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1 Talking Point 5 Week in 60 Seconds 6 Consumer Week in China 8 M&A 9 Property 10 Auto Industry 12 Aviation 14 China and the World 5 April 2013 16 Society and Culture Issue 187 19 And Finally www.weekinchina.com 20 The Back Page High Noon for tycoons m o c . n i e t s p e a t i n e b . w w w Are businessmen the latest target for Xi Jinping’s anti-corruption campaign? Brought to you by Week in China Talking Point 5 April 2013 Flying too close to the sun? Scandals at Suntech, Hanlong, Jointown and Jinye. Has a crackdown started? Suntech’s founder Zhengrong Shi has been told by the authorities he cannot leave China braham Lincoln earned his nick - to petition her husband for addi - merely a coincidence, or another Aname ‘Honest Abe’ for his in - tional funds from Congress. The facet of President Xi Jinping’s anti- tegrity. But as his biographer Doris president was livid and refused, corruption drive. Kearns Goodwin points out, Lincoln’s recognising that such lavish spend - wife Mary was not her husband’s ing on home improvement didn’t First Shi: what’s happened to him? equal in this regard. In fact, she was chime well with the deprivations of Last week Shanghai Securities News – prone to creative accounting. the civil war period. a newspaper run by the Xinhua News When she arrived in the White (For those curious about the out - Agency – reported that Shi would not House in 1861, Mary was dismayed come: French helped Mrs Lincoln be allowed to depart the country by how poorly the place was fur - out of her predicament by persuad - “while authorities investigate the nished. Keen to impress the Wash - ing a friendly congressman to bury state of the company’s finances”. ington elite with her own sense of $6,800 of furnishing bills in a com - Given that Shi is an Australian style, she went to New York to buy plex list of military appropriations.) citizen, this is a measure of the seri - fine Parisian wallpaper, luxury rugs Of course, Mary wasn’t the last ousness of the situation. and elegant curtains. In fact, Mrs person to spend beyond their Longer term readers of WiC will Lincoln got a bit carried away, far ex - means in seeking to realise their have some familiarity with the un - ceeding the government allowance grand vision. Fast forward to mod - folding debacle. Last August we for the First Family’s home. “Afraid ern day China, and a similar pitfall chronicled Shi’s decision to step to inform her husband, she invei - has beset Shi Zhengrong, once reck - down as CEO of the solar panel gled John Watt, the White House oned to be the country’s richest maker (see issue 161). Once a world groundskeeper, to inflate his ex - man. Shi’s solar firm Suntech leader in the solar industry, Shi’s pense accounts and funnel the extra Power is now bankrupt, making firm had run up major losses due to money over to her,” writes Goodwin. him a lead example of a number of sagging demand for its panels, cou - P h o t o But it wasn’t enough. The bills business tycoons who have strayed pled with falling prices. Aside from S o u r kept coming and Mary found her - into trouble in the past couple of all the red ink, Suntech further c e : R e self asking the Commissioner of weeks. And local media is wonder - spooked investors by booking a u t e r s Public Buildings, Benjamin French, ing whether Shi’s difficulties are €560 million $724 million) hit on a 1 Week in China Talking Point 5 April 2013 loan guarantee it gave to an invest - ment vehicle named Global Solar Fund. Apart from the size of this hole, the bigger surprise was that Suntech – which controlled the fund – was accusing Global Solar of fraud. Fund managers were bemused by Suntech’s explanation: how could management not know what its own fund was doing? As WiC warned in that issue, the next crunch for Shi would come the this March, when more than $500 Detained: Liu Han of the Hanlong Group is being investigated million in international bonds were due to be repaid. Without a stun - debt was 10 times its market capi - of energy production from his solar ning return to profitability, Sun - talisation and as bankruptcy was cells and ratcheted up output, he tech looked likely to default. That is declared, the stock had plunged was wont to get philosophical. At what happened last month, leading from its once-great heights to just one point he told media that he was to Shi’s departure as chairman too. $0.39. less interested in profits than “solv - Suntech thereby achieved a dubi - For those who bought into Shi’s ing the problems