Investment Banking

“The Tough Battle to Bring Western Brands to China” the Financial Times

Leave a Comment / August 9, 2020

When John Zhao sealed the £900m takeover of the UK’s PizzaExpress in 2014 he burnished his reputation as a pioneer in China’s private equity industry. Two years later Hony Capital, his buyout firm, ploughed money into WeWork as the New York shared-office provider set its sights on an aggressive expansion in China.


Both deals shared a simple premise: take well-known western brands to China and they will flourish. “We have capital; we have a huge market to give access to,” Mr Zhao said shortly after the capture of PizzaExpress, which set a record for a Chinese buyout deal in the UK.


The acquisition was one of a wave of Chinese private equity investments over the past decade but few firms were as ambitious as Hony in their targets. Spun out of state-backed Legend Holdings in 2003, Hony shot to prominence through a series of restructurings of other state-owned groups. As it grew, so did its appetite for higher-profile, cross-border investments.

However, almost two decades on, Hony’s breezy confidence that China’s increasingly wealthy middle class would be ready-made consumers of all western brands has proved misplaced.


PizzaExpress restaurant openings in China have lagged behind an ambitious goal while local, lowercost competitors have lured customers away. Confidence that middle class would eat up imported names such as PizzaExpress prove misplaced.

This lacklustre start in China, combined with rising costs and a slowing casual dining market in the UK, left PizzaExpress with a £1.1bn debt pile that has set the scene for a restructuring battle between Hony and other bondholders.

After a calamitous 2019 in which WeWork was rescued by Japan’s SoftBank, its biggest backer, the New York-based company has ditched its leasing model in many cities, laid off thousands of staff and struggled with a particularly poor performance in China.

“The ‘can’t-miss’ strategy continues to do just that,” said Peter Fuhrman, chairman and chief executive at Shenzhen-based investment bank China First Capital. “Chinese investors and corporates have mainly fizzled when buying and localising western consumer brands.”

Other Hony investments — including the Beijing-based bike-sharing business Ofo, which collapsed in late 2018 — have soured, causing competitors to rethink importing western brands to China.

Chinese business history is littered with cases of western multinationals making the opposite mistake. UK retailer Marks and Spencer closed its Shanghai stores in 2017 after its combination of clothing and imported food confused local shoppers. US electronics retailer Best Buy retreated from China in 2014 after struggling to compete with cheaper domestic competitors.

But Chinese private equity groups appeared undeterred. They raised $230bn of capital between 2009 and 2014, according to investment bank DC Advisory.

Nanjing-based Sanpower largely flopped with its buyout of high-end retailer House of Fraser in 2014 and its failed attempt to expand the UK retailer across China. Bright Food, the state-owned Chinese group that bought a 60 per cent stake in Weetabix in 2012, failed to make the UK breakfast dish popular in China and eventually had to sell the brand in 2017.

“Four years ago everyone thought [buying foreign brands and bringing them to China] was the best thesis — but a lot of people got burnt,” said Kiki Yang, the partner leading Bain & Co’s Greater China private equity practice. “It’s not easy to bring something with no brand awareness to China. In reality, the success rate is very low.”

People who know Mr Zhao have said he was one of the first serious Chinese investors to have a solid grounding in the way deals were done in the US while also enjoying deep ties to state-owned groups, putting him in an enviable position at the advent of the Chinese private equity industry.

In its early days, that helped Hony become a rare channel connecting investors such as Goldman Sachs and Singapore’s Temasek with lucrative state deals that were otherwise inaccessible to foreign capital.

The PizzaExpress deal was a turning point for Hony and
other investors in the sector.

By 2014, the group had completed several successful cross-border deals, including an investment in Italian concrete producer Cifa. But the takeover of a popular British restaurant chain won instant global attention for Hony and Mr Zhao, who had spent most of the 1990s working at Silicon Valley technology companies such as Vadem and Infolio.

Hony’s investment in PizzaExpress came just as the UK’s casual dining market began to suffer from oversupply. It was also beginning to face stronger competition from local restaurants in China, a sign the UK brand name meant little to many Chinese diners.

PizzaExpress originally intended to open 200 outlets over a five-year period. So far it has launched about a dozen restaurants in the mainland, giving it a total of about 38, according to its website. In its annual results in April, the chain admitted it had “experienced challenges in China as we face intensifying competition from local brands”.

Without the promised growth in China to cushion the decline in the UK market, PizzaExpress has been pushed towards a debt restructuring process, cementing the deal’s position as an emblem of troubled Chinese investments overseas.

 “Every time you say ‘China cross-border’, people think of PizzaExpress,” said one senior Chinese private equity executive. “It’s become a laughing stock — and bad for the reputation of China PE.”

PizzaExpress, Mr Zhao and Hony declined to comment.

As it seeks to resolve PizzaExpress’s problems, WeWork’s near collapse has inflicted further damage on Hony’s reputation. Hony and Legend Holdings led a $430m investment round in WeWork in 2016, and Mr Zhao became a member of WeWork’s board and later a consultant to its China business. SoftBank and Hony led a $500m investment round a year later.

With Mr Zhao acting as a consultant, WeWork expanded aggressively across the country, buying Chinese rival Naked Hub for $480m in cash and stock in 2018. Yet demand for office space fell in 2019, leaving some of its new areas of business virtually empty.

For example, in the western Chinese city of Xi’an, nearly 80 per cent of its desks were vacant, the FT reported in October. In the bustling start-up hub of Shenzhen in southern China, 65 per cent of its 8,000 desks were vacant.

WeWork declined to comment.

The poor performance of the business in China has left investors questioning how one of China’s private equity superstars could lead the group so far off course, according to people familiar with the matter.

“My impression is that Hony is not doing well these days,” said Liu Jing, a professor of accounting and finance at Cheung Kong Graduate School of Business in Beijing. “The economy has shifted to technology and they have lost their edge.”

https://www.ft.com/content/f735c956-15b6-11ea-9ee4-11f260415385


Chinese Private Equity Funding Hit By Sharp Downturn — Financial Times

Leave a Comment / August 10, 2020

Fundraising by renminbi-denominated private equity groups in China plummeted 86 per cent last year, squeezed by a tighter availability of credit and a slower initial public offering market.

The fall — revealed in a new report published on Friday — underlines how the Chinese private equity market has gone into reverse from the boom times of a few of years ago, when scores of new funds were launched and the country’s technology
companies attracted sky-high valuations.

Hundreds of small, inexperienced Chinese private equity funds that rushed into investments in technology and new economy companies have begun to suffer from a sharp contraction in fundraising and tougher environment for exiting investments.

Private equity houses raised about $13bn in renminbi-denominated funds in 2018, down about 86 per cent from the $93bn raised the year before, according to data compiled by the consultants Bain & Co.

At the same time, small Chinese private equity groups struggled to cash in on their investments in 2018. Sales and initial public offerings worth less than $100m fell by about 64 per cent last year compared to a five-year average.

“The level of optimism and fervour for investing in the tech sector foreshadowed what we are seeing now,” said Usman Akhtar, a partner at Bain & Co, referring to how many small private equity houses are struggling to exit from investments at expected prices. “It’s the start of this and it may take a few years to pan out.”

The tightening of credit in China is a broad trend with an impact far beyond private equity. Banks, trusts and other sources of capital have been squeezed during China’s attempt to slow the growth of debt.

So-called shadow banking has been an important source of funds for small private equity groups. Without these channels to fresh cash, many of the imperilled funds are simply shutting down, raising doubts over whether investors will be paid.

China’s woes are mirrored across Asia where large private equity is sucking up most of the available capital while also finding means to exit their investments, Mr Akhtar said. Hong Kong-based PAG, which is run by former TPG and JPMorgan executive
Shan Weijian, raised a $6bn fund in November, following a more than $9bn fund raised by Hillhouse, the Beijing and Hong Kong-based group.

Large exits of more than $500m clearly diverged from smaller deals in 2018 by rising just over a quarter on the year before.

Global demand for Chinese technology IPOs started 2018 with a bang but quickly showed signs of fizzling out, leading to a bottleneck of private equity seeking to exit their investments.

Over the past year several large, private equity-backed groups have been forced to scale back their IPOs or delay them indefinitely.

Tencent Music, which is partly owned by private equity, was last year targeting a $4bn float but ended up raising only $1.1bn after several delays.

“The reality is that all PE and VC investing in China has been an unhedged bet that the IPO process in China would liberalise and institutional investors in US and Hong Kong would show consistent, strong interest in Chinese IPOs. Neither is true,” said Peter Fuhrman, chairman of China First Capital, a Shenzhen-based investment bank.


https://www.ft.com/content/c0cf8c6e-4634-11e9-a965-23d669740bfb



      Are US and China Decoupling? Guest Lecture at University of Michigan Ross School of Business

      Leave a Comment / February 21, 2019

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      I was honored and delighted to teach a class via video lecture at the University of Michigan Ross School of Business for third year, this time on the potential decoupling between the US and China, the competitive realignments as well as investment opportunities.

      The lecture’s title: “Chimerica No More: Are China and the US Decoupling? How Will This Alter World Economics and Commerce?”

      Thanks to Professor David Brophy and his class on Global Private Equity for the invitation an incisive questions.

      This is a video link to the presentation. (Click here.)

      This is a video link to the full two hour class. (Click here.)

      This is the PDF of the presentation — without the animations. (Click here.)

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      China Merchants Steams in to Compete with SoftBank’s Vision Fund — Financial Times

      Leave a Comment / August 9, 2020

       

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      China Merchants Group has been adopting new technology to resist foreign competitors for nearly 150 years. Founded in the 19th century, the company brought steam shipping to China so it could compete with western traders.

