Sohu probes source of billionaire Chen Guangbiao’s wealth

Sohu probes source of billionaire Chen Guangbiao’s wealth

Staff Reporter

2014-01-02

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Chen Guangbiao shows off his “room of cash,” made from 16 tonnes of RMB100 bills, in Nanjing, Dec. 24, 2013. (Photo/CNS)

Chinese tycoon Chen Guangbiao, known for his attention-seeking charitable endeavors including literally throwing cash at people, recently made headlines after releasing a photo of himself surrounded by an estimated 1.4 billion yuan (US$231 million) in RMB100 bills. The photo has lead Chinese web portal Sohu to launch an investigation into his wealth.Chen said that he surrounded himself with 16 tonnes of banknotes on Dec. 24 so that people could learn about and actively take part in the country’s third nationwide economic census, which began on Jan. 1.

It took 20 people five hours to stack three walls and a block used as a table with bricks of bank notes, according to Chen, who said he has nothing to hide and that anyone is welcome to probe his wealth.

Chen’s remarks caught Sohu’s attention on how he made so much money, even though he has complained to reporters about the difficulties his recycling company faces in winning government contracts — which, he says, has rendered him a subcontractor earning a smaller margin.

Citing a report published by the China Business Journal in May 2011, Sohu stated that Chen’s company, Jiangsu Huangpu Recycling Resources, posted losses of around 4.3 million yuan (US$710,000) in 2008 and around 17 million yuan (US$2.8 million) in 2009. However, in a report published by Guangzhou’s Southern Metropolitan Daily, Chen was quoted as saying in 2010 that his company recorded sales of 10.3 billion yuan (US$1.7 billion) and net profit of over 400 million yuan (US$66.1 million).

Chen once said that 95% of his company’s business stemmed from sub-contracting, which was usually at a margin of 4%, but a company source said it is unlikely that Jiangsu Huangpu Recycling Resources could have earned even 100 million yuan (US$16.5 million) in profit.

Chen’s fortunes turned after he was named as the country’s top philanthropist, which helped his company win more government contracts, according to the Sohu report. Meanwhile, during an event in Wuhan in central China’s Hubei province in November 2009, the eccentric entrepreneur told reporters that 60% of his business resulted from his charity work.

One of the big contracts awarded to Chen’s company, according to Sohu, was the removal of the curtain walls at China Central Television’s building in Beijing after a fire in 2009 when the state broadcaster’s headquarters were under construction.

Sohu concluded that Chen’s charity work has thus helped him build relations with government officials and allowed his company to win an increasing number of contracts. Sohu questioned however the donations Chen claims to have made, as records showed that the money was usually jointly donated along with other companies or individuals rather than by Chen himself.

A source told Sohu that Chen may have even procured officials’ schedules to ensure that he would be seen carrying out relief work with them during the aftermath of the 7.9-magnitude earthquake that hit southwest China’s Sichuan province in 2008.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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