Arrested development

Healthcare firm Tianjin Quanjian mired in pyramid scheme scandal


Some like it hot: Quanjian displays its fire therapy techniques

Senmiao Street, Shijixi Street, and Quanjian Street in Tianjin’s Wuqing District used to be lined with coaches that brought visitors to the coastal city. Locals said many were keen to source goods that were typically used in fire therapy (a healing method that involves applying herbal paste to an affected area, which is then covered by an alcohol-soaked towel and – like the cocktail the Flaming Lamborghini – briefly set alight). But the neighbourhood has been dead quiet lately, thanks to a high profile investigation that led to the downfall of Tianjin Quanjian, a ‘naturopathy’ conglomerate from the area.

A total of 18 suspects linked to the company, including its founding chairman Shu Yuhui, were arrested on January 7. They are alleged to have organised pyramid schemes, engaged in false advertising, and performed illegal medical practices. The news shocked the country, not only because Shu, 50, is a high-profile football club owner (he once boasted he would sign Lionel Messi for his club, also named Tianjin Quanjian), but also due to the sheer sprawl of the Quanjian empire.

According to DXY, an online healthcare platform, the 14 year-old company has over 7,000 franchised shops across the country that claim to offer the aforementioned fire therapy, one of Quanjian’s three patented products. The other two are an insole that claims to correct skeletal defects and a negative ion napkin said to treat gynaecological diseases for women and prostate problems for men.

Additionally, the company operates two hospitals as well as selling dozens of health supplements, cosmetics and personal care products.

Since obtaining the licence for direct sales to homes in 2013, Quanjian has seen its sales revenue more than triple to Rmb17.6 billion ($2.57 billion) as of 2017. Shu himself has invested in 36 other companies and various real estate projects.

For the Chinese – a society that has trusted pseudoscientific methods of curing diseases for thousands of years – naturopathy might not come across as counterintuitive, which partly explains Quanjian’s popularity.

The claim that Shu had sourced 600 secret traditional Chinese medicine (TCM) formulas for treating more than a hundred diseases, including a costly cancer treatment was widely believed to have helped Quanjian gain credibility.

Yet local media tends to attribute Quanjian’s meteoric rise to its business model, which relies substantially on recruiting new members for its salesforce, or what can typically be understood as pyramid selling. More precisely, Quanjian’s dealers all have to join the company as associates by paying a fee or buying a certain amount of Quanjian’s products. They can then expect to earn promotional and collaborative bonuses through helping the company grow its membership base. The highest-ranking associate is expected to manage five teams, with each comprising 28,000 members.

Wang Gui told Southern Weekly that she had initially paid Rmb7,500 to become a Quanjian member and further invested Rmb70,000 into the company. And yet she had only received Rmb8,400 in return due to her “failure” to bring in new members. “I was promised to earn a commission of Rmb50,000 per week,” said Wang, noting that she was enticed by the charismatic leaders of Quanjian who presented at multiple events and gave free tours.

A senior associate nicknamed Gao told that Qunajian’s strategy to draft in new members was to feed the illusion of becoming super-rich. “I was taken to the best hotel restaurants when meeting with a Quanjian leader in Shandong,” he said, adding that he was forced to upgrade his car to a BMW when reaching a higher status within the company’s hierarchy. He explained that flaunting one’s wealth helps catch the attention of potential members, who are then brought to Quanjian’s headquarters in Tianjin for further indoctrination. There they see a luxurious office building, a modern hospital, many medical certificates and pictures of Shu with his helicopter.

The last mass meeting that the company had in late December reportedly attracted 2,000 people. Many of them, as you would expect, later went shopping along Senmiao Street, Shijixi Street, and Quanjian Street.

The company was put under the spotlight by DXY on Christmas Day, when it said that Quanjian was responsible for the death of a four year-old girl from Inner Mongolia three years ago. The victim Zhou Yang was originally treated for cancer in a top-tier hospital in Beijing, until Quanjian persuaded her father to adopt the alternative therapy it had designed. While Zhou’s condition worsened using Quanjian’s therapies, the company conversely put out an advertisement saying it had saved Zhou’s life miraculously (the girl was yet to die when the ad was released).

The exposé prompted the Tianjin government to probe the company and launch a broader clampdown on the city’s health supplement industry. It also coincided with a campaign by the National Administration of Traditional Chinese Medicine to weed out questionable players in the TCM industry. There were over 3,000 health supplement frauds last year, said the People’s Daily.

And the probe has become bigger than Tianjin. Authorities have expanded it into the health supplement industry nationwide.

The football club sponsored by Quanjian has not been immune to the fallout from the scandal. It is now under the supervision of the Tianjin Football Association and has dropped Quanjian from its name. The city’s table tennis team has done likewise; as has a high-speed train named after the company on the Beijing-Shanghai line. It has erased the brand from the exterior of its carriages.

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