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Wanda bet

18 March 2016 By Rachel Morarjee

China’s richest man is too busy snapping up trophies overseas and building malls in obscure Chinese cities to write a book. That’s probably why Wang Jianlin has decided to bundle together a collection of his recent speeches instead.

Anyway, the Wanda Group chairman says business books are “all nonsense” and told an audience at a Chinese business school in 2012 that titles offering recipes for success hold no valuable lessons for the budding entrepreneur. His “The Wanda Way” is no exception.

Despite the gushing introduction by a Harvard Business School professor, Wang’s hastily cobbled together mishmash of philosophy and anecdotes offers few insights into how any other company might adapt to changing markets or organisational challenges in the world’s second-largest economy.

It’s a pity about the editing too. Each of Wang’s speeches is followed by a transcript of the subsequent question-and-answer session peppered with references to Chinese legends involving old men, hares and tree stumps that will only mystify Western readers. Editors did manage to cut out any controversial stuff, though. One notable omission is the session at Harvard last October where Wang for the first time publicly answered questions about his business ties to relatives of Chinese leaders including President Xi Jinping.

Nevertheless, the speeches offer some insight into navigating government relations in China, a challenge Wang says is harder to surmount than “getting a Phd at Harvard”. Operating a private company in the People’s Republic involves a complex dance with state power, even for a party loyalist with Wang’s impressive credentials. A son of a veteran of the Communist Party’s Long March, Wang spent 17 years in the People’s Liberation Army, joining when he was just 15.

His military training honed his ability to game the system. While training in the snowy wastes of northeastern China, Wang’s squad leader taught him how to take a small portion of rations in his bowl at mealtimes, finish it quickly and then be at the head of the line for seconds. This trick allowed Wang to avoid the hunger pangs that dogged his fellow recruits.

While building his real estate empire, he demonstrated a similar ability to make alliances with the government officials who could lend him money during regulatory crackdowns or grant permits to do business even as he courted global giants like Wal-Mart Stores. These are not lessons any Western executive could emulate, though.

Already a giant in China, Wanda is now bidding to become a global force with investments ranging from movies – it is bidding to become the biggest cinema operator in the United States – to theme parks and a stake in Spanish football club Atletico de Madrid. Wang’s speeches shed light on how he hopes his overseas buying spree will help realize domestic ambitions.

The footprint of Wanda’s shopping malls offers clues to how consumers in China’s hinterland want to spend their money. Though many smaller cities are larger than most European capitals, they are grim conurbations of buildings covered in blue glass and bathroom tiles with little in the way of entertainment. Wanda wants to change that.

Wang says his company will take control of commercial real estate in little-known cities like Langfang and Wanzhou that other developers have shunned. Rather than owning developments outright, Wanda will operate shopping and entertainment centers for other investors and bring in a mix of sport, tourism and culture that draws on expertise acquired overseas. In doing so, Wanda hopes to offer something no one else can and – in Wang’s revealing words – “eliminate the competition”.

The challenge, though, will be to stay on the right side of the government. “The Wanda Way” shows how the hand of the state has guided the company’s success. Operating hotels abroad is not just about business but fulfils Wanda’s “responsibilities to the Chinese nation”. Cutting the contribution from real estate to total revenue below 50 percent by 2020 is not just sensible diversification but realizes the “national goal for economic restructuring”.

But staying in tune with state planners is easier when building shopping centers and offices than when trying to capitalize on the animal spirits of the Chinese consumer. Even Wang himself admits that “In China, football and stock markets are the hardest challenges to overcome”.

Wang is betting that small-town Chinese consumers will put their hands in their pockets and spend money on the trophies he has acquired abroad. Though it remains to be seen whether his overseas gamble will pay off, he has a head start. Asked about Wanda Group’s core competency at Harvard, Wang said: “the first advantage is that we have money”. That’s a business lesson no one can dispute.

 

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