      Now an arm of the Chinese state, CMG has been enlisted once again to buy up technology at a time when global private equity is vying for a share of China’s burgeoning tech market.

      The country’s largest and oldest state-owned enterprise, CMG said this month it would partner with a London-based firm to raise a Rmb100bn ($15bn) fund mainly focused on investing in Chinese start-ups.

      The China New Era Technology Fund will be launched into direct competition with the likes of SoftBank’s $100bn Vision Fund, as well as other huge investment vehicles raised by top global private equity houses such as Sequoia Capital, Carlyle, KKR and Hillhouse Capital Management.

      “They have been very important to China in the past, especially in reform,” said Li Wei, a professor of economics at Cheung Kong Graduate School of Business in Beijing. “But you haven’t heard much about them in technology . . . It’s not too surprising to see them moving into this area, upgrading themselves once again.”

      CMG is already one of the world’s largest investors. Since the start of 2015 its investment arm China Merchants Capital, which will oversee the New Era fund, has launched 31 funds aiming to raise a combined total of at least $52bn, according to publicly disclosed information.

      But experts say little is known about the returns of those funds, most of which have been launched in co-operation with other local governments or state companies.

      Before New Era, China Merchants Capital’s largest fund was a Rmb60bn vehicle launched with China Construction Bank in 2016. While almost no information is available on its investment activity, the fund said it would focus on high-tech, manufacturing and medical tech.

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      CMG’s experience investing directly into Chinese tech groups is limited, although it has taken part in the fundraising of several high-profile companies. In 2015 China Merchants Bank joined Apple, Tencent and Ant Financial to invest a combined $2.5bn into ride-hailing service Didi Chuxing, a company that now touts an $80bn valuation. It also invested in ecommerce logistics provider SF Express in 2013.

      Success in Chinese tech investing is set to become increasingly difficult as more capital pours into the sector.

      “Fifteen billion dollars can seem like a droplet in China,” said Peter Fuhrman, chairman and chief executive of tech-focused investment banking group China First Capital, based in Shenzhen. “We’re all bobbing in an ocean of risk capital. Still, one can’t but wonder, given the quite so-so cash returns from China high-tech investing, if all this money will find investable opportunities, and if there weren’t more productive uses for at least some of all this bounty.”

      CMG, however, has always set itself apart from the rest of the country’s state groups. It is unlike any other company under the control of the Chinese government as it was founded before the Chinese Communist party and is based in Hong Kong, outside mainland China. Recommended Banks China Merchants Bank accused of US discrimination

      The business was launched in 1872 as China Merchants Steam Navigation Company, a logistics and shipping joint-stock company formed between Chinese merchants based in China’s bustling port cities and the Qing dynasty court.

      Mirroring its New Era fund today, it was designed to compete for technology with foreign rivals. At that time it was focused on obtaining steam transport technology to “counter the inroads of western steam shipping in Chinese coastal trade”, according to research by University of Queensland professor Chi-Kong Lai.

      Nearly a century later, after falling under the control of the Chinese government, CMG became the single most important company in the early development of the city of Shenzhen, China’s so-called “window to the world” as it opened to the west.

      Then led by former intelligence officer and guerrilla soldier Yuan Geng, the company used its base in Hong Kong to attract some of the first investors from the British-controlled city into the small Chinese town of Shenzhen, which has since grown into one of the world’s largest manufacturing hubs.

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      Its work in opening China to global investment gained CMG and Yuan, who led the company until the early 1990s, status as leading figures in the country’s reform era.

      Today the company is a sprawling state conglomerate with $1.1tn in assets and holdings in real estate, ports, shipping, banking, asset management, toll roads and even healthcare. The company has 46 ports in 18 countries, according to the state-run People’s Daily, with deals last year in the sector including the controversial takeover of the Hambantota terminal in Sri Lanka and the $924m acquisition of Brazilian operator TCP Participações.

      CMG did not respond to requests for comment. But one person who has advised it on overseas investments said the Chinese government was using it in the same way the company opened up Shenzhen to the outside world, helping “unlock foreign markets”.

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      https://www.ft.com/content/e7e81928-7f57-11e8-bc55-50daf11b720d


       

      -phttps://www.ft.com/content/e7e81928-7f57-11e8-bc55-50daf11b720ds://www.ft.com/content/e7e81928-7f57-11e8-bc55-50daf11b720d

       


      In Today’s China, Paradoxes Still Abound. But So Do Opportunities — Site Selection Magazine

      Leave a Comment / November 21, 2017

       

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      In September, China First Capital Chairman and CEO Peter Fuhrman, familiar to attendees at the World Forum for FDI in Shanghai last year, delivered a talk from China to Harvard Business School alumni. Here, with Mr. Fuhrman’s permission, we present excerpts from his remarks.

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      GDP growth has never and will never absolutely correlate with investment returns.

      Any questions? No? Great. Thanks for your time.

      Of course I’m joking. But that key reality of successful investing is all too often overlooked, and China has provided all of us over these last 30-some-odd years with a vivid reminder that IRR and GDP are by no means the same animal.

      China is, was and will likely long remain a phenomenal economy. The growth that’s taken place here since I first set foot in China in 1981 has been something almost beyond human reckoning. Since I first came to China as a postgrad in 1981, per-capita GDP (PPP) has risen 43X, from $352 to $15,417. China achieved so much more than anyone dare hope, a billion people lifted out of poverty, freed to pursue their dreams, to make and spend a bundle.

      China this year will add about $1 trillion of new GDP. Just to put that in context, $1 trillion is not a lot less than the entire GDP of Russia. So who is making all this newly minted money? And how can any of us hope to get a piece of it? Another question: Why, if China is such a great economy, has it proved such a disaster area for so many of the world’s largest, most sophisticated global institutional investors, private equity firms and Fortune 500s?

      Turning Inward

      Let’s start with the fact that China is a part of the World Trade Organization, but not entirely of it — not fully subscribed in any way to the notion that reciprocity, openness, free trade, level playing fields and equal treatment are positive ends unto themselves. As China has gotten richer it has seen even less and less need to attract foreign capital and foreign investment. That’s a tendency we see in other countries, including obviously some of the rhetoric we now hear in the U.S. — that more of the gains of the national economy should belong to its citizens. But China’s way is different.

      The renminbi is a closed non-tradable currency, so getting US dollars into and out of China has always been difficult. China now has the world’s second-largest stock and bond markets, but those markets are largely closed to any investors other than Chinese domestic ones. But China also continues to provide companies going public with by far the highest multiples anywhere in the world.

      When I first came to China 36 years ago China was a 100-percent state-owned economy. Twenty years ago the first rules were put in place to allow a private sector to function. Today, according to anyone’s best estimate, it’s about 70 percent private and 30 percent state, and most of the value creation is being provided by that private-sector economy. So in theory there should be very interesting M&A opportunities. But it’s been exceedingly difficult to get successful transactions done. One of the core reasons is that by and large all private-sector companies in China, large and small, are family-owned.

      The other thing important to consider is a Mandarin term: guifan. It’s the Chinese way of explaining the extent to which a company in China is abiding by all the rules of the road — the taxes you should pay, the environmental and labor laws you should follow. It’s not at all uncommon that successful private-sector companies in China are successful by virtue of having negotiated to pay little or no corporate tax on profits.

      For foreign-owned companies in China it’s an entirely different story. They are by and large 100-percent compliant with the written rules. This has an enormous impact on the operating performance of any company, so you can imagine how potentially skewed the competitive environment becomes. And keep in mind that corporate taxation in China in the aggregate is, if not the highest in the developed world, then among the highest, and the environmental and labor laws are every bit as difficult, rigorous, tough and expensive to implement as they are in the U.S.

      China is a country where local government officials are scored on the measurable success of their time in office, and success is overwhelmingly attributed to GDP growth. So it should be no surprise if what they’re trying to do is optimize GDP growth, the percentage of a company’s income that goes back to the government in taxation can have an adverse effect on that. Instead the government will continue to urge its local companies to take the money and, rather than pay tax, continue to invest, expand and therefore build local GDP.

      The Hum of Consumerism

      The reasons to stay engaged and find a viable investment angle include GDP growth. China’s GDP is likely to continue to grow by at least 6 percent a year. Second, across my 25 years of involvement in China, every one of the predictions of imminent collapse — financial catastrophe, local government debt, bad bank loans, real estate bubbles — have proved to be false. It appears China has some resiliency, and it’s certainly the case that the government has the tools and financial resources to ride out most challenges.

      Third has been how effortlessly it’s made the transition that still bedevils lots of Europe, from a smokestack economy to a consumer-spending paradise. At this moment every major consumer market in China is booming both online and offline. Alibaba, Baidu and Tencent are now operating as three of the most profitable companies in the world.

      How does China have a robust, booming consumer economy and an enormous appetite for luxury brands, yet on average salary levels that are still one-fifth or one-sixth the levels in the US? The simple answer is that almost all the Chinese now living in urban China — about half the population, compared to about 15 percent when I first got here — owns at least a single apartment if not multiple, which is more and more common. The single best-performing asset in history has probably been Chinese urban real estate over the last 30 years. It’s fair to say the average appreciation over the last 10 years is at least 300 percent.

      Though China has a population whose incomes on paper look like those of people flipping burgers at McDonald’s, they seem to have the spending power and love of luxury goods like the people summering in East Hampton. Even Apple itself has no idea how big its market is here in China. It’s likely that at least 100 million iPhone 8s will be sold to Chinese over the next year. The retail price here in China is at least 30 to 40 percent higher than in the US, with most phones bought for cash, without a carrier subsidy.

