After years of frustration, tempers boiled over as aggrieved former workers petitioned billionaire Yao Zhenhua outside his office.
Photo from CFP
By LI Hao
Strongman boss of property developer Baoneng YAO Zhenhua was almost lynched in a parking lot last week by workers and former workers, some of who have not been paid for two years.
A mob awaited the billionaire at the company's headquarters and surrounded his car, banging on the roof and yelling: “Pay my salary.” Yao had to be rescued by security staff. After the attack, the notorious corporate raider went directly to a meeting of even more angry workers.
A week ago, the police were called when Yao tried and failed to storm the headquarters of Jonjee Hi-Tech, a partial subsidiary, in an attempt to take back control of the company by force.
In 2016, with a personal wealth of 115 billion yuan (US$16 billion), Yao was the fourth richest man in China. Baoneng and Yao’s calamity began in 2017 when he sunk tens of billions of dollars into car making. The company, founder and subsidiaries appear to have no qualms about their financial plight.
Before the EV misstep, Baoneng seemed invincible and staged a much-publicized hostile takeover of rival property developer Vanke in 2015. Vanke CEO WANG Shi called Yao’s methods “barbaric," and after years of struggle marked by stock market manipulations and a failed purge of Vanke’s board, ended with Vanke's acquisition of Shenzhen Metro to dilute Baoneng’s shareholding. Baoneng pocketed 30 billion yuan from the operation.
Just as the Vanke saga unfolded, Yao was trying to do exactly the same thing to home appliance giant Gree Electric. DONG Mingzhu, Gree’s CEO, called the effort "sinful."
“If Yao succeeds, it will be the beginning of the end for Chinese manufacturing,” she famously said. Yao eventually gave up on Gree and "Chinese manufacturing" managed to struggle along just fine. In 2016, Yao wreaked havoc on glass maker CSG and energy company Shaoneng.
In 2017, Yao was barred from the insurance industry for ten years after providing fake documents and breaking the rules on the maximum investment in equities.
But it didn’t take him long to find a new home for his money and bought 51 percent of carmaker Qoros for 6.6 billion yuan, following up two years later with another 1.5 billion. In 2020, Yao acquired another automaker for 1.6 billion yuan.
As other aspiring EV makers have found out, car making is an expensive endeavor with uncertain and far-off returns. Baoneng produced one model during its car-making days and since the Evergrande default, cash has been hard to come by. A court document from last November shows Qoros with liquid assets of 2,651 yuan in cash at that time.
In 1992, Yao established the first predecessor of Baoneng, supplying vegetables to Shenzhen. Shenzhen Xinbaokang Vegetable Industries adopted its current name in 2000. By 2003, Baoneng had control of land and other properties, taking advantage of the inviting Chinese property market.
In 2005, the company built Shenzhen Baoneng All City, a residential-commercial complex, and by 2009 similar ventures across China were achieving annual growth of about 30 percent. But by 2021, Baoneng was in deep trouble.
Quros owes workers 10 million yuan in salaries and has been investigated and blacklisted almost everywhere it operates. In December, a court ordered Baoneng to auction off a Qoros factory to pay some of its debt.
Non-car subsidiaries combined owe 2,550 current and former employees 82 million yuan in back pay, according to a document obtained by Jiemian News. Many subsidiaries haven’t paid staff for two years.
The group is operating under 78 restraint orders with 113 court rulings against executives. A former engineer told Jiemian News that he and his team of 17 are owed a total of 644,000 yuan.
In an exchange disclosure statement, Yao blames the pandemic, large manufacturing investments, and expiring debt. The same statement shows that Jonjee Hi-Tech, the target of Yao's attempted coup de théâtre, owed 192 billion yuan as of December 2021.
Last year, Baoneng Group was forced to auction off its new developments in Shenzhen and Hefei to pay off its debt. This April, Baoneng Automotive and some real estate subsidiaries sold 2.5 million square meters of properties in Shenzhen that were used as collateral.
The only parts of Baoneng that seem to be doing OK are Jushenghua, the investment subsidiary at the heart of the Vanke debacle, and Qianhai, the company that provided the fake documents that got Yao banned from the insurance market.
Jushenghua’s 2021 financial statements, the most recent available, show revenue of 74 billion yuan and a net loss of 12 billion yuan, with 555 billion yuan in assets and 82 billion yuan in debt.
Jushenghua controls 20 percent of Qianhai. In 2021, Qianhai made 67 billion yuan and lost 12 billion in its main business. The company reported a net profit of 245 million yuan, mainly from its financial holdings.
Baoneng Group issued a statement after the parking lot showdown, condemning the violence and promising to spare no effort to resolve the salary issue.
