BANKER WHO MADE HIS MARK IN CHINA
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