Tang Wanxin is a president of D’Long Strategic Investments, Tang Wanxin was once one of China’s most prosperous entrepreneurs, only to succumb to a scandalous fall in 2004 that resulted in the loss of billions of yuan and a lengthy prison term.
Background
Tang Wanxin was born on 3 April 1964 into a family of mid-level government bureaucrats in Urumqi, capital city of the Xinjiang Uygur Minority Autonomous Region. Tang’s father, an engineer in the Urumqi Municipal Urban Construction Bureau, and his mother, a director in the city’s park and recreation office, were natives of Shaanxi Province.
Education
The youngest of five children, Tang enrolled in the China Petroleum University in Shandong Province in 1981, only to drop out of school a year later and move to Beijing. In 1983 he restarted his studies at the Xinjiang Petroleum Institute in Urumqi, but entrepreneurial desires again caused him to quit school in 1985.
Career
In 1986 Tang, his brothers and several ex-classmates founded a company named the D’Long Group. Their first business venture was to ship camera film from Xinjiang to Guangdong Province in Eastern China, where the cost of development was substantially cheaper. D’Long soon branched out into entertainment, computers, and tourism industries. In the early 1990s the Tang brothers took their chances in China’s nascent stock market and quickly made tens of millions of yuan, which was used to expand their business. In the late 1990s D’Long subsidiary Xinjiang Tunhe, listed on the Shanghai Stock Exchange in 1996, emerged to become Xinjiang’s largest tomato paste producer, out-competing government-run facilities in this lucrative export market. Within a few short years Tunhe controlled 80 percent of the region’s tomato paste production. By the end of the decade the Tang brothers had become some of the wealthiest individuals in the country and headed one of the fastest growing companies in China.
By 2003 D’Long was the controlling partner in five firms, worth billions of yuan, and all listed on the Shanghai and Shenzhen stock exchanges: agro-business giant Xinjiang Tunhe Group Co. Ltd, 9.5 billion yuan; alloy supplier Shenyang Hejin, 683 million yuan; auto parts manufacturer Torch Investment, 611 million yuan; Zhongyan Textile, 119 million yuan; and cement producer Xinjiang Tianshan, 56 million yuan. From 2000 to 2004 the group aggressively sought to acquire companies both in China and abroad, leveraging their buyouts with borrowed money that carried annual interest rates as high as 20 percent from private sources and 5 percent from banks. In 2003 alone D’Long took over textile producer Qingfeng Group Co. Ltd in Jiangsu Province; purchased a controlling stake in GZL International Travel Service in Guangdong; and announced that subsidiary Torch Investment planned to acquire a majority stake in Aerospace Brilliance Holdings Co., which produced minivans in a joint venture with France’s Renault. D’Long investments even included a decommissioned Soviet-era aircraft carrier, The Minsk, converted into a theme park in Shenzhen.
The Tang brother’s most ambitious acquisitions, and notable failures, were abroad. In 2000 D’Long purchased US-based lawnmower and bicycle manufacturer Murray for $400 million, though the company quickly filed for bankruptcy. Later an attempted billion-dollar investment by D’Long in German aircraft manufacturer Dornier Fairchild failed to materialize. Despite these setbacks, Tang and his brother Tang Wanli, the top executives at D’Long, were rising stars in the Chinese financial market. In 2002 the Tang brothers were listed as the twenty-seventh wealthiest mainlanders by Forbes magazine, with an estimated wealth of $195 million. The following year China Money estimated their wealth at $250 million and in 2003 Asia Money bestowed upon the Tang brothers the title, ‘kings of Chinese capital.’
Unfortunately for the company and its investors, D’Long’s performance was impressive, but unsustainable. D’Long used its stock holdings as collateral for loans from government-run banks and then used this money to purchase more shares to drive up their value, creating a dangerous cycle of accumulating debt and creating a bubble in China’s stock market. D’Long even went so far as to open thousands of fake accounts to manipulate stock prices in their favor. Tang’s economic empire began to unravel in April 2004 when the central government ordered a tightening of lending to stave off a looming bad loans crisis in China’s banking system. With credit cut off, the value of D’Long’s stock listings crashed, down 80 percent by July. The epicenter of the crisis was in Shanghai, where nearly all banks were creditors of D’Long. In June the Shanghai Banking Regulatory Bureau ordered banks in Shanghai to minimize their lending risk to D’Long, the company’s assets were frozen by creditors, and banks sued D’Long for repayment of outstanding loans. Tang looked for funding abroad, but when that failed he fled to neighboring Burma in May, only to fly back to Beijing in July, where he was placed under house arrest.
The fall of D’Long, which controlled 200 companies and had 60 000 employees, was the largest financial scandal in China’s history and affected 2500 institutions and 32 000 shareholders. In December 2004 Tang, his brother Tang Wanli, and D’Long’s 60 top managers were officially arrested. In January 2006 Tang and six of his colleagues went on trial. Government charges included illegal operations in the stock market for a gain of 9.8 billion yuan, illegally offering guarantees on 43.7 billion yuan invested by public shareholders, and failure to repay investors 16.7 billion yuan. In April 2006, Tang received an eight-year prison sentence and was fined 400 000 yuan. D’Long was hit with stiff sanctions as well, including a fine of more than 10 billion yuan. The landmark D’Long mansion headquarters in the Pudong financial district in Shanghai was sold off to a government-owned investment firm and the assets of the D’Long Group were transferred to the China Huarong Asset Management Corp., a state-run asset company appointed by the central government to salvage what was left of the Tang brothers’ financial empire.