- An initial attempt to uncover the genes of a Cantonese region that has nurtured successful business entrepreneurs and tycoons such as Li Kashing and Tony Ma for over 500 years
By Benny Pei and Sam Gao
There used to be three provinces which churned out prominent business empires and entities that once exerted prolonged impact to the Chinese economy since the late Ming Dynasty (1368-1644). They were Shanxi Province in the north, Anhui Province in the east, and Guangdong (or Canton) in the south. Of Guangdong Province, the southeastern part of it, known as the Chao-Shan region (潮汕), is particularly prominent, and has been carrying forward with its historic glory in the business world to an ever higher height with little disruption, with the former two having largely been phased into history.
The Shanxi businessmen culminated with launching money houses (票号or钱庄), which were rather primitive forms of banking in today’s terms but brought as much convenience then as Alipay has brought to today’s world. The money houses issued their own paper notes to their customers, which were exchangeable for gold and silver ingots and taels of equal value anywhere in their chain outlets across China (then also including the current Republic of Mongolia). The money houses exited the market largely at the start of the 20th century when Western-style banks firmly took hold in the market.
Anhui businessmen focused on trading of rice, tea, timber, salt, cloth and writing brushes and ink stones, and running restaurants and pawn shops. Their prominence started declining in the mid-19th century with the Taiping Rebellions (1851-1864) and the entry of Western and Japanese companies into the China market.Today, the Anhui people are little known in these industries except in the catering industry, as evident in Shanghai, where the sea food restaurant market had much concentration of Anhui people, but it needs to be noted that the average scale of their operations is far smaller than that of Hai Di Lao, whose founders are from Sichuan Province, and Xiao Nan Guo (小南国), which werefounded by a few Shanghai people.
Southeastern Guangdong, also known as the Chao-Shan region (as indicated in the pink area in the map above), comprises Chaozhou, Shantou and Jieyang cities mainly, which take up 10,918.5-square kilometers in geographical area. The region is reverently referred to as the ancestral place by some 30 million overseas Chinese in Malaysia, Thailand, Singapore, Indonesia and the Philippines in Southeast Asia, and elsewhere. Thailand has the biggest concentration of Chao-Shan people and some 10 million Chinese live and work there. Some ten million live in Guangdong Province, and as many are believed to be running businesses in the rest of China.
“Where there are tidal waves there are Chao-Shan people, where there is money to be made there are Chao-Shan people,” wrote Le Xiaorui in his book of dozens of profiles of the region’s business leaders published in 2016.
Economic achievement as of today
To understand what the Chao-Shan region has achieved economically, one only has to look at the The Billionaires by Forbes. In the list as of 20 January 2018, Pony Ma, with personal riches of USD 50.1 billion, was the wealthiest Chinese globally. A close runner-up from the region is Li Ka-shing, with riches valued at USD 36.7 billion (the richest person globally was Jeff Bezos, who has USD 108.1 billion at his disposal).
If the Top Rich List is misleading as it captures the most successful ones from the Chao-Shan people, then statistics from the region’s public companies is more worthwhile. The region has 114 actively trading public companies (three others are put on halt), which have a combined market capitalization of RMB 5.27 trillion. Among them Tencent Holdings (00700.HK) led with a whopping market capitalization of RMB 3.11 trillion.
The 114 companies are distributed across some 60 industries, but they show a relative concentration (47 companies) in real estate, medical care, culture and entertainment, petrochemicals and metallurgy. There are some 20 companies that produce consumer goods such as cereals, fruits and vegetables, soy sauce, stationery, jewelry, cooking utensils, bedding and shampoos.
The shampoo industry is represented by Laf, whose business has been growing steadily while companies such as Procter and Gamble have experienced stagnation or slow growth at best in the past decade.
Some 90 per cent (103 companies) of the 114 companies have their headquarters in the Guangdong Province and Hong Kong. The rest have their headquarters in Beijing, Qinhuangdao, Shanghai, Yangzhou, Chengdu, Guiyang and Haikou
Of the 114 companies, 41 originated in the Chao-Shan region and have their headquarters there - Shantou has 28 public companies.
