Update: Choice in 1989 Set Student on Road to Riches

At The New York Times, David Barboza and Michael Forsythe tell the story of Xiao Jianhua, a less-discussed former head of the official student union of Peking University, who found himself on the path to prosperity following the Tiananmen Square crackdown twenty-five years ago:

There was no public mention then — and there have been very few mentions since — of the head of the official student union of Peking University at that time. His name is Xiao Jianhua. Mr. Xiao never opposed the government, and the events of June 1989 did not make him one of China’s “most wanted.” Instead, they catapulted him into the ranks of its most wealthy.

After a tepid attempt to represent fellow students to university administrators that volatile spring, Mr. Xiao shifted course, agreeing with administrators that street protests had become out of hand. People who knew him at the time said he even worked with them to try to defuse the protests before Chinese troops descended on Beijing and crushed them with force.

The rewards were immediate. Just after he graduated, Mr. Xiao stepped into the world of business with direct financial support from Peking University, one of China’s most prestigious institutes. In the quarter-century since, he became the prototype of the politically connected financier. He has assiduously courted the party elite, including the family of its current president, Xi Jinping, becoming something of a banker for the ruling class and a billionaire in his own right.

[...] “Xiao tried to tell the government what the students demanded, but some of the activists didn’t like his conservative approach, so they set up their own organization,” says Mr. Guo, his former classmate. “At the time, he was only 17 years old and was put under a lot of pressure. Feeling powerless, he went to the library and buried himself in books.” [Source]

Also at The New York Times, Forsythe talked to two prominent Tiananmen student protesters about Xiao and the divergent paths they chose:

In many ways, Mr. Xiao, now 42, who enrolled at the university when he was 14, is the embodiment of what the students on Tiananmen Square, and their millions of supporters on the streets of Beijing, were protesting against. He became rich in part through his dealings with state-owned companies, and along the way companies he founded or controlled did business with the families of China’s most powerful leaders. It was anger at that kind of crony capitalism — in 1989 only in nascent form — that was one of the main factors that drove Beijingers to the streets that year, said Wang Juntao, like Wang Dan and Mr. Xiao also a former Peking University student.

[…] Both Wangs know of Mr. Xiao but do not know him personally. But both view his decision to stay away from the protests and side with the authorities with, at worst, ambivalence and, at best, real sympathy.

“I don’t think there is only one way to change China,” Wang Dan said in a telephone interview from Taiwan, where he teaches. “Some people want to make changes through making money and they indeed are willing to do things for the country and society — I agree with it. I don’t think everyone should be like me. Of course I don’t think everyone should be like him. So it’s better if there’s me, and him — this makes a relatively complete world.” [Source]

Update: In a letter to The New York Times, Xiao Jianhua, through a spokeswoman of his company, the Tomorrow Group, wrote to “set the record straight on how he made his billions,” emphasizing that his success derived not from political connections but from following Warren Buffet’s “value investing strategy”:

1. Mr. Xiao and Tomorrow Group built their business from scratch and their achievements are completely the results of hard work in investments. Those achievements have nothing to do with the “Event of 1989”. The so-called “rewards” that Peking University provided financial support to Mr. Xiao for his performance in the “Event of 1989” is untrue. Mr. Xiao was only 18 years old in 1989. At that time, facing the complicated event, Mr. Xiao and the University used their best efforts trying to procure the students’ activities to be in compliance with the law, and to avoid tragedy. However, when some students’ actions became more and more aggressive, Mr. Xiao felt powerless, and he switched to the library and concentrated on study, the same as some other students chose to do at that time. Mr. Xiao did not receive any financial support from Peking University for his foregoing action. The Article also admitted that Mr. Xiao started his venture as a computer reseller marketing computer brands such as HP, IBM, and made achievements step by step. After the “Event of 1989”, Peking University did not provide any financial support to any entrepreneur (and NO support to Mr. Xiao either).

[...] 3. As a loyal student to Mr. Warren Buffett’s theories, Mr. Xiao always makes judgments on the trend of stock market and investments in onshore and offshore markets based on his own study and at his sole judgment. He deeply understands the correctness of Mr. Warren Buffett’s theories, and has achieved success through market actions and investments completely in compliance with the laws and regulations. With respect to Mr. Xiao’s investments in the financial institutions, the investments are completely similar to Mr. Warren Buffett’s investments in Wells Fargo, which are only financial investments without being involved in the daily management of the invested target. Mr. Xiao’s financial investments are the same as those investments currently being made by many private equity funds in the Internet companies, which investments can be made without taking advantage of contacts with the government. Like many Chinese entrepreneurs which acquired stakes in Minsheng Bank, the foregoing investments are market-oriented financial investments with high return, and have nothing to do with the politics.

[...] 1. On the one hand, the Article claims that shareholders of Qinchuan Dadi sold shares at the same value as they bought them for, which means Qinchuan Dadi’s shareholders didn’t make any profits in that deal. However, The Times accused affiliates of Tomorrow Group of channeling interests. Where is interest channeling from if there was no interest to begin with?
Tomorrow Group and Mr. Xiao disclose again that Tomorrow Group was not involved in this deal, nor did it have any communications with Qinchuan Dadi’s shareholders. The related company mentioned in the Article was separated from Tomorrow Group a long time ago, and it had nothing to do with Tomorrow Group. [...] [Source]