Risen From Obscurity
From farmboy to billionaire, entrepreneur Lu Guanqiu is living the Chinese dream
By TAN WEI
With personal assets worth 5.4 billion yuan ($652 million), Lu Guanqiu, the 59-year-old private entrepreneur from Zhejiang Province, was listed as the fourth richest entrepreneur in China on the Rich List 2003, compiled by Rupert Hoogewerf.
Lu rose from obscurity climbing to the highest rung of the entrepreneurial ladder in modern China, thanks to two decades of economic reform. Wall Street Journal has hailed him as “a hero of the nation.” Lu Guanqiu has indeed become larger than his company itself.
Zhejiang provides fertile soil for the development of private economy. Of its 920 billion yuan ($110 billion) GDP last year, the private sector constituted 70.1 percent.
Lou Zhongfu, Board Chairman of Zhejiang Guangsha Holding Co. Ltd., once summarized the spirit shared among private entrepreneurs in the province, “When two adversaries meet on a narrow path, the courageous man wins out; when two brave men meet, the wise man prevails.” Lu Guanqiu has been both strategic and courageous in building up a fortune of 5.4 billion yuan from almost nothing.
From the Bottom Up
Born in a farming family in 1945, Lu could not have imagined today’s accomplishment. When he was young and in need of a job, his only prospect was becoming a worker in a state-owned enterprise.
He dropped out of school in his teens because of poverty and started a flour-milling factory, which almost broke him. He had to sacrifice the mill’s machines and even the three-room house his grandfather left him to clear his debt because policy at the time deemed private business “illegal.”
However, it was precisely this failure that made him well known locally. The local village leader then invited Lu to run an agricultural machinery repair shop in 1969 at the age of only 24 years. Without money, skilled personnel or experience in management, Lu manufactured agricultural tools for about a decade.
In 1979, Lu started to adjust his plans. He was contracted to run the shop, which was re-named as Wanxiang Agricultural Machinery Repair Factory, and subsequently concentrated on manufacturing automobile parts. For the first year, Lu went beyond contractual obligations and reaped an extra 1.54 million yuan ($185,990) from sales.
In 1988, Lu purchased the factory at 15 million yuan ($1.8 million), making it one of the private companies that kicked up much controversy at that time. The factory later evolved into the Wanxiang Group Corp., with which Lu came to fame.
50 Million Yuan and More
Enterprises are divided by the size of their pockets. Those with the capital of less than 50 million yuan ($6.04 million) are referred to as “small enterprises” and those above are “medium” or “large” enterprises.
Lu told Beijing Review that the sales revenue of the Wanxiang Group reached 15.2 billion yuan ($1.84 billion) and foreign exchange through exports was worth 380 million yuan ($45.9 million) last year.
The so-called “50 million yuan phenomenon” refers to the fact that private companies in Zhejiang seldom become large corporations. In 2002, for example, about 95 percent of private companies there counted less than 50 million yuan in their banks.
Perhaps many private entrepreneurs in Zhejiang lack the sufficient daring spirit that Lu exhibits because they are too concerned with profits and lack efficient access to prudent information. The nepotistic management tendencies of business also inhibit recruiting talent, which undermines pragmatically acquiring this most vital resource.
Lu’s son, Lu Weiding, and his son-in-law, Ni Pin, are Lu’s right and left hand men in management. When asked whether Wanxiang is a family business, Lu replied, “Presently, I think my son is the best we’ve got, but I welcome anyone who can manage the corporation better than my son and bring more income to farmers.”
Lu Guanqiu was able to perceive what needed to be done to be commercially successful. Lu and his company sailed over the threshold into medium-sized company land and have ambitions to expand and even raise their management levels to international standards.
In the 1990s, Lu established the Wanxiang Group Corp. and started to expand from the manufacturing industry to the capital market. In November 1993, Wanxiang’s Qianchao Co. Ltd. got it listed in the Shenzhen Stock Exchange.
Hong Xiaobin, researcher of the Guotai Junan Securities Institute, said the Wanxiang Group has been a domestic pioneer in terms of the paths it has blazed toward domestic and international capital markets.
From 2000 to 2001, the Wanxiang Group merged with three listed companies including Universal Automotive Industries Inc. (UAI), a NASDAQ-listed company. Being the first private enterprise in China to merge with an overseas company, Wanxiang is now drooling over another listed company, Xiangyang Automobile Bearing Shares Co. Ltd.
Zhejiang, China & Beyond
A globalizing economy and China’s WTO accession has entrenched the Chinese economy into the international market. Lu Guanqiu is among the pioneering private entrepreneurs in Zhejiang to keep pace with the trend to participate in global competition.
Lu, perpetually sober-minded, is quite aware of the situation. Businesses must establish filial companies abroad in order to secure a position in the global market. In 1994, the Wanxiang Group founded the Wanxiang America Corp., which proved to be an important move in integrating resources abroad.
Three years later, the Wanxiang Group became the first Chinese mainland company to supply its products to General Motors in the United States.
Through both prudent capital placement tactics and keen development skills, the Wanxiang Group has established 18 affiliated companies in seven countries including the United States, Britain, Germany and Canada in recent years, earning over $2.29 million in foreign exchanges each year.
In 2003, the successful launch of China’s first manned spacecraft, Shenzhou 5, threw limelight on Lu Guanqiu and his Wanxiang Group since the silicon chip produced by Wanxiang Guifeng Electronics Co. Ltd. was used in the spacecraft.
Lu’s company is sending shock waves around the world. Rockford, a veteran global supplier of first-class automobile parts, and General Bearing Corp. (GBC), one of the oldest axle manufacturers in the United States, all acquiesced to Lu Guanqiu. The Wanxiang Group won orders from the two worth $80 million for axles every year.
But Lu wants more.
Up to now, Lu has built up a group that dabbles in automobile parts, logistics, soft drinks, chemicals and real estate. Recently, Lu set another goal for himself. He said, “Automobile manufacturing has been a goal I have pursued all my life. Wanxiang will enter the automobile industry when its revenue reaches 100 billion yuan ($12.1 billion).”
The Wanxiang Group is seeking more
opportunities in the securities market because currently, “Wanxiang
possesses only three listed domestic companies, which is far from enough.”
Lu told Beijing Review that Wanxiang America. is planning to localize
its capital operation in the United States. In this next decade, he would
like to “add another ‘0’ to his fortune.”