Who’s Hu

China’s first private oil tycoon

Gong Jialong

Gong Jialong w

China’s economy has produced thousands of tycoons, many of whom have trodden a potentially dangerous path in challenging the state’s dominance in key industries. The rollercoaster career of Gong Jialong, the country’s first private-sector oil tycoon, offers a textbook example.

Getting started

Born in 1954, Gong started out as an oil driller in Hubei at 17. The job wasn’t a prestigious one and he tried his luck instead in car repair, where he proved a success. In 1975, he was transferred to the textile industry bureau of Hubei’s Jingzhou city to oversee its fleet of 50 delivery trucks, earning Rmb51 ($8.30 at today’s exchange rate) a month, although Gong admits today that his role as logistics head offered a few grey area opportunities to supplement his income.

Big break

Gong started his own trading firm in 1988. Fully private enterprises were still technically unlawful at that time. So Gong had to register a so-called ‘red-hat company’ – a privately-run firm with nominal state ownership – under the Jingzhou government. He acquired two filling stations and entered the oil industry.

The business grew. By the time Gong’s firm Tianfai Petroleum went public in Shenzhen in 1996, it operated more than 100 petrol stations and controlled about Rmb10 billion in assets. Even then only state firms were allowed to go public. As a result Tianfai was listed as a “commercial enterprise owned by all the people”. (Ping An Insurance is a more notable but similar case, see WiC194.)

Big fall

To his rivals, Gong’s wealth was built on state assets and political connections. But Gong was more convinced of his own entrepreneurial skills. He began to challenge the dominance of the state-owned oil giants in fuel distribution, founding the China Chamber of Commerce for the Petroleum Industry in 2004 to fight for private oil firms’ rights. With several private-sector counterparts, Gong established Great United Petroleum (GUPC) in 2005, aiming to achieve Rmb500 billion in sales in five years.

Gong never had the time to get close to that. A year later, he was found guilty of unspecified commercial crimes and handed an 18-month jail sentence. Nearly all of his businesses, including GUPC, were nationalised.

And then the comeback…

Strangely, Gong’s convictions were erased in 2008, albeit after he had served his time. He is now attempting a second act. Over the last four years, his team has acquired two upstream oil firms in Canada, as well as a stake in a 7,000-square-kilometre potassium mine. But rather than playing David against three Goliaths (CNPC, CNOOC and Sinopec), Gong is seeking their cooperation. The objective, according to Gong, is “contributing to China’s national security”.

Gong says he now has a more subtle understanding of state capitalism but comments of his non-jailed peer group that any private-sector entrepreneurs that have survived since the nineties and can still compete today are “extraordinary people”.

For more on jailed tycoons making business comebacks, see WiC167.

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