By DAVID BARBOZA JUNE 5, 2014 10:32 PM
The billionaire Chinese financier Xiao Jianhua, the subject of a New York Times profile on Wednesday, said he did not make money through his political connections but by following Warren Buffett’s value investing strategy.
He also said that although a company he co-founded stepped in last year to buy shares held by the sister and brother-in-law of President Xi Jinping, it wasn’t a bad thing but that he was helping the family dispose of their assets at a time when they were coming under scrutiny following a June 2012 Bloomberg News report.
In a lengthy statement released late Wednesday, Mr. Xiao said through a spokeswoman for his company, the Tomorrow Group, that he wants to set the record straight on how he made his billions and how his companies deal with the ruling elite, and that they were not channeling benefits to them.
This English statement is the Tomorrow Group’s own translation, with the only modification a fix to the spelling of Warren Buffett’s name. The company also issued a Chinese version.
Public Statement
By Ms. Yu Lan, Spokesperson of Tomorrow Group in regards to an untrue report published by the New York Times on June 3, 2014 regarding Tomorrow Group and Mr. Xiao Jianhua
On June 3, 2014, the New York Times published an article titled “With Choice at Tiananmen, Student Took Road to Riches” (the “Article”), which contains material untrue descriptions concerning Tomorrow Group and Mr. Xiao Jianhua. Ms. Yu Lan, as the spokesperson of Tomorrow Group, hereby makes the following public statements:
I. Mr. Xiao and Tomorrow Group built their business from scratch and their achievements are completely the results of hard work in investments.
1. Mr. Xiao and Tomorrow Group built their business from scratch and their achievements are completely the results of hard work in investments. Those achievements have nothing to do with the “Event of 1989”. The so-called “rewards” that Peking University provided financial support to Mr. Xiao for his performance in the “Event of 1989” is untrue. Mr. Xiao was only 18 years old in 1989. At that time, facing the complicated event, Mr. Xiao and the University used their best efforts trying to procure the students’ activities to be in compliance with the law, and to avoid tragedy. However, when some students’ actions became more and more aggressive, Mr. Xiao felt powerless, and he switched to the library and concentrated on study, the same as some other students chose to do at that time. Mr. Xiao did not receive any financial support from Peking University for his foregoing action. The Article also admitted that Mr. Xiao started his venture as a computer reseller marketing computer brands such as HP, IBM, and made achievements step by step. After the “Event of 1989”, Peking University did not provide any financial support to any entrepreneur (and NO support to Mr. Xiao either).
2. After the “Event of 1989”, Mr. Xiao believed that the political activities were very complicated, and there had been many elites and talents in the Communist Party. After studying Mr. Warren Buffett’s business philosophy, Mr. Xiao thought that engaging in business might be more suitable for his character. From then on, Mr. Xiao completely kept himself away from politics, and focused on business and investment. As the chairman of the strategy committee of Tomorrow Group, Mr. Xiao keeps studying the theories of Mr. Warren Buffett, and has achieved lots of success. The success in business has further strengthened Mr. Xiao’s determination that keeping himself away from politics and focusing on business. Mr. Xiao graduated from Peking University Law School. The principle of compliance with laws and regulations and reasonableness is always on the top priority of the investment guidelines followed by Mr. Xiao. Mr. Xiao’s not-being involved in any of the current corruption cases of several senior officials in China has indirectly proved the foregoing. Now, under the guidance of Mr. Xiao, the principle of compliance with law and staying-away from politics has become part of Tomorrow Group’s corporate culture.
3. As a loyal student to Mr. Warren Buffett’s theories, Mr. Xiao always makes judgments on the trend of stock market and investments in onshore and offshore markets based on his own study and at his sole judgment. He deeply understands the correctness of Mr. Warren Buffett’s theories, and has achieved success through market actions and investments completely in compliance with the laws and regulations. With respect to Mr. Xiao’s investments in the financial institutions, the investments are completely similar to Mr. Warren Buffett’s investments in Wells Fargo, which are only financial investments without being involved in the daily management of the invested target. Mr. Xiao’s financial investments are the same as those investments currently being made by many private equity funds in the Internet companies, which investments can be made without taking advantage of contacts with the government. Like many Chinese entrepreneurs which acquired stakes in Minsheng Bank, the foregoing investments are market-oriented financial investments with high return, and have nothing to do with the politics.
