6 Unusual Ways that Wealthy Chinese Have Their Made Fortunes over the Years

6 Unusual Ways that Wealthy Chinese Have Their Made Fortunes over the Years
Jul 15, 2014 By eChinacities.com

Editor’s note: In less than four remarkable decades, over 600 million Chinese have been lifted out of poverty. Among those, a growing number have leveraged the economic, political and social climate of the day to achieve staggering levels of wealth and notoriety. Sightings of Rolls-Royce, Porsche, Lamborghini and other luxury cars whizzing past glitzy malls housing international designer labels have become as commonplace as spotting street peddlars in busy tourist hubs.  Tales of rag to riches, staggering excess and startling consumption habits continue to grace Chinese media on a daily basis. But not everyone achieved fortune through the standard channels; a number of the wealthiest people in China chose more dubious methods to line their pockets. For some it was a ticket to lifetime wealth; for many others it marked the beginning of their demise.

The number of wealthy Chinese that have emerged since China’s reform and opening up movement has shocked the world. Within the 30 year long “get rich” movement, there have been various waves of wealth accumulation. The first wave revolved around success in China’s early marketization. Those who took the risk and reaped the benefits were part of the “market faction” of wealthy Chinese. Other waves include those who were successful in Internet entrepreneurship, or the “technology faction”, as well as those who earned their fortunes in the manufacturing wave (the “labor faction”). However, we cannot ignore those wealthy Chinese who were not a part of these factions or waves of emerging wealth. A number of wealthy Chinese merely took advantage of a chaotic social environment in order to line their own pockets. Here are a few types of wealthy Chinese who made their fortunes in more unusual ways.

1) Profiteers

In the 1980s, upstart “profiteers” made their fortunes by purchasing low-priced goods and reselling them at a higher value. These goods ranged from small soaps, to televisions to large vehicles. In the peak of profiteering, in 1989, Mou Qizhong become China’s largest profiteer by reselling a Russian airplane to Sichuan Airlines. Profiteers like Mou were able to make these trades because of uneven or asymmetrical information. Mou Qizhong knew that Russia would not export its airplanes but also knew that the country urgently needed goods related to light industry to bolster its economy. He reportedly earned a sum somewhere between 80 to 100 million RMB from the deal.

This kind of profiteering can be beneficial to both sides involved in the deal. However, profiteering itself is a somewhat controversial concept: Mou Qizhong was known as China’s “richest man” but was also known as the nation’s “chief swindler.”

There are profiteers in both the government and private sectors. Profiteers, therefore, are divided into two groups: private profiteers and government profiteers. Government employees involved in profiteering have more power and influence than those in the private sector. They are also able to accept bribes in the form of low purchasing prices. This kind of opportunistic fraud was the main form of government corruption in the 1980s.

2) The Restructuring of State-Owned Enterprises

In the beginning of the 21st century, in the wave of state-own enterprise reform, a large number of SOE employees were laid off. At the same time, there were some Chinese that became extremely wealthy as a result of SOE restructuring. In those days there were many disputes and controversies over investments in private enterprises and MBO (management buyout) models. The sales of state-owned enterprises, which were often done in secret, led to the cheap acquisition of resources and capital formerly owned by the state.

The most famous case of this is that of Gu Chujun. His company “Gelin Ke’er Holdings” expanded enormously by purchasing in-debt state-owned enterprises. His company also purchased Kelon Electrical and transformed the company’s deficit into a surplus. At one time, he was called the saviour of state-enterprises.

Gu’s acquisition of individual state enterprises was extremely quick and sudden. Many began to question how he was able to support such a large number of transactions so quickly. The public slowly became more and more vocal in their disapproval of Gu. In August, 2004, Lang Ping gave a speech on Gu and Gelin Ke’er holdings, criticizing Gu’s scheme to earn his fortune off of the reform of state-owned enterprises. After the speech, many economists became swept up in the debate between Gu and Lang.