Note that the 114 companies, as compiled by Tianxia Chaoshang, includes C.P. Pokphand, a company that is listed in Hong Kong and owned by Xie Guomin (in Thai, Dhanin Chearavanont) from Thailand, two companies founded by Li Ka-shing, one by his elder son Victor Lee, and two companies by his younger son Richard Lee.
Be distant from politics!
One thing that sets the Chao-Shan entrepreneurs from the Shanxi and Anhui ones is that the latter two had often nurtured some degree of connections and entanglements with the government. Salt was a government monopoly and Shanxi and Anhui businessmen were given the license to produce and trade salt. They certainly benefited from their relations with the government but that relationship proved to be a double-sided sword sometimes, as when the Qing Dynasty veered rapidly towards its imminent collapse in 1911, a great fortune some Shanxi tycoons had lent to the government could not be recovered.
The Anhui businessmen's prosperity or decline went in tandem with the political fate of their representatives in the government. Their most successful businessman was Hu Xueyan (胡雪岩), who was at once both a senior government official and a businessman. He was remembered admirably, enviously or derisively, depending on who was thinking of him, as a typical Red-Top Merchant (红顶商人) in the history, the red-top literally refering to the official hat as part of the official constume for all government officials in the Qing Dynasty. Hu's commercial success and termination was inseparable with the fate of the army he commanded. So when the Qing Dynasty ceased to exist, the Anhui businessmen largely disappeared.
The Chao-Shan region, which locals describe as “the tail of a province and a corner of the country" (省尾国脚), is viewed far-flung from the national capital, Beijing, and is naturally not endowed with the attention and importance Shanxi and Anhui provinces could garner. So here business has been conducted probably in its purest form - market economy has probably started always in a place where the government was the least capable to interfere with.
With little government entanglement, except when the government imposed bans on maritime trade in much of the Ming Dynasty (1368-1644), the locals would have to be self-reliant, be hard working and resourceful to achieve success in whatever business pursuit they find themselves engaged in, but there are also some other characteristics not so much found in the Shanxi and Anhui entrepreneurs.
Different mentality surrounding life goals
One thing the Chao-Shan business people set them apart from others is that they are less rigid toward traditional values and are willing to adapt themselves as circumstances arise. The Shanxi and Anhui people believe that one must return to their hometowns, preferably in splendid clothes (衣锦还乡), in their retirement years and be buried along with their ancestors. One should return home even if they have “not a shirt on their back” because they believe that fallen leaves must return to the root (落叶归根). The Chao-Shan people, however, subscribe to the notion of taking roots wherever they are landed (落地生根).
The notion of “fallen leaves around their roots” has probably limited the business ambition of Shanxi and Anhui entrepreneurs, as they had to congregate all of their riches toward their hometowns in their twilight years. This is manifested in the fact that Shanxi and Anhui entrepreneurs all aspired to build up grandiose houses, often with exquisite gardens, at a certain time of their careers. The houses would often resemble to certain extent the official residences of Beijing, which again alludes to their linkage to officialdom in some ways. Such conspicuous spending and such lofty and luxurious personal dwellings are rarely found in the Chao-Shan region and actually anywhere else they happened to live.
By Shanxi and Anhui’s standards, the residential houses built up in the Chao-Shan region are rather modest if not obscure as the region’s entrepreneurs have had to keep sizeable fortunes to continue to grow their businesses. Notably, the Chao-Shan people have built more family shrines in their hometowns, to enhance their family clans’ prestige and social status in their hometowns, and for their own self-esteem. Needless to say the shrines also serve as a sort of social club where descendants from across the world reunite under their ancestors’ pictures on certain occasions, nurturing family relations and exploring for business collaboration opportunities.
