Economy, Talking Point

Lacking protection

A worrying trend as one of China’s richest men gets stabbed outside home

Stabbing w

Back in the saddle: Zong shows off his bandaged hand after the attack

If there is a Guinness World Record for the biggest ransom ever paid, Hong Kong’s richest man Li Ka-shing would surely merit an entry.

Li’s eldest son Victor was grabbed from a car on his way home in 1996. Cheung Tze-keung, the notorious gangster who masterminded the kidnap, eventually walked away with $133 million, reports the New York Times. The billionaire’s son was later returned unharmed.

Details of the sensational story were only made public in 1998 after Cheung was arrested and tried in Guangzhou. At the trial he also revealed that he’d made another $77 million from kidnapping Walter Kwok, a member of another of Hong Kong’s richest families.

The criminal – who went by the nickname Big Spender – was sentenced to death by firing squad (though that wasn’t the end of the story for his wife – she was sent the bill for the bullets that killed him).

Neither Li nor Kwok was travelling with a bodyguard at the time of their kidnapping. That would swiftly change as both families beefed up their security with personal protection teams.

The security issue is back in the headlines this month, although this time it relates to a tycoon from Hangzhou rather than Hong Kong. Zong Qinghou, China’s second-richest man and chairman of the beverage giant Wahaha, was attacked outside his home this month by an assailant with a knife. The billionaire survived the stabbing, but the assault sent shockwaves through the media and online world, prompting debate about whether China is becoming an increasingly dangerous place for the rich. There were also plenty of theories as to why Zong had been chosen for attack as well.

So what happened?

Despite having an estimated net worth of Rmb$115 billion ($19 billion) Zong is famously frugal. He says that he spends no more than $20 on daily expenses and that his sole extravagance is drinking locally-picked longjing tea. “Other rich people have bodyguards but I just come and go on my own,” Zong once said (see WiC142).

He might be having second thoughts about that now. The life-threatening incident happened on the morning of September 13, when he was accosted by a disaffected 49 year-old. The migrant worker, identified only by his surname, Yang, wanted a job from the Wahaha boss. When rebuffed, he slashed at Zong with a knife, slicing tendons on the billionaire’s left hand.

News of the attack was considered so sensitive that Xinhua, China’s official news agency, only confirmed it a week later after rumours reached the Hong Kong press.

Xinhua later published a photo of Zong returning to work with a heavily bandaged hand (pictured above). Wahaha also sought to play down the issue, claiming that 67 year-old Zong was recovering well from his “minor injuries”.

According to Xinhua, Yang was arrested five hours after the assault. Preliminary investigations suggest he had been motivated to visit Zong’s home by a TV talk show in which the tycoon had promised he would help two migrant workers to find jobs at Wahaha.

As ever, conspiracy theorists were soon at work. Zong’s home is located in one of the top residential complexes in China, leading many to wonder how a jobless labourer could sneak in so casually. In an online survey by Hexun, more than 40% of respondents said that they didn’t believe the official account.

“An incensed jobseeker turning to violence? It is simply too unbelievable,” agreed Wang Zhian, a commentator who often appears on CCTV talk shows.

What is the unofficial version of events?

The most popular alternative story is that the knife attack was motivated by Wahaha’s recent business reshuffle.

One unidentified insider told the Hong Kong Commercial Daily – which broke the news and prompted Xinhua’s confirmation – that the incident might have been a “revenge attack for laying off managers at a Wahaha division”.

Last November Wahaha opened its first shopping mall, the Waow Plaza in Hangzhou. Zong plans to open 100 similar malls over the next five years, saying that he’ll use the real estate to help less-known European brands sell to middle-class Chinese. But the move into retail has got off to a bad start. Revenues have been weak and Chinese consumers didn’t warm to the Waow brand, which is short for ‘Wahaha Europe’.

Zong has since rechristened the shopping mall under the Wahaha name. But the China Times says he wasn’t happy with the management team at the new division and all but a few executives were fired.

“The attack on Zong is very likely to be a result of internal conflicts,” an insider told the newspaper. Zong had previously denied that he had ordered a major management reshuffle at the retail division (speaking out the day before he was attacked) and claimed instead that the bad publicity was being drummed up by a few departing executives.

What does the attack mean for Wahaha?

“The attack on Zong has again brought Wahaha’s succession issue to the forefront,” says China Business News. Specifically, it raises the question of whether his 32-year-old daughter Kelly Zong is ready (or even willing) to take over the empire, which reported revenues of Rmb63.6 billion last year.

Kelly Zong has been working at Wahaha since 2010, earning a decent reputation in the domestic media as “the most diligent princess”. Her father seems to maintain a watchful eye over her (“If she has any problems, I’ll go and wipe her butt,” Zong told the Financial Times in April).

But last month, Zong junior did an interview with Phoenix TV that raised a few eyebrows, possibly even paternal ones. Wahaha is at a “dangerous stage”, she suggested, commenting that the group’s diversification is “too overblown” and lamenting that the company hasn’t produced a new bestselling product for years.

More surprising, Zong admitted she doesn’t support her father’s decision to expand into department stores and wonders whether Wahaha has outgrown its roots as a family business. “I hope he will consider professional management but I doubt anyone can fit into the Group’s culture,” she said.

The sound bites didn’t stop there. Zong also revealed her dislike at having to mingle with government officials. “I think the government needs to realise that people of my generation will never be like my father’s generation,” she said, before adding that she wouldn’t be unwilling to relocate the entire business abroad if necessary.

“It is really possible. Do you know Li Ka-shing has already relocated his? Why is it impossible for me to do the same in the future?” she asked. (See WiC205 for the background to her assertion about Li’s shift out of Hong Kong.)

Are the Zongs right to feel insecure?

After the daylight attack on her father, Kelly Zong may feel even less inclined to stay in China. According to the China Business Journal, more than a thousand private-sector entrepreneurs have suffered unnatural deaths since 1980. “The fall of a government official would typically bring down a group of entrepreneurs. That explains the flurry of unnatural deaths, as well as the trend of rich people emigrating,” the newspaper said in an editorial. “More and more billionaires are feeling insecure. Private capitalists remain an underprivileged group politically despite their growing affluence.”

Growing income inequality means that the wealthy elite are often public enemy number two behind corrupt bureaucrats. The assumption is that self-made millionaires couldn’t have made so much money without behaving illegally, often in consort with the hated officials.

That led lawyer Xu Mingxin to opine (with distaste) that many netizens were actually sympathising with Zong’s attacker. “It is a shame that the logic of holding rich people to ransom and the disrespect for wealth has a growing audience,” Xu wrote on his blog. Tellingly, the remark was widely quoted in Chinese newspapers.

Perhaps that’s why Zong Qinghou – usually one of the more outspoken business leaders – has kept quiet thus far.

Further headlines about the attack could fuel more resentment against the rich and even spawn copycat cases, China Enterprises News suggested. “It looks like a simple assault case but it underlines a serious social problem of growing inequality,” the newspaper said. The debate even prompted intervention from an unlikely cheerleader. “We have to respect the creators of wealth,” the People’s Daily urged, before adding that Zong’s story of rising from the fields to the Rich List underlines the advancement of Chinese society.

The Global Times contributed too. According to its editor Hu Xijin, there are two yardsticks for measuring social stability. First, any ordinary man can stroll the streets at night with no fear of being attacked. Second, the rich can walk around without bodyguards. If so, the second condition looks increasingly fragile. China now has 4.3 million bodyguards working for 4,000 security firms, reports CBN, and the knife attack may result in the founding of quite a few more.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.