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Strategies & Market Trends : China Warehouse- More Than Crockery
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To: RealMuLan who wrote (502)8/24/2003 6:00:43 PM
From: hui zhou  Read Replies (3) of 6370
 
Yang Rong and shell companies. Yang Rong was 3rd richest man in China. How did he reach that level?

He set up Brilliance China Automobile(NYSE CBA) ("Hua Chen" in Chinese)10 years ago. But this company's structure is overly complicated. CBA controls 51% Jinbei Minibus while Jinbei has a joint venture with First Auto. Then, "Hua Chen" went public in Shanghai stock exchange and go to bio-tech and many other business in 1998. Recently, Yan Rong tried to abandon the auto business and went crazy for the cross Hangzhou gulf bridge and want to collect all the tolls which is more profitable. That provoked the Liaoning government. He was kick out of CEO title and be investigated for the economy crime.

Here is my take of this case. First the corporate structure is way complicated. Shell company "China Education Foundation" owns majority of CBA, while Hong Kong Huabo Finance co claims control 40% CBA. Since Yan Rong is the head of "China Education Fondation", HK co and the CEO of CBA. He is now claiming 70% of the CBA and suing Liaoning government

This is pretty like Enron style set up. Shell co like "China Education Foundation" has neither to do with education nor with auto business, but a empty co help CBA to go pblic in NYSE and to get bank loan. Usually, the more shells you set up, the more likely you got bank finance. And then, you shift money around between the diefferent shells and turnaround make a final claim as the overall owner of the company. Well, without Yan Rong's "contribution and creativity". I guess CBA is running better without him.
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