A well-experienced industrialist, who had already built a very successful, substantial company, buys a majority ownership interest in an existing company in China, in exactly the same industry in which he has made his name. To make the purchase, our industrialist uses a significant portion of his own resources, plus borrowings and money from others that is lent or invested solely on the strength of his name. He takes over control of the company, and two years later, the company has shut down due to a lack of orders.  

But that’s only the beginning of our industrialist’s troubles. Promised certain payments by the previous owners which are now due, the workers at the factory begin to demand that our industrialist make good on these promises. Arguing that the obligations to them belong to the previous owners, not to him, our industrialist and his son are taken hostage by the workers and physically held for five days in the factory. With the help of the local government, both are released. But, at the time of this writing, they have both been missing for more than one week. Rumors swirl throughout China as to what has actually transpired. All of the China problems frequently encountered by foreigners are mentioned: questionable title to the land; non-transparent obligations to workers and the ambiguous role of the local government. The list goes on.

If the industrialist in the story was an individual who had made it big in the United States or Europe, the story would be shocking, but not so hard to believe. After all, China is one of the most difficult places in the world in which to operate, and the history of foreign investment in the country is replete with stories just like this one. If the story took place in the early to mid-1990s when China was still early in its economic reform program, the story would again be shocking, but not so hard to believe. Fifteen years ago, China was still in an embryonic stage of development, and there were bound to be clashes between Western-style capitalism and the old ways of doing things.

What makes this story both shocking and unbelievable is that it did not happen 15 years ago, but is happening today in 2008. The industrialist in question is not an American or European, but Wang Jianming, an icon in the Chinese automotive industry. Having built China’s largest diesel engine company over a thirty-seven year career, Wang Jianming tried his hand again by buying majority ownership of a diesel engine company in Jiangsu Province in 2006.

Befitting his status in the industry, Wang Jianming was recently named by China Auto News as one of the “30 Outstanding Entrepreneurs in China’s Automotive Components over the 30 Years of China’s Economic Reform.”

I have known Chairman Wang, as I always refer to him, since 1994 and consider him to be a friend. I am genuinely shocked and saddened to hear about this bizarre turn of events in what was to be his second career. Here is what I wrote about Chairman Wang in my book, Managing the Dragon:

Of partial Korean descent, Chairman Wang, as everyone calls him, is a stocky guy with a round face, a thick neck, a deep voice and a presence that is felt the minute he steps into a room. He never wears a tie, simply dress slacks and a dark (usually black) collarless tee shirt, with a pocket on the left. He carries it off, even though most would consider it inappropriate business dress. When sitting, he reminds me of the Giant Buddha statue in Leshan, Sichuan Province. Surprisingly, though, his five foot, nine inch height makes him all of a sudden appear considerably smaller when he stands up…………..

Chairman Wang is a legend because he personally built Yuchai from a small company located in the city of Yulin, in the remote Guangxi Autonomous Region in the southwest corner of China, into the country’s largest diesel engine company…………….. Unlike most diesel engine companies, Yuchai is not affiliated with a truck manufacturer, and did not have a captive market with a parent company. Chairman Wang is somewhat of an outsider, without the strong central government support afforded the more traditional state-owned companies. He became the industry leader through the sheer force of his personality and will, and his story is nothing short of remarkable.

With growth slowing in the developed markets of the world, and China continuing to be the fastest growing big economy in the world, my guess is that Western companies will re-double their efforts to establish or grow their operations here. When their top executives arrive in Beijing or Shanghai, they will see a China that looks very different from the China I first saw. Again, from my book:

Parts of China are now so modern that it’s entirely possible to spend a week or two here with the Chinese characters on the signs serving as the only reminders that you’re in China. In Beijing or Shanghai, you can stay at one of many five-star hotels, eat at upscale restaurants on a par with anything else in the world, and drive off in the latest model car to visit modern factories located in any one of China’s many economic development zones.

We call this “China Light.” It’s not the China I first experienced in 1993, and in many ways it’s a bit misleading. All of the new development around the urban areas encourages the notion that doing business here is just like doing business in New York, London, or Paris. That’s a dangerous misimpression to have.

After experiencing “China Light,” it’s difficult for many visitors to imagine that “China Heavy,” or the less developed side of the country, even exists.

As Chairman Wang’s most recent experience illustrates, “China Heavy” is still alive and well in November, 2008. If he can fall victim to it, believe me, anyone can.