The fight over real estate giant Vanke has observers asking what ‘Chinese capitalism’ actually means.
BEIJING — One year ago, it would have been unimaginable to see Wang Shi (pictured), the larger-than-life CEO of Vanke, China’s largest real estate developer, facing investors calling for his head. But on June 27, the embattled CEO offered to step down, signaling a possible end to a months-long battle for control of the $27 billion company he founded. The dispute marks one of China’s first corporate takeover battles, pitting Wang, a real estate tycoon much admired for his public-minded approach to business, against Baoneng, a private insurance conglomerate, which began quietly accumulating Vanke shares last year. While hostile corporate takeovers are common in the West, they remain nearly unheard of in China, where interpersonal relations and a web of government connections continue to govern major boardrooms. Disputes rarely spill out into public view — much less receive comparisons to Game of Thrones. But the fight for Vanke has gotten observers debating core questions about whether Chinese business is, and should be, a capitalist or a socialist animal.
At the center of the dispute is Wang, viewed by admirers as adventurous and erudite. He has climbed Mount Everest, penned several influential books, and took three-year sabbatical to study subjects including Japanese history at Harvard, all while creating one of China’s most recognized brands.
Wang styles himself as an alternative to China’s anything-goes business culture; Vanke’s company mission highlights “safeguarding the bottom line of moral values” and “resisting unjust benefits” as among its keys to success. Wang claims he has never given a bribe, a practice almost inseparable from the sticky business of real estate development in China.
Detractors say that Wang, once married to the daughter of a former provincial governor, is a savvy operator who has amassed political connections in a country where having friends in high places yields outsized benefits. Vanke itself started as a subsidiary of a state-owned enterprise (SOE) before becoming a publicly traded business, and Wang has since run it with the support of a small number of trusted, mainly state-owned institutional backers, who have mostly stayed out of his way. That may have given him the comfort to advance headier notions of business ethics.
It also may have made Wang complacent. In 2015, Baoneng, along with two of its subsidiaries, began quietly amassing shares of Vanke on the Shenzhen and Hong Kong stock exchanges. By November 2015, they had together surpassed the second largest shareholder and were on their way to securing a majority stake. Then Vanke’s management, sensing something afoot, sounded the alarm and halted public trading of its shares.
At Vanke’s December 2015 internal meeting, Wang reportedly compared Baoneng to a “barbarian” and criticized the company for being an irresponsible upstart that lacks “credibility” and would “ruin” Vanke’s brand and reputation. For months Chinese media speculated about whether China Resources, a large state-owned conglomerate and longtime faithful Vanke backer, would swoop to Vanke’s rescue. Instead, on March 14 Wang sought out Shenzhen Metro, an SOE that manages the expansion of Shenzhen’s subway, as a white knight to take majority control and let Wang continue to run the show in exchange for lucrative development deals. But the plan would have diluted existing investor shares, a burden few investors seemed eager to bear in order to keep Baoneng at bay. The plan even alienated China Resources. On June 26, an emboldened Baoneng counterattacked, accusing Wang of retaining his CEO salary while on leave at Harvard and calling for an investor vote to dismiss him and Vanke’s top management. On June 27, in what appeared to be a gambit to allow others in Vanke’s top management to keep their jobs, Wang effectively offered to step aside.