Twice a week in the winter of 1987, students living in the No. 5 dormitory of Shanghai’s Fudan University would hear a familiar knock close to midnight. A slight, bespectacled philosophy major was going about his rounds selling bread door-to-door.
The student, Guo Guangchang, earned about 30 yuan ($4.80) a month, doubling his income to help support himself through college. “I had a government subsidy then, but living costs were high,” Guo said.
Guo is flush with dough these days. Using Warren Buffett as a model, he’s one of a number of tycoons remaking the face of Chinese dealmaking, becoming China’s eighth richest person in the process. In contrast to state-owned companies that traditionally bought resources such as mines and oil fields to fuel the country’s soaring economy, Chinese entrepreneurs like Guo, 47, are looking overseas for brands, technology and financial assets that cater to the nation’s growing ranks of the affluent.
“Our focus going forward is on sectors where the life of China’s middle class can be upgraded: health, travel, leisure, education and the Internet,” said Guo, chairman of the $48 billion-asset Fosun Group, whose fortune is estimated at $5.7 billion by the Bloomberg Billionaires Index. “We call it marrying China’s growth with global resources.”
Since 2010 Fosun (656) has invested more than $3.4 billion in overseas assets including French resort operator Club Mediterranee SA, JPMorgan Chase & Co.’s 60-story tower 1 Chase Manhattan Plaza in New York and Raffaele Caruso SpA, an Italian maker of $3,300 suits, according to data compiled by Bloomberg.
Guo built Fosun by borrowing from the approach used by Buffett’s Berkshire Hathaway Inc. (BRK/B) It invests in financial assets such as insurance to secure long-term funding that can be deployed to expand across a range of businesses, said Eugene Qian, Citigroup Inc. (C)’s Shanghai-based head of global banking for China.
“Many people talk about being Buffett in China but few can pull it off,” Qian said. “Fosun is the closest in our view.”
Other Chinese entrepreneurs acquiring more overseas include Jack Ma, founder of China’s largest e-commerce company Alibaba Group Holding Ltd., which this year bought stakes in messaging service TangoMe Inc. and ride-sharing app Lyft Inc., and Wang Jianlin, who started Dalian Wanda Group. Dalian Wanda acquired British yachtmaker Sunseeker International Ltd. last year, after purchasing U.S. cinema chain AMC Entertainment Holdings Inc. in 2012 for $2.6 billion including debt.
Guo grew up in Hengdian in Zhejiang province, a small farming town about 150 miles (240 kilometers) south of Shanghai, now home to holiday chalets and Hollywood-style film studios. Plain rice served with marinated dried pickles was a major staple of the billionaire’s diet as a youngster.
At 18, Guo won a government subsidy to attend Shanghai’s prestigious Fudan University, where he developed an interest in philosophy as China was becoming more open to Western ideology.
“In 1985, China had a mental emancipation movement,” Guo said, recalling how philosophy classes would be packed with students. “That year was probably the most open the nation had ever been. You can call it teenage impulsiveness -- everyone was interested.”
After graduating, Guo worked at the university’s Communist Party Youth League for three years before answering a call by former Chinese paramount leader Deng Xiaoping in 1992 for the non-state owned economy to prosper.
“China’s economy and governance had made big strides in openness, and there were a lot of opportunities,” Guo said in an interview in a 13th-floor conference room in Fosun’s headquarters facing Shanghai’s iconic Bund waterfront. “So I got together a few friends, some of us graduated, some not, and we decided to take the plunge.”
They started with 38,000 yuan of their own money. Fosun, whose Chinese name Fuxing means “stars from Fudan University,” got its first break in 1993 when it made 100 million yuan selling a diagnostic kit for hepatitis antibodies with research help from Guo’s alma mater.
The next big opportunity came in the early 2000s as China started privatizing state-owned companies. Fosun invested in Shanghai Yuyuan Tourist Mart Co. (600655), a jeweler and department store operator formerly controlled by the city government, in 2002 and has become its biggest shareholder.
