decades ago toward a market economy was led by entrepreneurs such as Larry Rong Zhijian, who built the country's first international investment company Citic Pacific group, while two brothers from rural Sichuan province addressed shortages on the farm with an animal feed operation.

These people remain among the country's richest today, along with self-styled tycoons who snapped up property before most Chinese thought about the need for new housing and offices. Yet, a new survey on the country's rich suggests that as China's drive toward the global economy gains momentum, it has become less obvious where pots of gold might be hidden. Chinese entrepreneurs are making a fortune catering to a new generation, with business interests ranging from the Internet to confectionaries to soccer.

The country's richest man now is a 32-year-old entrepreneur, William Ding Lei, whose Web-based short-messaging service might be considered frivolity if it and others like it weren't the envy of telecommunication companies everywhere. Even valuing Ding's assets is newfangled for China, since his fortune rises and falls in line with the share price on his 52% stake in NASDAQ-listed NetEase.com Inc. (NTES). This week his worth was around US$1.3 billion, up from US$900 million at the end of September, but he wasn't even considered among the country's wealthiest a year ago. The rankings of China's 100 richest were published Thursday by a 33-year-old English accountant, Rubert Hoogewerf, who has been on their trail for five years. "It gives an idea of how far China has developed," he says. Worth US$300 million, Zhang Yin is perhaps the biggest exporter from the U.S., in terms of volume. Her America Chung Nam Inc. buys wastepaper there and sends it around the world, where it is made into products like boxes to hold six-packs of Coke.

Guo Hao's Agricultural Holdings in Fujian has organic farms, giving him a wealth of US$230 million. Wang Chuanfu is worth US$185 million on the back of a rechargeable battery business called BYD Co. (1211.HK). Wahaha Group's Zong Qinghou makes soft drinks and children's clothes, giving him a wealth of US$145 million. The bottom line is US$110 million this year, whereas it was just US$6.0 million when Hoogewerf's first list was published in 1999. But it still doesn't have anyone from the entertainment industry. And the rich tend to be a provincial bunch, with fewer than eight said to speak "passable English."

China's rich are also increasingly close to the government, with 34 holding a party-appointed post, although Hoogewerf waves off a suggestion the entrepreneurs could be fronts for the state. He says they tell him things like, "as our business grows, it's impossible to avoid politics." Hoogewerf is publishing the list with Euromoney Institutional Investor Plc (ERM.LN). He and New York-based Forbes magazine, which will announce its own ranking of China's rich later this month, parted ways earlier this year in a dispute over control of the list.

Forty of the 100 names this year are new compared with the list published last year in Forbes, which goes some way toward underscoring how topsy-turvy China's move toward a market economy has been. Li Zhaohui, a 22-year-old with wealth of US$290 million, became the youngest person on the list and China's first millionaire heir when his father was killed earlier this year in a business dispute. His control of Shanxi Haixin Iron and Steel Group underscores another trend, steel millionaires, with five of the 10 youngest having some interest in the industry. The Li case also underscores how getting onto the list is sometimes seen in morbid terms. Several of the people who came to public view through lists like Hoogewerf's have fallen extraordinarily hard.

Among those dropping right off this year's rankings is Zhou Zhengyi, a now-discredited Shanghai property tycoon arrested in September after being identified as kingpin in a banking and property scandal that touched high-level bankers and bureaucrats. He was ranked No. 11 with a wealth estimated at US$320 million when the list was published by Forbes in 2002.

His fall followed that of Yang Bin, a one-time envoy to North Korea listed in 2001 as worth US$900 million. He is now serving an 18-year sentence for fraud and bribery in northern China. Hoogewerf says he doesn't accept that Chinese entrepreneurs have "original sin," meaning that succeeding in the country's requires dirty dealing. The consistent anchor to riches in China has remained property, with most of the top-10 and nearly 60% of the overall wealth emerging from the sector. But information about these property multimillionaires can be notoriously sketchy, with Guangdong-based tycoon Zhu Mengyi's Hopson Development (0754.HK) said to be China's biggest real estate developer. "Nobody knows him. He's terribly low key. I couldn't find a photograph of him to save my life," Hoogewerf said.
Source: Yahoo News

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