In September 2005, Gu Chujun was formally arrested. In his 2008 trial he was sentenced to ten years in prison for false registration and misappropriation of funds. He was later released on September 6, 2012. 

3) The Stock Market Wealth Explosion

In 1990, after A shares were first opened in the Chinese stock market, many people began to manipulate stock. Delong Holdings’ Tang brothers were the most famous. “Delong Holdings,” appeared to merely be another giant banking and finance conglomerate. However, somehow the stock of the companies that Delong controlled all rose to extremely high levels, without exception. It turns out that Delong violated all kinds of laws by using different techniques to manipulate stock including insider trading and market manipulation. Through these techniques, Tang Wanxin created a new peak for stock market wealth.

However, the stock market took a turn in the early 2000s. Most of “Delong Holdings” stocks went back to their original levels and the Tang brothers went bankrupt while in jail.

4) Smuggling

The most famous case of smuggling is the case of Lai Changxing in Xiamen. Lai was charged with smuggling on the scale of billions of Yuan. A large number of senior officials were involved in the case. Lai eventually fled to Canada to avoid imprisonment.

It has been rumored that there have been many wealthy smugglers in Chaoshan and other coastal areas.

For example, when Chaoshan was formed there were clearly divided groups who worked in procurement, sales, finance and other roles. Some Zhanjiang smuggler gangs wormed their way into the new society by transforming their gang’s family style management into a more business-like system. These gangs also began to collaborate with other smuggling gangs from Hong Kong and Shantou in order to expand their scope. In these areas, the wealthiest people were mainly also suspected smugglers.

5) The Turmoil of the Financial Market

When financial markets are illegally manipulated, many are able to take advantage of the subsequent financial crisis for personal gain and become extremely rich and powerful.
The “327 Incident”, which led to the collapse of China’s t-bond future’s market, helped at least four individuals make their fortunes. 28 year old Wei Dong, 29 year old Yuan Baojing, 34 year old Zhou Zhengyi and 30 year old Liu Han all become wealthy because of the crisis. Sources say that Wei Dong earned $200 million Yuan during the “327 Incident.” Soon after, his companies, which included Jiuzhitang, Qianjin Pharmacy, and Sinolink Securities, all became major players in the market. However, in 2008, Wei suddenly mysteriously jumped to his death at his home in Beijing at age 41.

6) The Privatization of the Real Estate Market and Mineral Industry

Privatization has created a large number of big bosses in the mineral industry, but how many of them have secret operations on the side as well?

As for the real estate market, former deputy editor of “First Financial Daily” and founder of Chinese Yuan think tank Zhang Tingbin, purports that local governments and real estate companies created a system together in order to reap profits. Land in China was previously collectively owned by the entire nation. However, the new auction system pushed real estate prices to their limits. The wealth redistribution from this super real estate bubble created an unprecedented amount of wealth for certain clusters of people. Today, nearly half of Chinese billionaires are in the real estate business.

Source: wenxuecity.com

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Keywords: Chinese made their fortunes Wealthy Chinese

4 Comments

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Guest2301262

7). Bedroom fortunes. Remember that girl with Red Cross China, and the 2008 Sichuan earthquake? I suppose the definition of 'unusal' varies depending on who/what you are dealing with. To those who insist 'we do it our way' it can be as natural as breathing. In a way it is, to the 'right' 'persons'. ...lol...

Jul 17, 2014 14:48 Report Abuse

bill8899

LOL "the restructuring of" SEOs. Definitely an unusual way to make money.

Jul 15, 2014 23:18 Report Abuse

mike168229

Entrepreneurs, no. Opportunists, thieves and criminals - yes.

Jul 15, 2014 11:32 Report Abuse

coineineagh

Yup, they all sound like avenues of fortune that any clever entrepreneur without connections to the government or starting capital could engage in. Great opportunities here in China!

Jul 15, 2014 00:33 Report Abuse