      ‘You’ll Be Older Too’

      So where is it possible to make money in China? One message above all: Active investing beats passive investing every time. What you need to do is either be the owner-operator or be a close strategic partner with one, and stay actively engaged.

      There are four major areas of opportunity: Tech, health-care services, leisure and education (see graphic below). The potential for building out a chronic care business in China is enormous. Looking ahead 25 to 30 years, sadly China will likely suffer a demographic disaster. This country will become a very old society very quickly. That’s the inevitable product of 30 years of a one-child-per-family policy. By 2040 or 2050, 25 percent of China will be over the age of 65.

      The overall rate of GDP growth is unlikely to ever rival that of a few years ago at 10 to 12 percent a year, but overall what we have is higher-quality growth. People in China are living well. Things should continue to motor along very smoothly at least for one more generation — a generation whose members are better educated, more skilled, ambitious and globalized than their parents.

      There’s no denying the reality of what a better, happier, freer, richer country China has become since I first set foot here. I marvel every day at the China that I now live in, even while I occasionally curse some of the unwanted byproducts like heavy pollution in most parts of the country, overcrowding at tourist attractions, bad traffic, and a pushy culture that’s lost touch with some of China’s ancient glories.

      China will continue to amaze, inspire and stupefy the world. The Chinese have done very well and will do better. At the same time, those of us investing in China may do a little better in years to come than we have up to now. More of the newly minted trillions in China just may end up sticking to our palms.

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      China’s Soccer Push Puts a Storied Team Under Murky Ownership — The New York Times

      Leave a Comment / August 11, 2020

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      By SUI-LEE WEE, RYAN McMORROW and TARIQ PANJA

      NOV. 16,    2017

      Li Yonghong in April with David Han Li, left, of Rossoneri Sport Investment, part of A.C. Milan’s new ownership group, and Marco Fassone, the club’s chief executive.

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      BEIJING — When the Chinese businessman Li Yonghong bought A.C. Milan, the world-famous Italian soccer club, virtually nobody in Italy had heard of him.

      Virtually nobody in China had, either.

      Mr. Li had never been named to one of China’s lists of the country’s richest people. The mining empire he described to Italian soccer officials was hardly known even in mining circles.

      Nevertheless, Mr. Li seemed to have what mattered most: money. He bought the club in April for $860 million from Silvio Berlusconi, the former Italian prime minister, to clinch China’s biggest-ever soccer deal.

      Today, Mr. Li’s acquisition of A.C. Milan appears to be emblematic of a string of troubled Chinese deals.

      The soccer club, bleeding money after a spending spree on star players, is seeking new investors or a refinancing of the high-interest loan that Mr. Li took to buy the club. That loan comes due in a year.

      Chinese corporate records show that — on paper, at least — someone else owns his mining empire. That company’s offices were empty on a recent visit, and a sign on the door from the landlord cited unpaid rent. A spokesman for A.C. Milan said Mr. Li’s control of the mining business had been verified by lawyers and banks involved in the transaction.

      Chinese records also show a series of business disputes and run-ins between Mr. Li and Chinese regulators.

      China’s emergence as a world economic power came with a ready checkbook for major brand names. Chinese owners now control the Waldorf Astoria hotel in New York, AMC theaters, the Hollywood production company Legendary Entertainment and A.C. Milan.

      Then Chinese officials began to worry that the spending was simply part of an exodus of money from China so vast that it once threatened to destabilize the country’s economy, the world’s second largest. This summer, the government ordered its banks to scrutinize lending to some of the country’s biggest deal makers.

      Outside China, some of the deals led regulators to ask questions about the tycoons behind them. Some wealthy people in China list their holdings under the names of relatives or associates to avoid scrutiny, a practice that has attracted criticism inside and outside the country.

      In the case of Mr. Li, the mines that he told A.C. Milan he controlled have been owned by four different people since last year, according to Chinese corporate records. The business changed hands twice for no money, the documents show.

      Mr. Li declined an interview request through A.C. Milan. The club spokesman defended Mr. Li on his business disputes, saying that sometimes he was a victim and that sometimes he was not aware of complicated rules. The spokesman also said the club was evaluating several refinancing proposals and was confident it could cover the loan.

      Chinese spending on soccer totaled $1.8 billion over the past five years, according to Dealogic, a data provider, but Chinese officials are putting a stop to the spree amid concerns about the flight of money abroad.

      “There’s a lot of ways to invest in football and the sports industry for much less money,” said Mark Dreyer, who tracks Chinese soccer investments on his website, China Sports Insider. “People were basically using the government’s previous push for sports as a way to diversify into different industries and get their money out of China.”

      Mr. Li had plenty of reasons to buy A.C. Milan. President Xi Jinping had professed his love for soccer and wanted China to be a superpower in the sport by 2050. The Chinese government had laid out a plan for increasing sports investment.

      An acquisition of A.C. Milan would be a marquee deal. A decade ago, the club was home to some of soccer’s biggest talents, including Ricardo Izecson dos Santos Leite, who is known as Kaká, and Andrea Pirlo. It was a seven-time European champion.

      But it has not won an Italian championship for six years or a European title for 10. Fans welcomed Mr. Li’s arrival as a potential catalyst. This summer, A.C. Milan began to spend on new players in a way that seemed to signal a desire to compete again.

      Still, Mr. Li and Mr. Berlusconi struck the deal at a difficult time. Beijing, spooked by the unprecedented capital outflows and a weakening currency, had imposed restrictions on overseas investment at the end of last year.

      Mr. Li set up companies in the British Virgin Islands and Luxembourg that would put the club’s legal ownership outside China, according to Marco Fassone, A.C. Milan’s chief executive officer. Mr. Li also borrowed about $354 million from the hedge fund firm Elliott Management, a loan he must pay back by October 2018. A spokeswoman for Elliott declined to comment.

      A.C. Milan remains debt laden and unprofitable, and could have trouble repaying what it owes on its own. It spent about $274 million to sign 11 players this summer, according to the club spokesman, making it among the biggest spenders in European soccer.

      In August, A.C. Milan had to wait for the transfer of two players it had signed from other teams because it had not deposited the required bank bonds. The club blamed a timing issue for the delay, and the transfers were eventually completed. The team is in seventh place but, with more than two-thirds of the season left to play, must finish among the top four to earn a spot in European soccer’s elite Champions League next season. The team could lose valuable television revenue if it fails to reach that level.

      It is unclear how much Mr. Li’s wealth might help the club address its troubles.

      He was initially unknown to the deal makers trying to sell the club, the people involved in the transaction said. He was originally part of a group that included Sonny Wu, a well-known investor who is chairman of the private equity firm GSR Capital, these people said. But Mr. Wu pulled out of the deal.

      In an email, Mr. Wu said he had not talked to bankers about Mr. Li or his consortium. Rothschild & Company, the investment bank that advised Mr. Li, declined to comment.

      Mr. Li told A.C. Milan that his holdings included phosphate mining operations in the city of Fuquan in Guizhou Province.

      But Chinese corporate filings show that the mines are owned by another party: Guangdong Lion Asset Management, an investment company. And Guangdong Lion has had a complicated ownership record over the past two years, involving a number of people with similar family names. (One court proceeding suggests Mr. Li has a relationship with Guangdong Lion, although it is not clear what kind.)

      Originally, Guangdong Lion was ultimately owned by two investors, Li Shangbing and Li Shangsong, according to filings. Like Li Yonghong, the two men come from the same area of Maoming, a city on China’s southern coast, according to the documents. But in a phone interview, Li Shangbing said he did not know Li Yonghong.

      Li Shangsong, who declined to comment, sold his interest in Guangdong Lion in 2015 to a person named Li Qianru, according to the documents. The documents did not include personal information about Li Qianru, who could not be reached for comment.

      In May 2016, according to the filings, Li Shangbing and Li Qianru, sold Guangdong Lion to yet another Li: Li Yalu. The sale price: $0. The filings do not provide personal information about Li Yalu.

      Three weeks later, Li Yalu sold a half stake in Guangdong Lion to a similarly obscure investor, Zhang Zhiling. The price: $0. Neither could be reached for comment.

      Li is a common surname in China, and the relationships among the various Lis are unclear. The A.C. Milan spokesman declined to comment.

      Li Yonghong, the A.C. Milan owner, and Li Shangbing have two things in common.

      The first is a relationship with Guangdong Lion. A Chinese court cited Li Yonghong and Guangdong Lion in April for failing to resolve a loan dispute with another Chinese company, saying both parties had disappeared. The court did not specify the relationship. The A.C. Milan spokesman said that Li Yonghong had merely guaranteed the loan and that “he is a victim in this case.”

      The second is an interest in investing in European sports.

      In May 2016, a day before Li Shangbing sold Guangdong Lion for no money, he started a company called Sino-Europe Sports Asset Management Changxing Company, according to China’s corporate database.

      Two days after he registered the Sino-Europe firm, another person registered a new company with a strikingly similar name: Sino-Europe Sports Investment Management Changxing Company. The two companies’ headquarters were in the same building in the city of Huzhou.

      Sino-Europe Sports Investment owns a stake in A.C. Milan as a result of its role as a shareholder in Rossoneri Sport Investment, a Chinese company that is part of the group led by Li Yonghong that owns the soccer club.

      In the phone interview, Li Shangbing denied setting up either Sino-Europe company and said he did not own any part of A.C. Milan. He declined to answer further questions. A.C. Milan declined to comment on Li Shangbing. The listed owner of the Sino-Europe Sports Investment Management Changxing Company, Chen Huashan, could not be reached for comment.

