http://www.washingtonpost.com/wp-dyn/content/article/2006/02/16/AR2006021602515.html?nav=rss_world/asia
BAOTOU,
China -- The Communist Party officials who run this grimy steel town on the
grasslands of Inner Mongolia had big ambitions but little finance. So they
called in one of China's most successful capitalists, Yan Jiehe, and let him
handle almost everything.
Yan used the same plan he has applied across China's vast hinterland in
amassing one of the country's largest personal fortunes: His company, China
Pacific Construction Group, put up nearly all the money, hired workers and
bought materials. On dark and muddy roads, workers added pavement and
streetlights shaped like flowers. In the lonely center of the city, they
inserted six public squares and statues of Genghis Khan. The city will pay in
installments.
Yan's little-money-down financing has gained his company more than $50
billion in construction contracts since it was launched four years ago,
elevating China Pacific into the largest private employer in the land, with more
than 100,000 workers. Yan was recently ranked as China's second-richest man by
analyst Hu Run, whose annual list of the wealthy has become a national event.
Yan's personal assets were estimated at $1.6 billion, trailing only the $1.75
billion fortune amassed by Huang Guangyu, founder of Gome, a chain of discount
electronics shops.
"I was going to be number one," Yan, 45, said in an interview. "I have villas
and apartments in Nanjing and Shanghai. I drive a BMW. I have a Mercedes-Benz, a
Cadillac, a Lincoln Town Car. I have everything. But in China, the bigger the
tree, the more wind it catches. I knew being listed as the richest man would be
asking for trouble, so I pushed to be ranked lower."
The turns by which the former schoolteacher rose to the ranks of the
ultra-rich demonstrate the frontier nature of China's construction boom and the
enormous sums being spent on highways, bridges and skyscrapers. They also show
the hybrid nature of business in a land no longer communist yet not fully
capitalist and the importance of cultivating ties with the local party officials
who still determine what gets built.
"In China, it's not the know-how, it's the know-who," said David Chen, chief
executive of MKA Capital Inc., an aircraft leasing and finance company based in
Shanghai. "The government still controls lots of things. If you're a contractor
or a real estate developer, you need a license. You need the land. You need to
work with the government and you need people to be on your side. That's why all
the nightclubs are full every night and why all the high-end restaurants have
private rooms. People are in there talking business."
As word of Yan's wealth filtered into the Chinese press in recent weeks, he
has tasted controversy. Critics assert that he built his fortune by exploiting
the vanity of officials in backward places, sating their hunger for trophy
projects when they should be investing in services for the poor.
"I hate businesspeople like Yan," said Zuo Dapei, a senior economist at the
Institute of World Economics and Politics of the China Academy of Social
Sciences in Beijing. "They are making fools of local government officials. In
remote areas, many officials are unsophisticated, and their good intentions can
be exploited by shrewd businesspeople. But others are just acting. When bribes
are involved, they just pretend to be foolish."
Yan acknowledged that he targets "remote, underdeveloped provinces" lacking
in finance and construction expertise. He said he fronts the costs because that
allows him to make deals directly with local officials and avoid competition,
enjoying average profit margins of 35 percent. "It makes the profit margin much
higher when you have no competitive bidding," Yan said.
Yan made no apologies, portraying himself as a rainmaker able to spread urban
development far from China's wealthier coastal areas.
"Local governments often don't have much capital, but they really want to
build infrastructure," Yan said. "So my model is very popular. Before, I had to
approach local governments. Now, they come to us."
