Chinese Character

Under the radar

Meet the tycoon who turned a village into a conglomerate


Nanshan: to produce stars like her?

The most talented young golfers in China can be found teeing off at a mountainous facility in Shandong province. Opened in 2012 at a cost of around $80 million, the Nanshan International Training Centre is a sprawling complex. On a recent visit a journalist with the Financial Times found its clubhouse had a “a view overlooking identical red-roofed golf villas”. Somewhat more unusually he could also see “industrial chimneys in the distance”.

The purpose of the centre is to train Chinese golfers capable of winning gold at upcoming Olympics. But the FT’s description also makes plain that the China Golf Association needed a partner for the project. Those villas (a luxury property development) and the chimneys (evidence of heavy industry) come courtesy of one of Shandong’s biggest conglomerates, the Nanshan Group.

Not surprisingly, it’s a big player in real estate; and as those chimneys suggest, it operates aluminium smelters and textile plants too. Likewise Nanshan has made a big push into tourism, hence the lure of supporting the golf facility. Apart from owning a variety of other golf courses, Nanshan has hotels, a vineyard and a majority stake in Qingdao Airlines (last year Nanshan also made a splash at the Farnborough Air Show when it signed a deal to buy two ARJ21s, a soon-to-be-launched commercial jet aircraft that’s made by state-owned Comac).

“Nanshan, which wanted to expand its reach in the golf market, footed the bill for the training centre,” points out the FT, adding that the goal of the conglomerate and the China Golf Association “wasn’t just to establish another private golf academy but to create the most technologically-advanced and best-coached training centre in China.”

But it was unusual for Song Zuowen to sponsor such a high-profile facility. The notoriously low-key founder of Nanshan Group never gives interviews. Qilu Weekly was told by a local official in Yantai city, where Nanshan is based, that “it is difficult to meet Song Zuowen, even harder to see Song Zuowen speak”. He added that the local government had once tried to start a campaign to promote Song’s business acumen – in 2010 he was named by media as Shandong’s richest man – but it was rebuffed after several rounds of negotiations. Song was unenthused by the proposed slogan ‘Learn from Nanshan’, and explained his reluctance to get involved thus: “It is very dangerous to obtain honours that one should not have had.”

It may well have been his two sons – now senior figures in the group – that persuaded their father to eschew his old ways, and fall in with the government’s new enthusiasm for promoting China’s sports industry via golf.

So what do we know about this mysterious tycoon – estimated by Hurun last year to be worth Rmb14.5 billion ($2.31 billion) – and the company he grew into one of the country’s largest private conglomerates?

Song was born in 1947 in the village of Qiansong on Shandong’s coast. It was the definition of ‘dirt poor’ – a local jingle had it that “in Qiansong one needs to trade a life for a meal”. In these circumstances it was not surprising that Song’s education ended at primary school level, and that he would advance instead through hard work and entrepreneurial flair. For instance, he was quick to seize on the opportunities thrown up by Deng Xiaoping’s market reforms in 1978, and made his initial cash buying and selling lumber. The Rmb5,000 he earned from this funded what would become Nanshan – in origin a village enterprise that Song built into a fibreglass factory and then a cotton mill. As NetEase comments: “In his more than 30 years of entrepreneurship Song has dealt with tofu, cement, asbestos and textiles; he has merged the eight villages around Qiansong; and developed a small factory into a large group.”

He grew these villages into a company town. Dubbed by locals as “Nanshan city”, Qilu Weekly notes it has “a clean and tidy 20 metre-wide street, under the shade of pine trees, lined with power plants, aluminium companies, hospitals, villas, schools, factories, stadiums and the office buildings of Nanshan Group”.

The magazine compares Qiansong to Huaxi, famous throughout China as the country’s ‘richest village’. In this respect, Nanshan also shares the spoils of its commercial success with local residents (more on which later).

Some put Song’s success down to aligning his business interests with local government strategies. But as Qilu Weekly points out, this has not always been the case. True, whenever a new investment project was devised his first port of call was to meet with local officials. If they liked the scheme he’d persuade them to give swift policy support. Then again, if they weren’t enthusiastic and he felt optimistic about the project’s prospects, he would go ahead anyway – albeit quietly, reports Qilu Weekly.

Unlike some successful Chinese tycoons Song looks to have been fortunate in fathering a talented second generation, and it is now readying to take over the business. His elder son Song Jianbo helped develop the aluminium business and got Nanshan listed in Shanghai. His younger son Song Jianmin is described by Qilu Weekly as “equally shrewd”. Initially he took care of the property operation, but later was charged with growing the tourism division. Meanwhile, Song’s eldest daughter-in-law looks after Nanshan’s textiles and garment unit.

The sons are slightly less media shy than their father, and in one interview they were asked how the group’s miraculous expansion was financed. “First, accumulate capital,” said Song Jianbo, “then second, get loans, then third, get public financing.”

Their early method of accumulating growth capital was to pool the resources of the giant village-cum-city they had created, developing a hybrid structure that is both a conglomerate and a village cooperative. From its earliest days local residents became not just Nanshan’s employees but also its investors by forfeiting their bonuses to get shares in the enterprise. Today each family in Nanshan has what is known as a ‘golden booklet’ that details their seniority, capital and dividend due. At times of need they can apply to the company to draw down some of their funds – for instance, to buy a car or pay for a marriage – but otherwise the pool is used for new investments. The value of Nanshan employees’ shares and stored cash amounts to about Rmb900 million, according to the company.

There is, of course, a social dimension to the model. Cheap housing for Nanshan Group retirees is on offer, and even here there is an incentive for the next generation to stay loyal to the company. If the retiree’s offspring work for Nanshan their rent is reduced yet further.

So for the citizens of Qiansong, Nanshan looks to be the embodiment of responsible capitalism.

However, this being China, there have also been allegations that the company’s success might have been aided by bribing the powerful. This emerged during the public trial last September of Liu Tienan, a former senior official with economic planner, the NDRC (see WiC195). According to a report by the official state news agency, Xinhua, Liu alleged he’d received Rmb7.5 million from Song Zuowen, which led to speculation that the tycoon might be caught up in the ongoing graft swoop.

Till now nothing has happened, suggesting the investigators haven’t found Liu’s claim to be plausible. And since then Song has been spotted at public events with government officials. That may be telling: if his personal circumstances were in doubt, these bureaucrats would likely steer well clear of being photographed with him…

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