of mankind”. ous honour: it became the first vision at its height, it has been pre - But what looked like such a company from the Chinese main - cipitous destruction of shareholder brave new world in 2008 soon land to default on its foreign bonds value. Bondholders now look likely began to resemble a more mun - since GITIC (an investment vehicle to take a similarly drastic haircut. dane financial mess. Why so? Shi’s reporting to the Guangdong gov - The Chinese banks are also facing rivals were building panel factories ernment) in 1998. Worse was to fol - billions of renminbi of bad loans. at a rapid clip too, leading to vast low. Eight local banks including overcapacity (Suntech’s annual ICBC and Bank of China then sought Clouds on the horizon for Shi? output reached 2.4 gigawatts last to collect Rmb7.1 billion ($1.14 bil - Shi was born in 1963 at a time when year, with other Chinese firms pro - lion) of loans owed by the firm’s China was struggling with a series of ducing 37.6 gigawatts). Anti-dump - local operation, Wuxi Suntech. famines and natural disasters. Times ing tariffs imposed by the US and When the monies weren’t repaid, were so bad that his destitute par - slowing demand in Europe then the banks petitioned a judge to de - ents gave him to another family to hurt export demand. Panel prices clare the unit insolvent, which he raise. From such inauspicious begin - collapsed, pushing firms like Sun - did on March 21. nings Shi entered university at 16. tech into losses. At this point Shi’s For Shi, the descent into bank - Thanks to his proficient English, he decision to fund his breakneck ex - ruptcy was an Icarus-like fall. In then won a scholarship to study in pansion through debt and convert - 2006, his 30% stake in New York- Australia. There, Shi charmed his way ible bonds turned into a CFO’s listed Suntech had put his personal into the laboratory of Professor Mar - worst nightmare. fortune at $1.7 billion, temporarily tin Green, a Nobel Prize winner who Industry conditions, ill fortune ranking him China’s top tycoon. has been described as ‘the father of and poor corporate finance skills all With his personal drive and impres - solar energy’. explain why Suntech faced a crisis sive engineering background, the Shi returned to China in 2001 last month. However, local media tycoon rapidly expanded, riding a and persuaded the city government reckons there could be another rea - wave of enthusiasm for clean en - in Wuxi to back his solar panel en - son why Shi has been told that he ergy. At its peak in January 2008 terprise, Suntech. With the Wuxi bu - cannot leave the country: his con - Suntech’s stock traded at $90, and reaucrats alert to the sector’s trol of a firm called Asia Silicon. Bei - Shi’s firm looked on course for commercial potential – and keen to jing’s investigation is thought to be P h o t o global domination. create a new energy cluster – Shi got looking at whether it was used to in - S o u r c But in order to become the the nod. For much of the next appropriately funnel funds out of e : I m a world’s largest maker of photo - decade it looked like a win-win rela - Suntech. g i n e C voltaic panels, Suntech had bor - tionship for both parties. Mean - In an article last year CBN de - h i n a rowed heavily. By last month its net while as Shi improved the efficiency scribed as “suspicious” that Asia 2 Week in China Talking Point 5 April 2013 Silicon had signed a long term con - tract to supply $1.5 billion of poly - silicon products to Suntech at Planet China “high prices”. It also looked odd Strange but true stories from the new China that the supplier was given inter - est free loans by Suntech as well as PLAYHOUSE PLAN. Worried about spoiling your children? Fear not, the bar a series of advance payments for has just been raised significantly by a Chinese mum who purchased a $6.5 its polysilicon. CBN reckoned that million apartment in Manhattan for her toddler. The Tiger Mom told Kevin Brown, a Sotheby’s employee in New York, that she was buying the property the Shi-owned private vehicle was so that her daughter – currently two – could live there when she gets into getting favourable treatment from Columbia or NYU. “I was shocked,” Brown told CCTV, the channel that ran the its ‘client’. report. The flat is in One57, a 90-floor skyscraper that overlooks Central The ongoing investigation will Park.The building, which is yet to be completed, features a 24-foot aquarium, a ask Shi to clarify that these con - private ‘arts and crafts atelier’ and even a special washroom for pets.