The death of a so-called dark horse

September 17, 2006 at 6:56 am (China, Companies)

China’s media love uncommon stories and newsworthy figures. That’s why they like to quote Sun Hongbin, former Chairman of a property developer named Sunco (the name is apparently derived from the founder’s surname), a dark horse. But few dark horses end up as white horses, none is Sun, who sold his 50 percent stake at Sunco last week to a Hong Kong infrastructure company. This end of the dark horse, however, has been much predicted by both real estate community and a few economists.


Let’s take a look at how Sun performed as a vigorous dark horse. He could easily drop 3 billion yuan on an auction of a single land project while his self-owned capital is less than 1 billion yuan. In 2003 he spent more than 7 billion yuan merely to buy land. His company swole to more than 8,000 people in less than two years. He deposited 12 million square meters’ land in a year. He proclaimed at several open events that he will badly beat Vanke, a listed property developer. Most of his senior executives were less than 30 years old, some of whom even can’t use computers. (facts are from a news report from Southern Weekend. By the way, I have to say the newspaper’s reporting and editing skills are deteriorating.)


People will naturally ask the source of his money. The answer is very simple: either from banks or from governments. Not surprisingly, this is the answer to most questions toward Chinese company’s capital. Low interest rates rendered Sun cheap money, and his dominance in Tianjin, a coastal city southeast of Beijing, rationalized much support and credit from the local government. In fact, the local government formed a partnership company with Sun only to pump money to Sunco.


Sun was so presumptuous that he was almost excluded from the real estate circle. But to Sun, he was well on his way, the way to build his empire, or, the way to withdraw someday, with his pockets full of cash. Despite his sorrowful tone, he might be the only winner of the stake selling deal. The buyer have to face staggering debts; the employees have to leave; property buyers spent the life-long savings only to suffer low-quality houses; as for bank, Sun left them one more non-performance loan. Sun will be the only one making money from the deal. How much is his 50 percent stake worth? No public reports cover this.


It might be time for China’s media to stop hailing people like Sun. They won’t create mysteries (in fact, there is no economic mysteries). They can only create bad loans and helpless consumers.


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