      Guangdong Lion’s listed headquarters are in a fancy skyscraper in Guangzhou. In August, the offices were closed, with an eviction notice on the door. Inside, desks and chairs were in disarray, computers were missing hard drives, and maggots festered in a trash can.

      The phone number listed for Guangdong Lion connects to a woman who said she helped companies register with Chinese regulators.

      Li Yonghong has an extensive business history, but Chinese records show it includes disputes with regulators and others.

      In 2013, China’s securities watchdog fined Mr. Li $90,250 for failing to report the sale of $51.1 million in shares of a real estate company. A.C. Milan said Mr. Li had simply been unfamiliar with listing rules.

      In 2011, that same real estate company said in a stock filing that Mr. Li was the chairman of Grand Dragon International Holding Company, a Chinese aviation company. Grand Dragon said in June that he had no present or past association with the company. The A.C. Milan spokesman said he had no knowledge of this.

      In 2004, Mr. Li’s family business, the Guangdong Green River Company, teamed up with two other companies to bilk more than 5,000 investors out of as much as $68.3 million, according to The Shanghai Securities News, the official newspaper of China’s financial watchdogs. They had sold contracts for lychee and longan orchards and promised investors hefty returns, according to the report.

      Mr. Li’s father and brother were sentenced to jail. Mr. Li was investigated but not accused of wrongdoing, the report said.

      A.C. Milan said the episode had nothing to do with Mr. Li, adding that “he was not aware of the situation until the investigation.”

      Amid Chinese concerns about deals abroad, China’s purchases of soccer teams with prestige names is likely to slow considerably for some time to come.

      “If outbound investment should have the purpose of ‘strengthening the nation,’ even within the broadest of definitions,” Peter Fuhrman, chairman of the investment bank China First Capital, said in an email, “buying a soccer team in the U.K. or Italy would hardly seem to qualify.”

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      As published in The New York Times–

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      China Investing, The Pain and the Perks — Harvard Business School Global Alumni Lecture

      Leave a Comment / October 10, 2017

       

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      It was a delight and a privilege to give a talk on China investing to Harvard Business School’s global alumni organization. If you’d like to see the slide deck, please click here. The audio version of the lecture, done by worldwide webcast,  is also up on YouTube.

      The topic was a big one — why have China investment returns so often failed to keep pace with the phenomenal growth in the country’s economy, and can investors do anything to improve the odds of success? Given an hour to discuss, I could only really scratch the surface.

      A key takeaway: the past needn’t be prologue. Investing in China may prove less vexatious in the future. In part, that’s because of the growth of a mass affluent consumer market in China, a shift that plays to the strengths of many US, European and East Asian companies and institutional investors. Second, of course, everyone now can learn from past mistakes and misperceptions.

      As I said in closing, “China will continue to amaze, inspire and stupefy the world. Chinese have done very well and will do better. At same time, those of us investing in China may do a little better here in years to come than we have up to now. More of the newly minted trillions in China just may end up sticking to our palms.”

       

       

       

      Venture Fundraising in Yuan Soars as Investors Target Chinese Tech Firms — The New York Times

      Leave a Comment / August 11, 2020

       

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      HONG KONG (Reuters) – China-focused venture capital funds are increasing their bets on local technology companies and a further opening of Chinese domestic capital markets, raising money in the yuan at the fastest pace in five years.

      Fund managers have raised 95.8 billion yuan ($14.54 billion) this year through late September in funds denominated in the Chinese currency, which is also known as the renminbi, compared with 56.7 billion yuan in all of 2016. That puts 2017 on pace to be the biggest year since 2012, when 145.8 billion yuan was raised, according to data provider Preqin.

      There are currently 78 funds looking to raise as much as another 1.15 trillion yuan over the next couple of years, Preqin said, most of it coming from mammoth-sized state-owned entities and so-called government guidance funds, which seek to foster domestic innovation in different industries from advanced engineering and robotics to biotechnology and clean energy.

       Those include the 350 billion yuan sought by the China Structural Reform Fund, 200 billion yuan targeted by the China State-Owned Capital Venture Investment Fund and a proposed 150 billion yuan for the state-owned Enterprise National Innovation Fund.

      The enormous size of the fundraising ambitions of the Chinese state-backed funds means it may take some time before they reach their final goals. The China Structural Reform Fund, which was launched in 2016, has raised 20 percent of its registered capital and its president said in an interview with Caixin Global that funding will be completed by the end of 2018.

      “We’re at the all-time highest of capital-raising high water marks, with a tsunami of government-backed entities seeding incubators, VC funds, locally, provincially, nationally,” said Peter Fuhrman, CEO of China-focused investment bank China First Capital. “China has a lot of money in its government apparatus. It wants to seed innovation and entrepreneurship and this is how it’s doing it.”

      The surge contrasts with the slowdown in seed financing for start ups in the United States, which is down for the past two years. It also compares with flat growth expected for U.S. venture capital fundraising in 2017, according to estimates from the National Venture Capital Association (NVCA).

      CATCHING ENTREPRENEURS

      Firms such as Lightspeed China Partners, Morningside Venture Capital, GGV Capital and investment and merchant bank Ion Pacific that previously only had U.S. dollar funds are launching their first funds in yuan. Others like Hillhouse Capital, Sequoia Capital China and China Renaissance that have raised funds in both currencies are adding to their yuan cash pile with new funds.

      Key to those firms is to not lose potential investment opportunities in sectors closed to foreign investors or miss out on investing with the Chinese entrepreneurs who now want to list their companies locally instead of in the United States.

      “Catching the right entrepreneurs in the ecosystem is our number one priority, so currencies to us are just tools, those are the tools that I need to catch these entrepreneurs,” said Harry Man, partner at Matrix Partners China, which has funds in both currencies. “That’s why if you don’t have RMB in your hand, ultimately you’ll be missing 50 percent of the deals. Then you’ll be forced to raise an RMB fund and that’s why everybody is doing it.”

      Sequoia Capital China, which backed top Chinese technology firms such as Alibaba Group (BABA.N), is looking to raise at least 10 billion yuan for a new fund, while Hillhouse Capital, an early investor in companies including Tencent Holdings Ltd (0700.HK), Baidu Inc (BIDU.O) and JD.com Inc (JD.O), is targeting about 8 billion yuan for its fund, sources told Reuters.

      The investment management arm of securities firm China Renaissance is also adding to its yuan reserves with a new fund worth about 6 billion yuan, according to a person familiar with the plans who couldn’t be named because details of the fundraising aren’t yet public. Ion Pacific is raising 1 billion yuan for its debut fund in the Chinese currency, while GGV Capital is about to close fundraising for its first yuan-denominated fund.

      “Some sectors don’t allow foreign investors, so for example, in the culture and media industry you need to apply for certain licenses like video licenses and you need to be a local investor,” said Helen Wong, a partner at Qiming Venture Partners.

      “Now the IPO window is open for the local stock market, so that encourages a lot of companies to go for a local listing,” she added, in reference to the increase in IPO approvals by regulators in 2017 that is prompting more companies to start preparations to go public. Previously, a slow approval process and long line of companies waiting for clearance dissuaded many from those plans.

      The shift would give an added boost to the Shenzhen and Shanghai bourses. China has had 322 new listings this year, raising a combined $22.9 billion, Thomson Reuters data showed. This already surpasses the 252 for all of 2016, even after the country’s securities regulator slowed the number of weekly IPO approvals in May.

      It could also reduce the influence of the Nasdaq and New York stock exchanges, where many Chinese technology companies previously flocked when they went public.

      “For the RMB side, you see more companies in restricted sectors like healthcare and media and certain parts of cleantech that needs government support to get started,” said Hans Tung, managing partner at GGV Capital. “You also see companies in the fintech space and a lot of them need a license to operate a business in the financial services industry, so they tend to want to list in China.”

      As published in The New York Times.

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      Why Has China’s GDP So Outpaced IRR?

      Leave a Comment / September 23, 2017

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      It’s the paradox at the core of China investing: why has such a phenomenal economy proved such a disappointing investment destination for so many global institutional investors, PE firms and Fortune 500s.

      Financial theory provides a conceptual explanation. Investment returns are not absolutely correlated to GDP growth. China will likely go down in history as the best proof of this theorem. China as certainly delivered exceptional GDP growth. In per capita PPP terms, China is 43 times larger than in 1981, when I first set foot in China as a grad student. No other country has ever grown so fast, for so long and lifted so many people out of poverty and into the consumer middle class.

      Commensurate investment returns, however, have been far harder to lock in. Harvard Business School’s global alumni organization invited me to give an hour-long talk on this topic this week. It required a quick gallop through some recent and not always happy history to arrive at the key question — does the future hold m0re promise for global institutional investors looking to deploy capital in China.

       For more detailed look at some reasons for the big disconnect between China’s national GPD growth and investment IRR, and some suggestions how to improve matters, please have a look by clicking here at the HBS talk slide deck.

      Publicly-quoted shares in Chinese companies have failed by far and away to keep pace with the growth in overall national income. In the alternative investment arena, global PE and VC firms enjoyed some huge early success in late 1990s and first part of the 2000s. Since then, the situation has worsened, as measured in cash returns paid out to Limited Partners. One major reason — the explosion within China of Renminbi investment funds, now numbering at least 1,000. They’ve bid up valuations, gotten first access to better opportunities, and left the major global PE and VC firms often sitting on the sidelines. With tens of billions in dry powder, these global firms look more and more like deposed financial royalty — rich, nostalgic, melancholy and idle.

