Herd instinct

Cattle controversy for CFO

Although Li Fucheng isn’t as well known as China’s tech titans or biggest property bosses, the titles of ‘Yanjiao’s Li Ka-shing’ or ‘China’s Cattle King’ are true recognition of a man who has worked in the business world for many years.

Or, at least, that is how Fucheng Group describes its founder on the company website.

Born to an impoverished family in Hebei province in 1946, Li quit school at a young age and made ends meet by selling sesame oil on the streets. He then found that the material left from extracting the oil from sesame seeds could be sold as animal feed. In 1983 he pivoted, putting all of his savings as well as additional borrowings of Rmb5,000 into a cattle farm in Sanhe, a city in Hebei. According to the Fucheng website he started with seven cows.

His cattle-breeding business started to do well. The company grew to such a size that Fucheng became the first “cattle stock” to be listed on the Shanghai Stock Exchange in 2004. But Li was already changing tack once again. He started acquiring large plots of land in Yanjiao, a county in Sanhe about 30km from Beijing. He figured that millions of migrant workers who couldn’t afford to live in the capital would opt for Yanjiao instead.

Li flooded the Yanjiao market with low-cost commercial housing. At its peak, the tycoon reportedly controlled as much as half of the housing supply there, which earned him the moniker of ‘Yanjiao’s Li Ka-shing’ (styled after the Hong Kong property tycoon of the same name), says Caijing.

“As long as there are beipiao [migrant workers in Beijing], I will keep building homes,” he declared.

Property agents claimed that the main reason Fucheng was able to keep the costs of its homes so much lower than its rivals was because it had acquired so much land at knock-down prices early on (somehow, it had also been able to predict where the local subway stations would be built, Caijing also noted).

There have been other rumours of senior executives being accused of bribery, as well as grumblings that Fucheng paid thugs to intimidate residents to give up their homes for redevelopment.

Last January, Li was sentenced to three years in prison for committing the crimes of accepting bribes and falsifying invoices. Although he had handed the company reins to his son as far back as 2014, Li senior was still an influential figure at Fucheng, Jiemian reckoned, staying in charge of daily operations.

As the case of Gome’s Huang Guangyu has also shown, just because a tycoon is behind bars isn’t necessarily an impediment to running a business empire remotely.

So it proved of interest when news surfaced in late April that Fucheng’s chief financial officer Cheng Jing had refused to sign off on the company’s 2021 annual report, as well as the first-quarter figures for 2022, claiming that she couldn’t confirm the accuracy of the numbers.

“Major shareholders have interfered with the company’s operation and management and have failed to maintain financial independence. I have been unable to diligently and conscientiously perform the duties of chief financial officer. The authenticity of some businesses also cannot be determined,” Cheng warned in a statement, making little effort to disguise that the major shareholder she was alluding to is the founder Li.

Cheng’s biggest concerns are about Fucheng’s cattle breeding business. She explained that in May 2021 she was instructed to pay Rmb160 million by Fucheng Group, the listed company’s major shareholder, for a herd of animals. Since then the parent company has failed to produce the necessary sales documents. “Cheng Jing believes that unless she could verify the validity of the invoices, there is a risk of reporting untrue purchase prices and inflated costs of assets, which would have a considerable impact on the company’s reporting of financial data,” Jiemian reported, adding that “up until the day the company announced the 2021 annual report, all the relevant original documents were still not presented”.

“Judging from the accusations made by Fucheng’s chief financial officer, Li Fucheng is, in fact, deeply involved in the day-to-day operations and management of Fucheng,” Caijing added.

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