II. Some details regarding those deals are self-contradictory and inconsistent with facts.
1. On the one hand, the Article claims that shareholders of Qinchuan Dadi sold shares at the same value as they bought them for, which means Qinchuan Dadi’s shareholders didn’t make any profits in that deal. However, The Times accused affiliates of Tomorrow Group of channeling interests. Where is interest channeling from if there was no interest to begin with?
Tomorrow Group and Mr. Xiao disclose again that Tomorrow Group was not involved in this deal, nor did it have any communications with Qinchuan Dadi’s shareholders. The related company mentioned in the Article was separated from Tomorrow Group a long time ago, and it had nothing to do with Tomorrow Group. After Tomorrow Group’s lawyers’ consultation with Qinchuan Dadi and other related parties, the conclusion is as follow:
Shareholders of Qinchuan Dadi, after the Bloomberg News report mentioned in the story, voluntarily quit their legitimately operated business for family, costing them their input or bringing them a huge loss. Thus, shareholders of Qinchuan Dadi didn’t make any extra profits through their family clout.
Qinchuan Dadi’s shareholders didn’t take advantage of any government connections or family influence when they bought shares in the investment company in question. It was a legitimate business transaction, and it was also legal when they made their exit. There was no interest channeling at all. The share transfer mentioned in the story was made at the same value as the shareholder first acquired the shares, which already generated opportunity costs for those shareholders.
2. The transaction concerning Tomorrow Technology Company and Beijing Zhaode Company
Tomorrow Technology is a listing company. All its actions are decided by its shareholders’ meeting and board of directors, which are all market actions. After Tomorrow Technology acquired Zhaode Company, Tomorrow Technology, as a listing company, received huge gains from its foregoing investments. From the perspective of the original shareholders of Zhaode Company, if they had not sold the shares to Tomorrow Technology, they would receive more commercial gains. Therefore, the transaction is a normal and legal transaction, and there is no transfer of gains and benefits by Tomorrow Technology to Beijing Zhaode Company.
3. Transaction concerning Digital Domain
In this transaction, the enterprise relating to Tomorrow Group and Mr. Che Feng are just co-investors, who acquired the shares at the same price per share. There is no transfer of gains or benefits involved in the transaction. If we were to follow the analysis of the New York Times, all the similar co-investors, including mutual funds, could be suspected of transferring gains and benefits. In addition, the investment amount is very small, and Mr. Xiao has never discussed with Mr. Che Feng concerning said investment.
The Article contains a fair amount of paragraphs trying to imply that Mr. Xiao and the foregoing shareholders are suspected of transferring gains and benefits. However, based on the foregoing analysis, the conclusions made by the Article conflicted with each other and seriously distorted the truth. The other transactions mentioned in the Article are also untrue, and we do not plan to refute them one by one here.
The history of Tomorrow Group is a history that a private-owned enterprise made its achievements and developments through hard work. However, the New York Times falsely described the history of Tomorrow Group as a person who did not participate in aggressive activities in the “Event of 1989” and obtained rewards from the government, and labeled the normal and legitimate transactions which comply with customary business principles as transferring gains and benefits, which not only distorted the truth but also violated the objectivity of a media.
Tomorrow Group and Mr. Xiao Jianhua hereby request that the New York Times shall remove the untrue parts in the Article and correct the same, and request that the other media must not quote the foregoing untrue parts in the Article. However, with respect to the true facts described in the Article, Tomorrow Group fully respects the New York Times’ freedom and rights to report those true facts.
Ms. Yu Lan Spokesperson of Tomorrow Group June 4, 2014
From http://sinosphere.blogs.nytimes.com/2014/06/05/billionaire-issues-statement-about-times-article/?_php=true&_type=blogs&smid=tw-share&_r=0