(31. - 1320.) Red Roulette by Desmond Shum - Shum grew up in a family both cursed and blessed by the Communist Party of China. His paternal grandfather, a distinguished lawyer, declined to leave the mainland in 1949 when the Communists took over, trusting in the Party’s socialist rhetoric. The Party took away his assets and left him humiliated. His maternal grandfather moved to Hong Kong at the takeover and sent money regularly back to his grandmother gaining status and protection for her, even during the Great Cultural Revolution, as she was associated with “patriotic overseas Chinese”.
Ill-treated by his parents, Shum grew up in Hong Kong. For much of his schooling he was focused on sports, he was a Chinese giant at 6’5”, rather than academics. Seeking the status that comes from an elite education he studied hard to get into Queen’s College.
From their struggles on the mainland Shum and his parents were frugal in ways beyond money. They never wasted food.
In 1989, just after the Party’s brutal crackdown on student protesters, Shum moved to the United States to attend the University of Wisconsin.
In 1994 he joined private equity firm, ChinaVest, seeking to become part of China’s economic boom.
He soon learned of the corruption within the Chinese government needed to facilitate business:
For me, Robertson’s cultivation of Feng Bo peeled back the curtain on the inner workings of a political system that mouthed Communist slogans whilte the families of senior officals gorged themselves at the trough of economic reforms. These sons and daughters functioned like an aristocracy, they intermarried, lived lives disconnected from those of average Chinese, and made fortunes selling access to their parents, inside information, and regulatory approvals that were keys to wealth.
Shum’s book confirmed the importance of guanxi (connections) described in the crime mystery stories of Xiaolong featuring Inspector Chin during this era.
When he returned to China to live in Beijiang he found himself at a disadvantage. He did not know how the new China worked and lacked connections. Both were essential to exploiting the tradeoff the Party provided:
....give us your freedom and we’ll let you make money.
After a faltering start in business he met The Lady Chairman Whitney Duan (Duan Zong), a powerhouse of a woman who had worked her way from the coastal province of Shandong to Beijiang. Her company, Great Ocean, engaged in real estate developments and importing IBM computers. She stood out in the male dominated business world of China.
To succeed in China connections with the Party leadership were vital. Whitney had an elite connection through her friendship with Auntie Zhang, the wife of Wen Jiabo who became Chinese Premier, the second most important position in China.
Trained as a geologist Auntie Zhang was known as the “Diamond Queen” for her role in re-establishing China’s jewelry industry.
While her husband devoted himself to work, Auntie Zhang was eager to do business.
Their children were avaricious, eventually becoming billionaires.
By 2003 Whitney was Auntie Zhang’s “closest female companion” and they had opened an office together.
Shum recounts vividly the intrigues in China’s red aristocracy as its members compete for riches and power. Conflicts in families are inevitable.
Their lives changed when they were able to purchase a small share in Ping An, a giant insurance company. They borrowed $12 million. They held their shares despite a twelve fold increase in value after the company went public in Hong Kong because “China’s controls on the movement of capital banned the sale of Chinese stock overseas”.
When the company was listed on the Shanghai Stock Exchange the price went up to twenty-six times the value of their original shares and they cleared over $300 million.
Shum believes “that luck lies at the heart of most fortunes”. When they invested in Ping An they did not knowit was going to go public.
Shum led the way in their next venture, a logistics hub at the Beijiang airport. Completing the approval process and building the hub took Shum’s people skills, great persistence and some help from their connections in the Party. Shum needed 150 chops (“Chinese seals that are used in lieu of a signature”) in the process and he led the way in getting almost every chop.
Business was unfriendly to family life. Most days he was circulating through offices working out problems. Almost every night he was meeting lower level officials who could keep a project on time or stall it. They would gather to eat and drink for hours. The amount of alcohol consumed was breathtaking.
They made almost $200 million on the project.
Their crowning project was a luxury real estate development in downtown Bejiang in which they combined their experience in luxury hotels and buildings around the world with great designers. It was called Genesis.
As they progressed they believed for a time the Party was ready to adjust governance and control to give some freedom. The opposite proved true. When the Party perceived its control was threatened it acted decisively. Individuals not part of the Red aristocracy would be sidelined and jailed in corruption investigations. State controlled companies demanded control or at least shares in private companies.
They reserved for themselves the 10,000 square foot penthouse in their hotel/condo building. Among its perks was an indoor pool.
When the NY Times ran a front page story that the Wen family was worth almost $3 billion Auntie Zhang sacrificed Whitney. It was Whitney practising “yiqi, the code of brotherhood”.
Shum describes how Xi Jinping maunouvered himself into becoming China’s leader as General Secretary of the Chinese Communist Party.
Though Wen supported Xi, the family, caught up in the turmoil over their wealth, “ ‘donated’ all of their assets to the state in exchange for a guarantee that they wouldn’t be prosecuted”.
I felt I was reading a real life version, on a grander scale, of the fierce business and personal battles in Hong Kong 40 years earlier described in Noble House by James Clavell.
The heavy hand of the party and the corrupt actions of high ranking families would seem bound to limit economic success but China has continued to thrive.
Shum has abundant anecdotes and brief histories of the participants while he keeps driving the narrative.
What happened to Shum and Whitney will be discussed in my next post.






