Background
Zhao Xinxian was born in 1941 into a worker’s family in Yingkou, Liaoning Province in 1941, Zhao dreamed of becoming a sailor in his childhood years. However, nearsightedness kept him out of the Chinese navy.
新先 赵
Zhao Xinxian was born in 1941 into a worker’s family in Yingkou, Liaoning Province in 1941, Zhao dreamed of becoming a sailor in his childhood years. However, nearsightedness kept him out of the Chinese navy.
After earning his bachelors degree in pharmacology from the Shenyang Pharmaceutical Institute, he joined the Qiqihar Medical College of the People’s Liberation Army (PLA) in 1964.
A few years later Zhao went to work for the Nanfang Hospital, an affiliate of the PLA’s First Military Medical University located in Guangzhou, Guangdong Province. From there Zhao worked his way up from pharmacist to director of the hospital’s Pharmaceutical Bureau. In 1985, with a loan of RMB5 million yuan, he and six colleagues founded Nanfang Pharmaceutical in Shenzhen’s suburb. China’s first automated production line for traditional medicine, the factory was to commercialize Zhao’s herbal extract for treating gastric disorders.
By 1987 Nanfang Pharmaceutical began to produce and market its ’999 Weitai,’ which became an instant hit as an effective treatment for chronic gastric disorders and sales reached RMB11 million. A year later, with an annual production of 1.8 billion and tax revenue of RMB400 million, Nanfang was ranked number 82 among the 500 largest industrial enterprises in the country, and was the best known, and most profitable, Chinese traditional medicine pharmaceutical company. Consequently Zhao became a celebrity entrepreneur, and received many awards, including those of Outstanding Army Entrepreneur and National Model Worker.
Three years later, Zhao co-founded the Sanjiu Enterprise Group with Sanjiu Medical and Pharmaceutical Co. and by 1995, it was ranked among the top 12 of over 20 000 Chinese corporations. At the Fortune Global Forum in 1999, Zhao boasted his ambition to make Sanjiu ‘Asia’s largest pharmaceutical enterprise’ in ten years, and in the ranks of the ‘world’s top 500 enterprises’ in 15 years. Under Zhao, marketing strategies and man-agement mechanisms were key to the rapid growth of the group. Believing that ‘marketing is the primary lifeline of an enterprise’, Zhao established sales networks in many large cities, such as Beijing, Shanghai, and Guangzhou. He was the first Chinese to use taxi billboards and celebrity endorsement in advertising. By early 2000, Sanjiu’s sales and marketing team had risen to over 3000 college-educated people. Due to this intensive effort, Sanjiu’s product captured 58 percent of the Chinese market share in stomach medicines in just one year; and in three years, the company had developed a national network to further secure market shares.
Encouraged by early success, Sanjiu undertook a massive expansion drive in the mid-1990s, diversifying into eight lines of business including pharmaceutical, agricultural products, tourism, and real estate developments. Between 1996 and 2001, the conglomerate acquired some 140 companies, becoming the largest pharmaceutical enterprise in China. However, the group’s debt ratio increased drastically from 19 percent to 80 percent by 1998. It is widely believed that Zhao’s expansion strategy of non-relevant enterprises and the lack of integration after acquisitions were among the major reasons that lead to Sanjiu’s eventual collapse.
In April 2000, Sanjiu Pharmaceutical was listed on the Shenzhen Stock Exchange, raising 1.67 billion yuan on the first day. Shortly after, Zhao also founded Sanjiu Shenzhen Finance, Sanjiu Biochemical, and Sanjiu Development, and invested heavily in the internet. He established arguably China’s biggest medicine and health website, 999 Health Web, which by 2003 had expanded to include 13 public service and 29 enterprise websites. However, 999 Health Web was never clearly defined, changing from a health portal to an education page, then to an e-commerce site, while substantial capital was wasted with each transformation. In August 2001, the China Securities Regulatory Commission issued a warning against Sanjiu Group for using more than 2.5 billion yuan or 96 percent of the company’s net assets, which directly endangered its asset security. In light of the public criticism, Zhao reduced the scale of expansion and went back to his roots, Chinese herbal medicine. He made two strategic plans, the ‘MacDonald Plan’ and the ‘Wal-Mart Strategy’: the former was to build a global chain of 1000 Chinese medicine clinics in five years; the latter was to establish a retail chain of 10 000 pharmacies. However both plans withered on the vine. By the end of 2002, Sanjiu’s net profit was only
22.71 million yuan, the asset debt ratio was 92 percent with debts of 19.1 billion yuan, and the asset return ratio was only 0.1 percent. The dire situation was soon exposed by the media and the group ran into financial crisis. Zhao was forced to resign from his positions as general manager and party secretary of the conglomerate. In May 2005, the group’s shares of Sanjiu Biochemical and Sanjiu Development were sold, symbolizing the collapse of Sanjiu Enterprise. While some considered Zhao as a self-disciplined figure and a role model for his employees, others reported that he liked to boast about his success and achievements. However when public prosecutors uncovered significant number of questionable transactions, Zhao was arrested for economic crime in 2005. After serving 20 months in jail, Zhao was released on 20 September 2007.