HVK Archives: Capitalist children of socialism
Capitalist children of socialism - The Indian Express
T.J.S. George
()
18 July 1997
Title: Capitalist children of socialism
Author: T.J.S. George
Publication: The Indian Express
Date: July 18, 1997
Socialist capitalism may sound like a contradiction in terms, but that is
precisely what China has developed as State policy. Corporate analysts say
that for this reason alone, if nothing else, Hong Kong will keep growing as
an international business beehive.
The 'red chip' companies are cited as the best examples of socialist
capitalism. These are companies set up by China's central and regional
governments (socialism). But they are listed in Hong Kong, the directors in
charge are proven businessmen accountable to shareholders, and they and
their employees are encouraged to earn performance incentives that can be
shamelessly high (capitalism).
The recently released annual reports of several of these State-owned
companies have been revealing. Shanghai Industrial, for example, is owned
by that city's municipal government. Its chairman, Cai Laixing, was given a
profit-related bonus option of 4 million shares at an exercise price of HK
$8.8. The share value had, in fact, shot up to around HK $46 per share.
This meant that if Chairman Cai wanted to cash his options, he would have
made a personal profit of around HK $150 million in that one year.
Cai did not exercise his option. But He Keqin, chairman of Guaongdong
Investment, did. His company, owned by Guaongdong provincial government,
granted him one million share options at HK $3.7 per share. He bought half
of what he was offered. Ale pre-share trading price last week was HK
$11.50, which meant that he could sell his 500,000 bonus shares and make a
personal fortune of HK $3.8 million.
The heads of most red chip companies were closet capitalists who suffered
during communism's fundamentalist days. They were reborn when Deng
Xiaoping was reborn. Zhu Yuening, head of China Travel International
Investment, the investment arm of the Chinese Government's Office of
Overseas Chinese Affairs, sold vegetables for a living during the Cultural
Revolution. Today, his company is a hot favourite with investors.
The most glamorous figure in the world of red chips is Larry Yung Chi-kin.
He was, like Deng Xiaoping, reduced to hard labour during the Cultural
Revolution. In 1978, just as Deng was launching his open-door policy, he
moved to Hong Kong. He is now almost setting the Hong Kong harbour on fire
with a company called Citic (China International Trust and Investment
Corporation).
There is an appearance of nepotism in the Larry Yung saga. He is the son
of Rong Yiren, Deng's economic policy advisor, who became Vice President of
China. Citic was founded by Rong Yiren in 1979 as a Beijing-controlled
government agency.
But corporate circles don't see it as nepotism because Larry Yung's
business credentials surpass everyone else's, though the media loves to
refer to him as the 'princeling'. He had cut his teeth in Hong Kong on his
own by putting deals together and earning massive profits which he would
reinvest to make more millions. Along the way, he also established a
reputation as a colourful character, enjoying such bourgeois pleasures as
racing, golf and high living in general.
When his unequalled business acumen made the Chinese authorities invite him
to take over Citic, he was in no hurry. He took over in 1987, almost a
decade after conquering Hong Kong, only after Beijing accepted his
condition that he should be given complete autonomy in local investment and
management.
Larry Yung has turned Citic into a household name in Hong Kong with a
market capitalisation of HK $82 billion and a multitude of businesses
including substantial holdings in such blue chips as Cathay Pacific, Dragon
Air and Hong Kong Telecom.
Yung too received a year-end performance bonus from Citic - 291 million
shares which, if he exercises his option, can make him personally richer by
HK $3 billion. But this capitalist son of socialism was probably
unimpressed by the prospect. After all, some time ago he had won a jackpot
of HK $36 million at the race course and given away the entire amount to
charity.
Perhaps the correct phrase to use is Capitalist Socialism.
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