In 2003, Fosun participated in the privatization of Nanjing Steel Group, previously owned by the Nanjing municipal government, according to the company.
That same year Guo became a delegate to China’s top legislative body, the National People’s Congress. An executive’s membership in the legislature can confer social status and sometimes make it easier for their company to expand into new areas, according to Willy Lam, an adjunct professor at the Chinese University of Hong Kong’s Centre for China Studies.
“It shows that you are accepted by the leadership,” Lam said. “You are considered to be somebody trustworthy and a leader in the community.”
Guo said personal relationships are an important element in commercial cooperation around the world and the company’s investments strictly follow laws and regulations.
In 2007, Guo set his sights abroad. Fosun International Ltd., the unit that would later make most of the group’s overseas acquisitions, went public in Hong Kong that year.
As Fosun’s founders plotted their overseas expansion, they considered different business models -- from the property-to-ports conglomerate built by Li Ka-shing, Asia’s richest man, to buyout titans like Carlyle Group LP and Bain Capital Partners LLC that use leverage to bolster returns. They settled on Buffett’s approach.
“We thought of longer-term solutions to fundraising, and then we thought of insurance and the Buffett model,” said Guo.
Since then, Fosun has invested in Xi’an-based Yong An Insurance Co. and Peak Reinsurance Co. of Hong Kong. Insurance now accounts for about 40 percent of Fosun’s assets.
Its first overseas deal came in June 2010, when Fosun paid 41 million euros ($56 million) for 10 percent of Club Med, the resort owner with operations in 40 countries.
It has since amassed minority holdings in companies including Folli Follie SA, a Greek retailer of jewelry and handbags, and German private bank BHF-Bank AG.
Last December, it raised the stakes further. Fosun paid $725 million to buy 1 Chase Manhattan Plaza, the largest purchase of a New York building by a Chinese buyer. In January it acquired 80 percent of the insurance unit of Portugal’s Caixa Geral de Depositos SA for 1 billion euros -- beating U.S. buyout firm Apollo Management International LLP.
In Guo’s latest foray, Fosun is working on an 8-billion-euro commercial real estate project near Athens with Greek company Lamda Development and Abu Dhabi’s Al Maabar, the Greek company said in a June 24 press release.
Fosun plans to at least double its assets in the next five years and is on the lookout for health-care, tourism and fashion acquisitions in the U.S. and Europe, Guo said.
Prospective investments abroad typically have a Chinese angle, according to Guo, such as acquiring a brand that can be introduced on the mainland or expertise that can be brought to bear serving China’s growing middle class.
Club Med, for example, opened its first resort in China six months after Fosun’s initial investment in 2010, according to Fosun’s website. It plans to open five resorts in China by 2015, making the country its largest market outside France.
The Chinese are increasingly able to afford such indulgences. About 54 percent of China’s urban households will earn 106,000 to 229,000 yuan ($17,000 to $36,900) a year by 2022, up from 14 percent in 2012, according to an estimate last year from McKinsey & Co. In the same period, China’s middle class will grow to more than 271 million households from as much as 174 million in 2012, McKinsey forecast.
Replicating Buffett’s success may be a tall order. The sheer diversity of Fosun’s businesses will probably work against Guo’s attempts to achieve scale, said Joel Backaler, the author of “China Goes West: Everything You Need to Know About Chinese Companies Going Global.”
“At the individual business unit level, each one has potential to do quite well overseas, but when you look at it in the aggregate, the amount of balancing and the portfolio approach to managing their business” requires sophistication and experience that Fosun doesn’t currently possess, he said.
To Guo, it all comes down to balance: expanding Fosun quickly, but not too quickly. To that end, he’s turned to tai chi, the ancient Chinese martial art whose practitioners seek to achieve harmony between the opposing forces of yin and yang. Guo, introduced to tai chi by Alibaba founder Ma, created an area in Fosun’s Shanghai function room for the company’s executives to practice.
“Keeping the balance of fast growing and smooth growing is always important,” said Guo. “It’s almost an art.”
To contact the editors responsible for this story: Philip Lagerkranser at email@example.com Larry Reibstein