      China this year will add approximately $1 trillion of new gdp this year – that’s not a lot less than the entire gdp of Russia. Indeed, China gdp growth in 2017 is larger than the entire gdp of all but 15 countries. Who is making all this money? Are all the spoils reserved for local investors and entrepreneurs? Can global investors find a way at last to get a bigger piece of all this new wealth?

      Overall, I’m moderately sanguine that lessons have been learned, especially about the large risks of following the Renminbi fund herd into what are meant to be sure-thing “Pre-Ipo” minority deals. Active investment strategies have generally done better. With China’s economy well along in its high-speed transition away from smokestack industries and OEM exports to one powered by consumer spending, there are new, larger and ripe opportunities for global investors. In virtually all major, growing categories of consumer spending, Western brands are doing well, and will likely do better, as Chinese consumers preferences move upmarket to embrace high-quality, well-established global household brand names.

      Harvard, its alumni and benefactors have a two hundred year history of investing and operating in China. So, there’s some deep institutional memory and fascination, not least with the risks and moral quandaries that come with the territory. The Cabot family, at one time among America’s richest, provided huge grants to Harvard funded in part by profits made opium running into China.

      Harvard Management Company, the university’s $35 billion endowment, was an early and enthusiastic LP investor in China as well as large investor in Chinese quoted companies including Sinopec. Their enthusiasm seems to be waning. Harvard Management is apparently considering selling off many of its LP positions, including those in PE and VC funds investing in China.

      This looks to be an acknowledgment that the GP/LP model of China investing has not regularly delivered the kind of risk-adjusted cash-on-cash returns sophisticated, diversified institutional investors demand. While China’s economy is doing great, it’s never been harder to achieve a successful private equity or venture capital investment exit. True, the number of Chinese IPOs has ratcheted up this year, but there are still thousands of unexited deals, especially inside upstart Renminbi funds.

      While decent returns on committed capital have been scarce, the Chinese government continues to pour billions of Renminbi into establishing new funds in China. There’s hardly a government department, at local, provincial or national level that isn’t now in the fund creation business. Diversification isn’t a priority. Instead, two investment themes all but monopolize the Chinese government’s time and money — one is to stimulate startups and high-tech industry (with a special focus on voguish sectors like Big Data, robotics, artificial intelligence, biotech) the other is to support the country’s major geostrategic initiative, the One Belt One Road policy.

      One would need to be visionary, reckless or brave to add one’s own money to this cash tsunami. Never before has so much government money poured into private equity and venture capital, mainly not in search of returns, but to further policy and employment aims. It’s a first in financial history. The distortions are profound. Valuations and deal activity are high, while returns in the aggregate from China investing will likely plummet, from already rather low levels.

      Where should a disciplined investor seek opportunity in China? First, as always, one should follow the money — not all the government capital, but the even larger pools of cash being spent by Chinese consumers.

      In China, every major consumer market is in play, and growing fast. This plays to the strengths of foreign capital and foreign operating companies. There are almost unlimited opportunities to bring new and better consumer products and services to China. Let the Chinese government focus on investing in China’s future. High-tech companies in China, ones with globally competitive technology, market share and margins are still extraordinarily rare, as are cash gains from investing here.

      Meantime, as I reminded the HBS alumni, plenty of foreign companies and investors are doing well today in China’s consumer market. Not just the well-known ones like Apple and Starbucks. Smaller ventures helping Chinese spend money while traveling globally, or obtain better-quality health care and education options, are building defendable, high-margin niches in China. One company started by an HBS alumnus, a native New Yorker like me, is among the leading non-bank small lending companies in China. It provides small loans to small-scale entrepreneurs, mainly in the consumer market. Few in China know much about Zhongan Credit, and fewer still that it’s started and run by a Caucasian American HBS grad. But, it’s among the most impressive success stories of foreign investment in China.

      Of course, such success investing in China is far from guaranteed. Consumer markets in China are tricky, fast-changing, and sometimes skewed to disadvantage foreign investors. For over two hundred years, most foreign investors have seen their fond dreams of a big China payday crash on the rocks of Chinese reality.

      The rewards from China’s 35 years of remarkable economic growth has mainly — and rightly — gone to the hard-working people of China. But, there’s reason to believe that in the future, more of the new wealth created each year in China will be captured by smart, pragmatic investors from HBS and elsewhere.

       

      As published by China Money Network

      As published by SuperReturn

      YouTube video of the full lecture to Harvard Business School alumni organization

       

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      China Steps Up Warnings Over Debt-Fueled Overseas Acquisitions — The New York Times

      Leave a Comment / August 11, 2020

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      BEIJING — China moved on Friday to curb investment overseas by its companies and conglomerates, issuing its strongest signal yet that it wants to rein in runaway debt that could pose a threat to the country’s slowing economy.

      Beijing has stepped up its efforts in recent months to restrict some of its most acquisitive companies from buying overseas assets, worried that a series of purchases by China’s conglomerates around the world has been driven by excessive borrowing.

      In the latest move, a statement published by China’s cabinet, the State Council, said the authorities would punish companies for violating foreign investment rules, and establish a blacklist of businesses that did so. The statement was attributed to the National Development and Reform Commission, the commerce ministry, the foreign ministry and the central bank.

      The statement pointed to acquisitions in sectors ranging from entertainment and sports clubs to hotels, but it was unclear whether or how the government would block deals.

      It reiterated a warning issued in December that restrictions on overseas investments were being imposed because of “irrational” investment trends.

      That statement said that the kinds of investments overseas it described were “not in accordance with macro-control policies.” The government wants to “effectively guard against all sorts of risks,” it said. The State Council document said the government nevertheless supported overseas investments in sectors such as oil and gas and in China’s “One Belt, One Road” program, which aims to promote infrastructure projects along the historic Silk Road trading route.

      “It’s the loudest yet of wake-up calls that the government holds the keys to the lockbox of the country’s wealth, public and private,” Peter Fuhrman, chairman of China First Capital, an investment bank, said in an emailed response to questions. “Bad M&A is all but criminalized.”

      A surge in overseas acquisitions by Chinese investors in recent years has ignited fears that soaring corporate debt levels could destabilize the country’s economy, the world’s second largest, and further weaken its currency.

      Companies like Anbang Insurance Group, Fosun International, the HNA Group and Dalian Wanda Group have capitalized on cheap loans provided by state banks to snap up trophy assets such as the Waldorf Astoria hotel in New York and AMC Theaters.

      Beijing’s clampdown on overseas investments shows how the interests of private business can collide with those of the Communist Party government. Beijing has made financial stability a priority this year, with the party’s congress scheduled in the fall. Among the party’s top concerns: controlling debt, stemming the flow of capital leaving the country, and China’s opaque “shadow banking” system.

      But while the latest statement from the State Council is likely to have an impact on mergers and deals, a lot of Chinese money is already offshore and thus not easily restricted by the government in Beijing, said Alexander Jarvis, chairman of Blackbridge Cross Borders, which has advised Chinese companies on several soccer acquisitions.

      “Deals are still going to happen,” Mr. Jarvis said. “There is plenty of Chinese capital overseas in offshore tax havens, in the U.S., across Europe, Hong Kong. I’m not sure they can fully control that capital.”

      In a sign of that deal making, a Chinese businessman, Gao Jisheng, struck a deal to buy an 80 percent stake in Southampton Football Club, a soccer team in the English Premier League, for about $271 million. Mr. Gao obtained the loan from a bank in Hong Kong, a special administrative region of China that is administered under separate laws, Bloomberg reported on Thursday.

      Geoffrey Sant, a partner at New York-based law firm Dorsey and Whitney, said it is likely that the latest announcement from Beijing will result in a “temporary pause” in overseas acquisitions.

      “I think they are thinking there’s a bit of irrational exuberance in the market right now and they just want to cool that off,” said Mr. Sant, who represents Chinese companies. “It doesn’t make sense to permanently ban some of these areas.”

      The State Council statement comes amid increased scrutiny of China’s “gray rhinos” — threats that are large and obvious but often neglected even so.

      In recent months, the government has said it would increase scrutiny of companies’ balance sheets, warning that some of the largest companies could pose a systemic risk to the economy.

      Encouraged by the slew of acquisitions made by some of the country’s most powerful tycoons, many smaller Chinese companies started looking overseas, spurred by China’s slowing economic growth to look for new markets.

      Many, however, had no experience running the businesses they were targeting. In one such example, Anhui Xinke New Materials, a copper processing company in central China, made a deal to buy Voltage Pictures, an American film financing and production firm, for $350 million. A month later, Anhui Xinke pulled out of the transaction.

      In other cases, it was not clear whether many of the big trophy acquisitions were actually good deals.

      In 2015, Legendary chalked up a net loss of $540 million, according to a regulatory filing that Wanda Film filed on the Shenzhen Stock Exchange. Fosun International, meanwhile, paid a premium to buy French resort operator Club Med, which was until then an unprofitable company, eventually agreeing to a $1.1 billion price tag in 2015 after a long takeover battle. The firm made a small profit last year, according to Fosun’s filings. And last year, AC Milan, the Italian soccer club that was acquired by a Chinese consortium for about $870 million, made a net loss of about $88 million.

      “I agree with the Chinese government. A lot of these deals are bad,” said Mr. Jarvis.

      Companies have already started feeling the pinch of Beijing’s clampdown on overseas investments, which started in earnest in December.

