Chinese Character

Sweet redemption

Meet China’s 90 year-old orange king (and formerly its tobacco tsar)

Chu-Shijian2-w

Chu: the Rockefeller of China?

In the late nineteenth century a handful of men in America amassed immense fortunes. Everyone knew their names – then as they still do now – John D Rockefeller, Andrew Carnegie and Cornelius Vanderbilt.

They were, on the one hand, the ultimate embodiment of the American dream and its pioneering frontier spirit. But even in their own lifetimes they also became collectively known as ‘the robber barons’; after exploiting a fast-growing but still immature market economy for their own ends.

Which men and women from China will be viewed in the same light 100 years from now, for good and for bad? Who will be remembered as the faces of China’s economic modernisation; the visionary figures whom history accords legendary status?

Jack Ma will almost certainly make the cut. He is a man who, after all, is as increasingly well known outside China as he is inside it.

There is another man who should definitely be on the list, yet is almost completely unknown outside China. He is Chu Shijian. Like those American business pioneers, Chu too is part of the fabric that ‘China Inc’ is starting to weave around itself as it creates the same kind of myths about its rise to superpower status.

Now aged 90, Chu is a Yoda-like figure. Indeed, fellow tycoons like Jack Ma still make regular pilgrimages to his home at the foot of the Ailao Moutains in Chu’s native Yunnan province, where he runs a highly successful orange business and eco resort serving dishes of wild vegetables.

The saga of his rise, fall and metamorphosis into a sage also bears more than a passing resemblance to the ups and downs of the robber barons, particularly Rockefeller. Both men ended up controlling vast swathes of their industries. While Rockefeller’s Standard Oil was the world’s biggest oil refinery of the era, Chu was known as ‘the tobacco king’ in the early nineties.

At a time when China was about to enter the reform era, nearly all its state-owned enterprises were struggling, including the Hongta Group, a small cigarette factory in Yunnan which Chu was appointed to manage in 1979.

When he arrived Hongta was producing just 300,000 cartons of cigarettes a year but the factory’s obsolete facilities meant at least 15% of its products were defective.

By the mid-1990s, thanks to Chu’s management skills and a decision to import modern machinery from England, Hongta became a profitmaking machine.

According to Southern Weekend, the firm became one of the world’s top cigarette makers behind BAT and Philip Morris. Hongta’s signature brand Hongtashan, or Red Pagoda Mountain, was also transformed into one of China’s most famous brands.

In the nineties the tobacco industry was the government’s biggest revenue generator, accounting for 11% of total fiscal takings. But Hongta still stood out among numerous competitors, which were typically run by local authorities or bigger state firms. During Chu’s 18 years in charge of Hongta, Southern Weekend said the company contributed a total of Rmb140 billion (or $22 billion at today’s conversion rate) in tax to the Chinese government. At its peak tobacco firms accounted for 70% of the fiscal income of Yunnan province, of which 70% came from Hongta.

Chu and Rockefeller share many of the same personality traits and management practices: a willingness to get their hands dirty; to experiment and innovate; to import the best machinery; to vertically integrate; to incentivise their workers.

In a purely free market economy like that of nineteenth century America, his entrepreneurial success would have made Chu enormously wealthy. But in a state-run economy, his official salary was still about $250 a month in 1995.

As the New York Times wrote in 1998, Chu was working in a system that was “so economically irrational that it encourages inaccurate financial reporting as well as outright embezzlement”. He was also working in one where guanxi counted for everything (for more on how this connections-based system operates in China, see WiC120). Hence once his childhood friend, Pu Chaozhu, retired as provincial governor, he was investigated for corruption.

Rockefeller suffered a similar backlash from the authorities: investigated for antitrust practices that resulted in his empire being broken up. The American baron remained immensely wealthy, giving much of his fortune away ($550 million or nearly $9 billion in today’s money, making him one of the biggest philanthropists of all time). Chu Shijian was not so lucky.

In 1999, Chu was sentenced to life imprisonment and stripped of his political rights. He was found guilty of embezzling Rmb1.1 billion (by siphoning off some of the difference between lower government-sanctioned cigarette prices and the higher price they were being sold at in the market).

His wife and daughter were also imprisoned. His daughter later committed suicide. His son, Chu Yibin, meanwhile, stayed in Singapore. The New York Times intimated that Chu junior ran the export side: reshipping cigarettes back to China where they earned the family money from price arbitrage.

But prison was not the end of Chu’s story and what happened next is why he is so famous in China. For his is a morality tale. Prison is where he found redemption, or so the story goes.

While incarcerated, he developed a liking for bingtang oranges (a variety that’s smaller and juicier thanks to a thinner peel). But the oranges have a relatively sour flavour. When he was released on medical parole in 2002, aged 74, he decided to reinvent himself as an orange farmer and make sweeter bingtang oranges that would better appeal to the Chinese palate.

Chu revolutionised the way the oranges were grown as well as harvested, developing his own type of organic fertiliser made from poultry dung, cane sugar and minced tobacco (what else). Tobacco helps the orange trees soak up the nutrients from Yunnan’s rich soil.

He banned pesticides and like Britain’s Prince Charles, he decided to nurture his trees by talking to them in the orchard. He also imported grading machines and paid his farmers based on the quality rather than the quantity of the harvest.

And perhaps most importantly, he demonstrated that he had not lost his touch when it came to distribution and marketing either. In 2012 he began selling his oranges on e-commerce platforms. By then aged 85, news articles about his successful reinvention went viral. Many Chinese tycoons took to the internet to pay tribute to Chu’s redemption. His old friend, Vanke’s founder Wang Shi summed up the business community’s overwhelming admiration for Chu: “Judge a person by his resilience and tenacity when he falls, not the glory at his peak.”

The so-called “Chu oranges’ were a nationwide hit and Chu earned himself a new moniker as the orange king. Clever branding and superior quality also mean his oranges still sell for substantially higher prices than competitors (even foreign ones) just like his cigarettes once did.

The packaging positions Chu’s oranges as a luxury product and cleverly uses his famous visage: he is depicted in homespun style with a woodcut of him sporting a traditional farmer’s hat.

“Pain is temporary, pride is forever,” runs the marketing blurb, recalling one of his most famous quotes. And it is very effective. Some consumers believe eating Chu’s oranges will help them soak up his inspiration.

“My parents complain his fruits are too expensive,” one fan told Xinhua in 2014. “It’s hard to explain the brand story to their generation who always want to be thrifty.”

Chu was back in the news again recently after announcing plans to hand over the business to his son and not the grandson-in-law who has helped him develop the business since 2008. Earlier he’d told media that the grandson-in-law would inherit, but when his son returned from abroad he appears to have changed his mind. Both men now work in the business but blood seems to have prevailed as Chi has preferred his natural son to take over.

Can the “Chu oranges” remain a superior brand under his son? “I don’t really care. This is the next generation’s business,” Chu, now 90, told China Entrepreneur magazine. “I have no regrets after giving my best.”


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