HONG KONG (Reuters) - China’s richest man, Huang Guangyu, who is being investigated for suspected economic crimes, is no stranger to controversy.
Two years ago, local authorities investigated the self-made 39-year-old billionaire in connection with a loan deal involving his investment company, Eagle Property Group. Huang was later cleared of any wrongdoing.
The current probe of Huang, the chairman and controlling shareholder of China’s top electronics retailer GOME (0493.HK) — known as China’s Best Buy (BBY.N), the top U.S. electronics chain — throws the spotlight on another Chinese tale of rags-to-riches fame.
Ranked first on Hurun’s China Rich List in 2008, Huang, worth $6.3 billion, was raised in a poor family in China’s Guangdong province. He moved to Beijing in his late teens with his brother and set up a home appliances distribution firm with 30,000 yuan ($4,392), and founded GOME in 1987.
GOME was valued at around $1.8 billion as of November 24 after which trading in the stock was suspended.
The influential Caijing magazine said last week Huang was detained as part of a probe into share price manipulation at SD Jintai (600385.SS), a drugs and medical equipment firm controlled by Huang’s brother, Huang Junqin.
SD Jintai’s stock surged more than eight-fold in 2007. It is still not clear if Huang owns a stake in SD Jintai.
GOME Electrical Appliance Holdings, the company Huang founded, said he is being investigated for suspected economic crimes but the probe is not related to the group, its assets or funds.
“Doing business in China is very complicated. Having a good relationship with everyone, with the government in particular, is a major key to success,” said Castor Pang, a strategist at stock brokerage Sun Hung Kai Financial in Hong Kong.
“It’s very difficult to say, though, that people have to deal with corruption to climb the ladder. In China, businessmen need to deal under the table to make things move faster, to get things done via short-cuts.”
China’s stock regulator has been battling with limited success to curb stock manipulation, insider trading and poor corporate disclosure that have plagued the Chinese market.
Huang is well known for his distaste of ostentation and — a relatively young man in the pantheon of self-made Chinese entrepreneurs — is legendary for keeping grueling work hours, according to GOME executives who have worked with him directly.
“I don’t know much about his personal dealings, but he’s an aggressive guy and I have absolute respect for him as a business man,” a source close to the company told Reuters on Friday.
“I would suspect it has more to do with his personal dealings. He is in on property, retail and also the capital markets,” added the source, who did not want to be named given the sensitive nature of the matter.
The source said GOME’s CFO, Zhou Yafei, who is also being investigated along with Huang, worked with the chairman closely, both on issues related to GOME, and on Huang’s other business interests.
There has been no word on Huang’s whereabouts.
“Wealth itself attracts a lot of attention. Billionaires are being created in China, and that’s a good thing. From a personal point of view, they need to install better practices in terms of transparency and business standards,” the source said.
“Wealth alone is not going to protect them.”
Apart from GOME, Huang’s assets include substantial holdings in real estate on the mainland.
“There are no boundaries for a businessman,” is Huang’s often-quoted personal philosophy.
“I didn’t really think much at that time. I just felt that if I still can’t make achievements, I could not face my ancestors and family,” Huang is quoted as saying in the book, China’s Rich List.
He rose to fame after he founded GOME and eventually tapped China’s consumption boom, transforming his street stall into China’s largest distributor of home appliances.
When he first vaulted to the ranks of China’s rich and famous in 2004, Huang showed no pride or emotion as “his left hand clasped his right hand” — a Chinese gesture of nonchalance as described by those around him at the time.
Shares of GOME have tumbled nearly 80 percent so far this year, much more than the 50 percent fall in the benchmark broader index .HSI as the global financial crisis takes its toll on consumer spending.
At an interview with Reuters last year, Huang was relaxed and easy-going, sharing cigarettes with journalists, while chatting freely on a crowded Beijing street on any number of topics from Chinese culture to the then-breakneck expansion of his still-young corporation.
Additional reporting by Fion Li; Editing by Anne Marie Roantree and Anshuman Daga