      The number of newly announced outbound mergers and acquisitions by Chinese firms fell by 20 percent in the first six months of 2017 compared to the same period in 2016, though it picked up in May and June, according to Rhodium Group, a New York-based research firm.

      In March, Dalian Wanda, the Chinese conglomerate that owns AMC Theaters and Legendary Entertainment, was forced to abandon its $1 billion deal to buy Dick Clark Productions, the firm behind the Golden Globes and Miss Universe telecast after Beijing tightened its controls on capital outflows. Months later, Wanda sold a majority stake in 13 theme parks to property firm Sunac China Holdings and handed 77 hotels to R&F Properties, another real estate company based in the southern city of Guangzhou, for $9.5 billion.

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      As published in The New York Times.

      The New York Times Interview Transcript

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      China’s New Plan for Silicon Valley Partnerships — Global Times

      Leave a Comment / August 11, 2020

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      The once-sizzling romance between China and Silicon Valley has cooled rather dramatically. This has some potentially serious consequences for both sides, but especially for China, which desires to invest in and gain access to some of the hottest new ideas from this cradle of innovation. A new strategy is needed.

      Until recently, Chinese investment funds and companies were investing hundreds of millions of dollars every year into promising Silicon Valley start-ups, as part of a strategy to forge closer ties between the US high-technology sector and the large Chinese market. But the flow of funds has largely dried up.

      There are two main reasons. First, Chinese regulators imposed new restrictions on large overseas investments. Second, the US government began to take a less friendly attitude toward Chinese technology investment in the US, killing several proposed deals and holding up approval on many others.

      There is every sign that things in the US are going to get more restrictive rather than less. As someone convinced of mutual benefits from Chinese investment in US technology, it all seems highly counterproductive. The world needs more deep and extensive ties between the Chinese and the US high-technology world, not just in start-up investing but also in university research and scientific conferences, shared research and development (R&D) labs, and partnerships among large companies working in hot fields like semiconductors, robotics, artificial intelligence and clean energy.

      What can China do? Rather than sending money out, it can encourage more US high-technology start-ups to relocate to China. There is a huge amount to be gained, both for China’s continuing industrial upgrading and for innovative US technology companies looking to grow into giants.

      China has in abundance the most vital ingredients for technology start-up success:  capital, a market and talented managers and engineers. In many industries, for example advanced manufacturing, robotics and new battery technologies, China often has more to offer technology companies than the US.

      China already has lured a lot of Chinese-born scientists and technologists back from Silicon Valley to open start-ups. The next step is to lure some of the best early-stage US technology companies to China. This addresses a big weakness in the US high-technology scene: companies there tend to view the China market as an after-thought. In reality, it is often the market most worth prioritizing.

      I’m seeing how well all this can work on the ground. We’re helping a promising US robotics company build its future in China. It is establishing a Chinese company as its main asset and moving some of its core team to China. It expects to add many more staff in China. The breakthrough product it’s now perfecting has a huge potential market in China’s manufacturing industry.

      Originally, this company was aiming to find investors in China to help it grow in Ohio. We helped explain why bringing the company to China would make a lot more sense. The company is applying for R&D grants as well as venture capital in China. Within a 100-kilometer radius of its future base in Shenzhen, South China’s Guangdong Province is the largest concentration of potential customers and partners in the world.

      We foresee big mutual gains if China can attract many more exciting early-stage technology companies. They  will create jobs, pay taxes and invest in local R&D. The benefits to China should be far larger than just buying some shares in a technology company based in Silicon Valley.

      The objective isn’t to evade US rules but to bring start-ups early in their growth stage to the market where the demand is greatest. Technology companies do best when they sit close to the biggest concentration of customers.

      The Chinese government has already said it wants to make the country more of a magnet for global technology talent. Shenzhen is a great city for US start-ups to grow big.

      The steep drop in Chinese investment in Silicon Valley may actually prove a blessing in disguise. It’s smart to keep more of that capital at home to invest in great technology companies in China. Many US technology start-ups will achieve far more, and far more quickly, if they make China their future home.

      The author is Chairman and CEO of China First Capital.

      http://www.globaltimes.cn/content/1061519.shtml

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      After Wanda Deal, Chinese Property Developer Faces Debt Risk — The New York Times

      Leave a Comment / August 11, 2020

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      A Dalian Wanda property in Nanchang, China.

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      BEIJING — The Chinese property developer Sunac China Holdings has turned into one of the country’s biggest white knights, swooping in to help troubled companies with too much debt. The risk: Sunac is amassing its own large pile of debt in the process.

      Sunac has more than doubled its debt load in a year to $38 billion. Its deal this week to buy a portfolio of theme parks and hotels from the Dalian Wanda Group, the heavily indebted Chinese conglomerate, will add to the tab. At $9.3 billion, the acquisition is larger than the market value of Sunac.

      “The problem for Sunac is twofold,” said Peter Fuhrman, chairman of China First Capital, an investment bank. “They themselves are already rather overleveraged and they are not paying distressed prices.”

      Sunac is offering a much-needed lifeline.

      For years, China fueled growth by providing easy credit. Chinese companies borrowed heavily, using the money to fund aggressive expansions.

      As the economy now slows, companies are increasingly running into financial trouble, with some having to borrow even more to pay their debts. Policy makers are worried that the country’s Passover level of corporate debt could threaten the broader financial system.

      Sunac, China’s seventh-largest property developer in terms of sales, has been able to tap into its financial strength to help companies under pressure. Since 2012, Sunac’s property sales have grown at double-digit rates nearly every year, giving it the firepower to scoop up assets and land plots.

      Before the Wanda deal, Sunac in January pumped $2.2 billion into LeEco, a tech firm struggling to pay off its creditors. This May, it paid $1.5 billion for an 80 percent stake in Tianjin Xingyao, a property firm known for leaving its projects uncompleted.

      In 2015, Sunac made a play to rescue Kaisa, pledging $1.2 billion to take over the troubled property company; it later pulled out after Kaisa did not meet certain conditions for the deal. That same year, it announced a partnership with the cash-poor Yurun Holding Group, which ran a business empire ranging from sausage making to property and finance.

      It is a remarkable turnabout for the company’s founder, Sun Hongbin.

      Mr. Sun started his career at the Lenovo Group, where he was promoted to run enterprise development. But he had a falling out with Liu Chuanzhi, the founder of Lenovo, over a business dispute. Related to the dispute, Mr. Sun was sentenced in 1992 to five years in jail for misappropriation of public funds.

      After his release in 1994, he met with the founder of Lenovo and apologized, according to the website of The People’s Daily, the ruling Communist Party’s official newspaper. The Lenovo founder eventually lent Mr. Sun about $74,000, which he used to start a predecessor real estate firm to Sunac.

      Lenovo did not immediately respond to a request for comment.

      When Mr. Sun started Sunac in 2003, he focused on the cities of Wuxi and Chongqing and then moved on to China’s most developed cities, among them Beijing, Shanghai, Tianjin and Hangzhou, building apartments with names like Beijing Fontainebleau Chateau. Sunac built its residential projects in good locations near city centers and was aggressive in acquiring land plots — with higher debt.

       Sun Hongbin, the founder and chairman of Sunac China Holdings.

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      “People who have failed are those who have been defeated by themselves,” Mr. Sun told a newspaper, China Business News, in 2013. “But I often tell others: After you fail, you can start again.”

      With the Wanda deal, Sunac is extending its reach into tourism, paying $9.3 billion for 76 hotels and a major chunk of its 13 tourism projects, in the country’s largest property acquisition ever. The purchase will help Sunac diversify its business, which is hurting from government restrictions on home sales as Beijing seeks to cool a frothy property market. It also strengthens the company’s hand in an industry dominated by bigwigs like the China Vanke Group and Country Garden.

      “Within the housing industry, the powerhouses are really strong,” said Lu Wenxi, an analyst for Centaline Properties who is based in Shanghai. “If you don’t gobble up the fat ones, it is easy to be eaten up by others. Taking on more projects will prevent you from being eaten.”

      Investors have rewarded Sunac for the deal. Shares of Sunac rose 14 percent in Hong Kong on Tuesday after they resumed trading after the deal announcement.

      But the deal will add to an already significant debt load. In 2016, the company’s net gearing ratio — a measure of total debt to shareholders’ equity — rose to 121.5 percent, from to 75.9 percent in 2015. Fitch Ratings recently downgraded the company’s credit rating to BB-, saying Sunac’s acquisitive approach had made its financial profile “more volatile.”

      Wanda is helping finance the acquisition. Sunac, in a statement to the Hong Kong Stock Exchange on Monday, said Wanda would procure a loan for the company worth about $4.4 billion.

      Seller financing is not uncommon, both in China and the West. But Wanda’s role means that Sunac doesn’t have all the money upfront.

      “In my experience, I’ve never seen it anywhere,” said Lester Ross, a Beijing-based partner with the law firm WilmerHale, who has advised deals in China for the last 20 years. “No client that I represent would accept a deal like that where you’re responsible for raising the money to pay for somebody else.”

      Sunac did not return multiple calls for comment. The company said in a statement to the Hong Kong Stock Exchange on Tuesday that the deal with Wanda “will add a large number of prime land reserves and property assets for the company at a reasonable cost.”

      The LeEco deal is also prompting concern.

      Sunac invested $2.2 billion in LeEco, buying minority stakes in three of the conglomerate’s more stable businesses, including the smart TV affiliate Leshi Zhixin, Le Vision Pictures, and Leshi Internet. The two companies don’t have many overlapping interests, and LeEco’s finances have continued to sour. Before the Wanda deal, shares of Sunac were falling on fears that LeEco’s problems would spread.