Pragmatic approaches
To a Chao-Shan person, the psychological need to look conspicuous is less important and practically not helpful to their businesses, because often their businesses are not based in their hometowns. This conforms to their popular belief and “code of conduct” that one should keep a low profile wherever they can. This is most manifest in the hushed if not demure personal style and image of Pony Ma, founder and CEO of Tencent. His direct opposite is Jack Ma, founder and former chairman and CEO of Alibaba, who is socially active, speaking domestically and overseas and has even taken on a senior role in an UN committee. Jack Ma is not from the Chao-Shan region and is a local of Hangzhou, and a prominent member of the Zhejiang businessmen.
This pragmatism also manifests in the attitude of the locals toward starting and owning petty businesses like being a roadside vendor. To them nothing is too trivial to start as a business, so says a local saying (小小生理会发家), so long as it generates meaningful incomes. Erecting a roadside stall or peddling wares with a bamboo pole straddled with two baskets of fruits is considered a line of business as normal and respectable as being a tailor or a restaurant owner, in this mountainous region where large patches of level land for farming and fishery is scarce.
However, in the current era of social media and digital economy, some Chao-Shan business people start to question the traditional wisdom of holding a low profile in society, and begin to balance between the virtue of keeping a low-key while benefiting from some exposure to the social media. A delicate balance to strike for sure!
The mercantile culture is so ubiquitous and deep-seated that it is found in one of children’s popular games, “selling red persimmons”. in Zhanglin port (樟林港埠), which fell into disuse after Shantou was opened up to be a port after the Opium War (1840-1842). This game is essentially hide and seek and is known as “old hawk catching chicks” in the rest of China. The concepts of selling on credit and demanding something as surety is in this children’s game:
A child acted as a vendor of red persimmons, yelling “come and buy red persimmons!” The rest of the children rushed over and “ate” all the fruits, and lined up, well prepared for refusing to pay. The leader of the gang told the vendor that they had no money to pay for the fruits. The vendor demanded that ”if the head of monkeys doesn’t have money to pay, the one next to him should pay!” The second one responded he had no money with him either. Then the vendor yelled “then the third one should pay!” The third one replied likewise. The vendor became angry and thundered: “then the baby monkey should be surrendered as a surety!” and rushed toward the last one in the line. The line of monkeys dashed around to avoid the vendor ... The baby “monkey” is finally caught, who will act as the vendor of red persimmons in the next round of the game.
Respect for talent
But readers should not be misled into thinking that the Chao-Shan businessmen think nothing but making money in their mind. Like the rest of China, the region worships Confucius and Guan Yu (a military general of the Shu Kingdom era, AD 220-280), and like much of the southeastern costal regions such as Taiwan and Hong Kong, the region also worships Mazu, a goddess.
Unique to the region is the local worshiping of Han Yu (韩愈), an acclaimed literary figure and statesman of the Tang Dynasty (618-960), reflecting the locals’ respect for people with scholarly achievement and wisdom. They recognize the value of knowledge, skills and experiences and are more often than not, generous with their money so as to bring in the service of talented people, as compared with their counterparts elsewhere in China. This is evident in the fact many Chao-Shan public companies have hired independent board directors and advisors from across the country. First and foremost serving such positions are people of Chao-Shan descent, but often people of non-Chao-Shan descent are hired as well.
Note: all photos used in this article are from the Internet.
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[About the authors]
Benny Pei is a scholar on the evolution of business practices and philosophies of entrepreneurs from the Chaozhou and Shantou region in southeastern Guangdong Province. He is also a mentor in the MBA Centre and the Veritas College of Shantou University. Prior to this he was a member of the board of directors and senior managers in a few Shenzhen-listed Chao-Shan companies spanning more than a decade.
Sam Gao, a food industry analyst and writer based in Shanghai, started researching the phenomenon of Cantonese tycoons in early 2018 and is an advisor for a public company based in Shantou. He once worked for Euromonitor, Global Data (Canadean), Mintel and Rabobank’s research department. He was a journalist at Xinhua in the 1990s.
