South China Morning Post


Shan Weijian recalls how he led sole foreign takeover of a Chinese bank in early 2000s when the nation was going through economic reforms


Shan Weijian recalled China’s golden era of economic reforms from 2000 to 2010 and the eyewaterin­g growth evident in this period.

In 2005, he led the only foreign takeover of a Chinese bank to date and had to navigate the twists and turns of a country that was eager to change, but only wanted foreign capital that would come in on friendly terms.

Shan was the co-managing partner of San Francisco-based private equity firm Newbridge Capital when it took over a controllin­g stake in Shenzhen Developmen­t Bank. It acquired non-tradeable shares held by various government units that amounted to an 18 per cent stake in the lender.

“I could not deny it: the opportunit­y to buy control of a bank in China, home to the fastest economic growth in the world, was certainly appealing,” Shan, who has also worked with JPMorgan in Hong Kong, said in his new book, Money Machine: A Trailblazi­ng American Venture in China, recalling his excitement at being approached by the Chinese bank.

That was in April 2002, four months after China joined the World Trade Organizati­on and started actively playing a role on the internatio­nal stage. Its economy grew by more than six times to US$6.1 trillion between 2000 and 2010.

“We weren’t the only ones who believed, in April 2002, that a bet on growth in China was as smart a wager as one could make anywhere on the horizon of global finance,” Shan said in the book, which is scheduled for release on February 7.

In Money Machine, Shan recalls countless meetings and negotiatio­ns with Chinese regulators and entreprene­urs, including then prime minister Zhu Rongji, Zhou Xiaochuan, the then governor of the People’s Bank of China (PBOC), and Peter Ma, the founder of Ping An Group. He and Newbridge Capital eventually concluded the hugely profitable deal.

“At the time, in the early 2000s, China was going through a phase of economic reforms, led by Zhu Rongji, whose boss, of course, was Jiang Zemin. And that administra­tion was very much responsibl­e for many of the major reforms that took place in China in early 2000s,” Shan said in an interview with the Post. Jiang died in November last year.

Newbridge received a preliminar­y go-ahead from the State Council, which was chaired by Zhu, Shan says in the book, pointing to the ease of dealing with China’s top authoritie­s. This paved a path for a foreign investor to become the controllin­g shareholde­r of a Chinese bank.

Newbridge tapped Frank Newman, Bill Clinton’s former US deputy treasury secretary, to run the bank in 2005. Newman, as chairman and CEO, successful­ly turned the bank around by cleaning up bad loans and winning awards for its innovative financial products. Newman retired in 2010 after the bank merged with Ping An Bank.

“Tell your partners that, in case of any emergency, like a bank run, the PBOC and the [China

Banking Regulatory Commission] will be on standby to provide liquidity support,” Liu Mingkang, the commission’s chairman, told Shan in fluent English on December 23, 2004, a week before the Shenzhen Developmen­t Bank deal was sealed.

Shan’s team at Newbridge, however, had encountere­d snags throughout its involvemen­t with Shenzhen Developmen­t Bank until Ping An Group’s eventual buyout of the private equity firm’s stake in 2010.

Newbridge eventually sold the Shenzhen bank for US$2.27 billion to Ping An, more than 14 times its original purchase price of US$150 million six years earlier. The bank itself did well under Newman’s management, with its assets nearly quadruplin­g, while its net profit soared by 20 times. Its non-performing loan ratio fell from 11.4 per cent in 2004 to 0.6 per cent in 2010, while its capital ratio grew to 10.2 per cent from 2.3 per cent.

In fact, the Shenzhen bank deal was Shan’s last major involvemen­t at Newbridge. He went on to establish the private equity business of PAG Asia Capital in Hong Kong in 2010. He is the firm’s executive chairman, CEO and managing partner. PAG managed US$50 billion in capital as of June last year.

In the 1980s, Shan earned an MBA, plus a doctorate in economics, from the University of California in Berkeley. He eventually became a professor at the University of Pennsylvan­ia’s Wharton Business School before he tired of teaching and joined Wall Street bank JPMorgan in Hong Kong in 1993.

I could not deny it: the opportunit­y to buy control of a bank in China ...was certainly appealing

 ?? ?? Shan Weijian led the foreign takeover of a Chinese bank.
Shan Weijian led the foreign takeover of a Chinese bank.

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