      In a January news conference, Mr. Sun said many people had tried to dissuade him from investing in LeEco, adding that several were “resolutely opposed” to it.

      “I seriously considered their views, but I don’t think their opinions are sufficient to change my mind,” he said.

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      Article as published in the New York Times

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      China Probe of Big Companies Could Redefine Their Role Overseas — VOA News

      Leave a Comment / June 26, 2017

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      China is probing the loan practices of a group of big private sector conglomerates who have been on a high-profile global spending spree over the past few years.And although the review targets only a few of the country’s most politically-connected companies, some analysts see an attempt to increase government control over the role played by the private sector in foreign markets.

      “I think this is an attempt to change the direction (of) the role these Chinese companies play in the Chinese economy,” says Paul Gillis, a professor at Peking University’s Guanghua School of Management. “To align them more closely with the policies of the government and to reduce the risks that actions of these private companies could end up having a shock effect on the economy as a whole.”

      Chinese authorities say they launched the probe because of worries that highly leveraged overseas deals pose risks to China’s financial system. Officials have already expressed worries over mounting debt among Chinese lenders, some of which may remain hidden by China’s opaque lending networks.

      Notable companies targeted

      According to media reports, the list of companies under review is a relative who’s who of Chinese enterprises.

      Among those reportedly targeted are Dalian Wanda, which owns the AMC Theaters chain in the United States and has been actively courting deals in Hollywood. High-flying insurance company Anbang, which owns New York’s Waldorf Astoria and Essex House hotels. Also on the list is Hainan Airlines, which bought a 25 percent stake in Hilton Hotels last year and another insurance company Fosun, which owns Cirque de Soleil and Club Med.

      Over the past few years, China has seen massive amounts of capital moving overseas with companies and wealthy individuals buying assets abroad. Authorities began taking steps late last year to tighten controls. But many big conglomerates view foreign investment as a golden opportunity – given the low global interest rate environment – and worth the risk of highly-leveraged investments.

      Peking University’s Gillis says it appears the Chinese government is coming to terms with how to effectively regulate private enterprises, companies that behave more aggressively than their state-owned counterparts. But he also sees the move as a further consolidation of power by President Xi Jinping, bringing companies more under the control of the central government.

      “I think many of the companies had a pretty favorable treatment from prior administrations, and I think Xi Jinping is less enamored of these large private companies than some of his predecessors were.”

      Expensive acquisitions by companies like Wanda and Anbang have thrust China into the global spotlight. But the news and commentary that followed the companies’ mega-deals has not always been positive.

      FILE - People walk past an entrance to the Anbang Insurance Group's offices in Beijing, June 14, 2017.

      People walk past an entrance to the Anbang Insurance Group’s offices in Beijing, June 14, 2017.

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      In some cases, the deals have given China a black eye, says Fraser Howie, author of the Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise. Anbang’s attempt last year to purchase Starwood Hotels is one example, he says.

      “This is high profile, global Bloomberg headline, Chinese company buys Starwood Group, next week it’s all off because the funding was never there, the due diligence could never be completed there, it made all Chinese bidders look horrible,” said Howie. “It looks dreadful for the party and for the leadership that these private entrepreneurs are running out there and yet China as a country is being impacted by it.”

      Earlier this month, the head of Anbang was the latest to be swept up in the ongoing financial crackdown.

      Regulating private spending?

      Authorities so far have not said specifically what the targeted companies may have done wrong, if anything. Some analysts argue that the probe is just a part of a process that began six month ago to curtail the flight of capital from China.

      “If cross-border M&A deals make sense, if they deliver strong returns, then there should be no problem either for bankers or those doing the buying. But, if Chinese groups overpay and get the money to do so from Chinese banks providing risky or underpriced loans, then Chinese regulators have an obligation to step in,” Peter Fuhrman, Chairman and Chief Executive Officer of China First Capital tells VOA in an emailed response.

      Others see a deeper message about Xi Jinping’s view on the role that private companies should serve broader national goals.

      Howie says the probe challenges assumptions about the role of private enterprises in China.

      “If anyone ever thought these companies were truly private in the sense of being independent or beyond government reach. Clearly that was never true,” he says. “Everyone operates at the discretion of the Communist Party, even if you’ve done nothing wrong and clearly even if you are wealthy.”

       

      https://www.voanews.com/a/china-probes-big-comanys-overseas-loan-practices/3913190.html

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      Alzheimer’s Could Be China’s Biggest Health Problem — The Week in China Magazine

      Leave a Comment / August 11, 2020

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      Alzheimer’s is the fastest-growing, major fatal disease in China. Today there are at least 9.5mn diagnosed sufferers in China with perhaps as many cases undiagnosed. Almost one million Chinese are diagnosed every year with Alzheimer’s, with the number of new cases each year expected to accelerate sharply beginning around 2030.

      It is also the major disease in China with the greatest mismatch between the number of patients and the amount of specialized care available. The US has about half the number of Alzheimer’s patients as China, and 73,000 beds in specialist Alzheimer’s treatment centers. China today has fewer than 200 beds. Alz care is a thriving $250bn industry in the US. In China, it’s barely even begun.

      The reason for this mismatch is clear. China’s healthcare system is already under strain to reform and improve the quality of care overall, especially for acute and infectious diseases like cancer, hepatitis and serious asthma. Alzheimer’s is not now a top priority either for government policy or for healthcare companies and investors. But, over the coming decades, no disease will likely impact more lives in China or likely cost China more to treat. By 2050, it is projected the number of Alzheimer’s patients in China will exceed 45 million, about half of all those worldwide with the disease.

      The total cost of treating all those people is impossible to estimate. Alzheimer’s is already the most expensive disease to treat in the US. The US government pays for more than half, through national health insurance paid through taxes on companies and individuals. With the number of Alzheimer’s cases in the US expected to double in the next 20 years, US government spending on Alzheimer’s care is on course to become the single-most expensive part of the US budget, larger even than military spending.

      China will almost certainly take a different path than the US, with more spending done by patients and their families, rather than through national health insurance. On average, Chinese Alzheimer’s patients will also be cared for longer by relatives, rather than placed in specialized nursing homes.

      But, the almost total lack of Alzheimer’s treatment centers, and trained nurses and doctors, is one of the most significant market failures in China’s healthcare industry. While the government, SOEs and private sector have been making significant investments in old age care (what the Chinese refer to as “yanglao”), most of this money has gone towards building and selling apartments in retirement communities, places for older people who are fundamentally still healthy and active. There has been little investment in the area of elderly care with most urgent need now and in the future– providing specialist centers for people with Alzheimer’s and other chronic diseases that afflict old people like Parkinson’s, serious arthritis, recovery from stroke.

      In China, Alzheimer’s is still often seen not as a disease but as inevitable and natural outcome of aging, a sad side-effect of the fortunate fact of being long-lived. China’s national broadcaster, CCTV has lately been broadcasting public service ads to raise awareness that Alzheimer’s is a disease. This is the same education process the US and Europe began over 40 years ago.  There were few cases anywhere in the world then. Europe and the US, the private and public sector, began spending heavily to train doctors and nurses, build out its care infrastructure to meet the projected surge in patients.

      Alzheimer’s, like diabetes, obesity, colorectal cancer, is a disease of economic success. As a country becomes richer and healthcare standards improve, people live longer. Nowhere has this transformation happened more quickly than in China, meaning nowhere else has ever seen as explosive growth in the number of Alzheimer’s cases. The average life expectancy in China has increased more in the last 30 years than it did in the previous 3,000.  China’s life expectancy is still growing faster than in developed countries. Chinese in Hong Kong recently passed Japan to become the world’s longest-living population.

      The facts: Alzheimer’s is an incurable disease that afflicts a large number of older people, but not the majority. 3 percent of people age 65-74, 17% of people between 75 and 85 will develop the disease. For those over 85%, there is a 30% chance of having it.  It is a mystery why some old people get the disease and most others do not. One interesting correlation: people with higher education levels are less likely to get the disease. The more you use your brain in complex ways, the more you may inoculate yourself against Alzheimer’s.

      Rural people are more susceptible than city-dwellers. Because China still has a larger percentage of its population living in rural areas，this suggests that the percentage of the +80 year-old population with Alzheimer’s in China may end up higher than in US, Europe or other Asian more urbanized societies including Japan, Korea, Taiwan, Singapore.

      Women are far more likely to get Alzheimers than men. The reason is women on average live longer.

      Despite billions of dollars in scientific and pharmaceutical research in the West, there are no drug or surgical treatments for Alzheimer’s. A drug cure for AD, widely predicted in the West 20 years ago, now seems very unlikely.  Brain chemistry and biology make developing a drug for Alzheimer’s difficult. Since 2002, 244 drugs for Alzheimer’s were tested in clinical trials in the US and Europe. Only one received US FDA approval. It has very limited and short-term impact.

      Although there are no drugs to cure Alzheimer’s, there have been remarkable successes in Europe and the US, especially in the last ten years, at Alzheimer’s care facilities managed by specially-trained nurses and doctors. They work together to slow the progress of Alzheimer’s patients, through physical therapy, psychological counseling, special equipment to improve memory and mobility, lots of one-on-one assistance, and a safe living environment designed for care of people gradually losing their ability to think, speak and function. The result: Alzheimer’s patients in the US and Europe now live twice as long after diagnosis as they did 30 years ago, an average of 8-10 years after diagnosis.

      The longer Alzheimer’s patients live, the more likely it is they will spend the final years in specialized care facilities. In this final stage, Alzheimer’s patients are often unable to talk, feed or bathe themselves, can remember almost nothing. The body’s immune system gradually stops working. As the brain is overcome by the disease and begins to decompose, even automatic body functions like breathing, digestion and swallowing are disrupted.

