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SCMP, 9 July 2014, Howard Winn.

    http://www.scmp.com/business/article/1549968/entertaining-insights-chinas-state-capitalism


Some years ago Tim Clissold wrote an entertaining tale entitled Mr China. The book describes a series of investment exploits he was involved in, to bring Western capitalist know-how to China, in the belief that this would bring China into the modern world.

The book is a series of case studies of investment projects, which are often hilarious in their outcomes while offering a cautionary tale. The stories were fascinating in providing a bottom-up picture of the myriad ways in which investing in manufacturing business in mainland China could go horribly wrong. Joe Zhang's latest book Party Man, Company Man: Is China's State Capitalism Doomed? has a similar appeal.

Zhang is from mainland China and, after graduating, spent some years working in the People's Bank of China, before spending 11 years with investment bank UBS as an analyst, mainly as head of its China research. Indeed he first attracted public attention around 2001 for exposing fraud at two mainland companies listed in Hong Kong, Greencool Technologies and Euro-Asia Agriculture. In 2006 he accepted an invitation to become chief operating officer of state-owned Shenzhen Investment, which is listed on the Hong Kong stock exchange. It is from this vantage point that he describes the state sector and its significance in the mainland economy.

The book is a highly entertaining insider's account of his experience at Shenzhen International, the thinking behind its operations, culture, and failings. But he doesn't lose sight of the bigger picture, dwelling on topics such as credit expansion and the property boom.

He is scathing of state-owned enterprises: "A vast majority of the state-owned companies either squander their advantages, or engage in destructive practices to stifle competition, they are in most cases overstaffed, inefficient, and corrupt. As a result their returns are poor on the whole." He said that in many cases the chairmen and the chief executives did not have real authority over their divisional heads either because they had more powerful political backing, or because they didn't respect them as they tended to be political appointments.

On occasions, divisional heads did not bother to attend executive or board meetings. And if they did they would be thanked for attending, "in person". Quite often cash could not be moved from one division to another that needed it. Zhang recalls his shock when he first attended a senior management meeting to find that despite being the chief operating officer, he was 11th in the pecking order, with those above him mainly Communist Party functionaries.

It comes as something of surprise that despite his criticism of the state sector, Zhang does not believe in wholesale privatisation and argues for "a robust and well-funded state sector". Essential, accessible and an entertaining read for those wanting to understand SOEs and China's state capitalism.

 




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香港慢牛投资公司董事长。瑞士银行11年 (研究主管/投行副主管)。86-89年任职人行总行。五年(2001-05)"机构投资者"杂志评选的中国分析师第一名。

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