      In the US and Europe, the average annual cost of caring for an Alzheimer’s patient is about $60,000, with the highest amount coming in the last two years of life. There are dozens of US and European listed companies focused on doing research and providing specialist Alzheimer’s care in nursing homes and clinics. In China, there are none.

      Traditionally in China, more money has been spent on young children’s education than on medical care for older people. But, as Chinese live longer the way money is spent across three generations will likely change. The grandchildren of people in their 80s will usually already be through college and working. That leaves more money, both in the hands of older people and their children, to provide more high-quality care for people at the end of their lives.

      A French listed company, Orpea, is moving fastest to build a big business in AD care in China. Last year they opened China’s most advanced Alzheimer’s clinic in in Nanjing. Orpea are among the world leaders in Alzheimer’s care. It is their first nursing home in China and they are planning now to expand quickly across the country. They have 775 nursing homes and clinics in Europe. Last year’s total revenues were €2.8 billion.

      In Nanjing, Orpea built a 5-star facility, as deluxe as one would find anywhere in the world, with marble floors, an elegant dining room, a huge indoor pool and water therapy center.  In total, it has 140 beds, including 22 in the Alzheimer’s clinic. None of the real estate is for sale. It is a service business, offering specialized care and housing to elderly including even the most challenging patients, those with late-stage Alzheimer’s disease 。

      Most of those living in the Nanjing facility are paying about Rmb20,000 a month. Though expensive, that’s still half the price per year of a shared room in a 3-star nursing home in the US. The level of care is as high as any specialized Alzheimer’s care center in the US or Europe. In almost all cases, the children of the patients are paying.

      Regardless of culture, Alzheimer’s tends to effect people the same way. Nothing can restore patients’ memory, or stop the progress of a disease that is, in all cases, 100% fatal. The goal of treatment is to slow the disease progression by treating early related health problems and the decline in motor skills.

      Most important is keeping patients physically and intellectually active. Orpea is using a new form of treatment known as “psychomotricity”, which rebuilds connections between a patient’s motor and cognitive skills. Successful treatment not only lengthens the lives of people with Alzheimer’s, it makes these patients more content, more social, more self-sufficient than if they were being treated by relatives at home.

      Orpea is also quickly learning new things about Alzheimer’s and how to care for patients in China. Among late-stage Alzheimer’s patients, those who have lost the ability to speak, to recognize people or their surroundings, one of the last skills they hold onto and enjoy is the ability to stuff meat dumplings.  There’s a special kitchen and dining room just for Alzheimer’s patients. The Nanjing center has both a KTV and a “memory room” with objects from the 1950s-60s. As Alzheimer’s progresses, patients can’t recall recent events, but often recover older memories for their youth, including old songs.

      Orpea plans to open at least two new nursing homes in Beijing this year and add other facilities soon in Shanghai. For now, they still have China’s Alzheimer’s care market, especially at the high-end, largely to themselves. But, they welcome competitors. “The need is so great, and the impact on patients’ lives so positive that we hope China will quickly develop a large, capable group of companies to care for people here,” explains Orpea’s China CEO, Nathaniel Farouz.

      How should China build its Alzheimer’s treatment infrastructure and bring it quickly up to global standards?  The biggest need will be providing care to Chinese with average family income and savings levels.

      One likely path will be for Chinese companies to acquire or partner with specialist nursing home companies in the US and Europe. There were rumors recently that one large Chinese investment group, CMIG, was seeking to buy Orpea. Orpea, though, denies any deal is being actively discussed.

      If there’s one advantage to getting a late start, it’s that China can learn from the mistakes and adopt the best ideas developed in the US, Europe and Asia. Japan, for example, is not only  building specialist nursing homes for Alzheimer’s patients in the final years of their lives, but also community centers for those still living at home or with relatives. Family members can drop off parents with Alzheimer’s to give caregivers a few hours to rest or run errands – or even for a few nights so they can take a quick vacation.

      Home nursing care is also expanding quickly in the West. This too seems to be improving and lengthening the lives of Alzheimer’s patients. Home nursing is still at a very early stage in China, but it is the fastest growing industry and largest source of new jobs in the US.

      The main beneficiaries of professional Alzheimer’s care are the patients, whose lives and health are improved. But, there are also economic benefits for the society as a whole. Alzheimer’s care potentially can offer millions of new, long-term and well-paying jobs in China, for people at all educational levels.

      From little spending now on specialized Alzheimer’s care, China will certainly grow into the world’s largest market for Alzheimer’s care. Government, at national, provincial and local level, should play a key policy-making, regulatory and coordinating role. Not only should they set standards and provide more transparent rules on which aspects of AD care will be reimbursed, governments can also do a great deal to foster the growth in urban China of high-quality private-sector nursing homes for chronically-ill old people. As the UN World Health Organization recommended in a recent report, “Central or local governments could adopt preferential tax policies or offer other financial incentives”  for Alzheimer’s care services and education.”

      In rural China, the government’s role will be even more important. The number of Alzheimer’s cases among China’s rural population likely will be proportionately higher and financial resources of families and local governments more limited.

      It’s hard to think of a business opportunity in China with better long-term investment fundamentals than specialized Alzheimer’s care. But, the industry should not be measured or motivated by profits. Its success and greatest return on investment will be in limiting the suffering, pain, helplessness and sadness of Alzheimer’s patients and their families.

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      Goldman, Lazard China Dealmakers Decamp for Upstart Funds — Bloomberg

      Leave a Comment / August 11, 2020

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      (Bloomberg) — Veteran China dealmakers at Wall Street banks and Western buyout firms are heading for the exits, in search of the more lucrative deals and higher remuneration offered by smaller funds.

      Three senior merger advisory bankers from Goldman Sachs Group Inc., Bank of America Corp. and Lazard Ltd. have resigned within the past month for senior roles at fledgling investment funds, according to people familiar with their departures, who asked not to be identified discussing private information. Carlyle Group LP Managing Director Alex Ying left the firm in January after two decades to set up Rivendell Partners, which focuses on mid-sized buyouts in Greater China and Vietnam, other people said.

      The moves highlight the increasing challenges big banks face in retaining their top dealmakers in an environment of tighter regulations and shrinking fees. Revenue from investment banking in the Asia Pacific region fell 8 percent in 2016 to the lowest in at least five years, according to data from research firm Coalition. Merger advisory revenue dropped 4 percent, the figures show.

      “Deal flow from China has come down considerably — those flows are severely curtailed relative to where they were,” said Henry Tillman, chairman of London-based advisory firm Grisons Peak LLP. “With investment banking revenue declining, people are going to look at their options.”

      Imminent departures include Andrew Huang, a managing director advising on Greater China mergers and acquisitions at Goldman Sachs who has resigned to join Chinese private equity firm FountainVest Partners, according to the people. Peter Kuo, a China M&A banker at Lazard, is leaving to help run a technology fund backed by Chinese investors called Canyon Bridge Capital Partners, the investment firm confirmed in response to Bloomberg queries.

      Higher Returns

      Ellis Chu, head of China M&A at Bank of America, has also resigned and will be joining an Asia-focused fund, the people said.

      Spokesmen for Bank of America, Goldman Sachs and Rivendell declined to comment on the departures. A representative for Carlyle confirmed Ying’s departure, declining to comment further. FountainVest Chief Executive Officer Frank Tang didn’t answer calls to his mobile phone seeking comment.

      Running or working for a smaller, Asia-based fund can offer managers greater independence in decision-making on deals and give them a bigger share of fees and profits from exiting investments. Senior executives at global buyout funds in Asia typically have to share 40 percent to 60 percent of deal fees generated in the region with U.S. and European counterparts, people familiar with the practice said.

      Smaller funds are also making more money. Private funds in Asia with assets of $500 million or less had a median internal rate of return of 16.1 percent over a three-year timeframe, compared with 11.5 percent at peers with more than $1 billion of assets, according to data compiled by research firm Preqin Ltd.

      High Turnover

      “A reason these guys are leaving likely also includes the fact those big firms have been having a challenging time of late in China, which leads to higher work pressure and unusually high turnover,” said Peter Fuhrman, chairman of Shenzhen-based China First Capital. “You can then try to set up on your own, make some deals, hope for success.”

      The exits follow other recent moves to smaller outfits. KKR & Co.’s two most senior China executives left in December to form a China-focused investment firm. Richard Wong, an M&A veteran at Morgan Stanley, resigned this month after 16 years to help set up Nexus Point Partners, a China-focused buyout fund started by MBK Partners Ltd. co-founder Kuo-Chuan Kung.

      The bankers and their new funds will face challenges when it comes to sourcing China deals. The government is clamping down on money outflows, which augurs poorly for outbound acquisitions. What’s more, competition is increasing from Chinese securities firms. Three Chinese banks ranked in the top 10 advisers on offshore acquisitions by mainland companies since the beginning of 2016, according to data compiled by Bloomberg.

      Among the first buyout specialists to make the leap from big outfits were KY Tang, who left UBS AG’s private equity fund in 2004 to start Affinity Equity Partners, and Michael Kim, who set up MBK in 2005 with five other senior Asian executives from Carlyle. In 2010, TPG Capital lost Shan Weijian, who left to found PAG Asia Capital. The next year, Mary Ma departed to help start Boyu Capital.

      https://www.bloombergquint.com/markets/2017/03/30/veteran-china-dealmakers-leave-wall-street-for-upstart-funds

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