Asset Managers

Chinese Billionaire Guo Guangchang Buys Like Buffett


Guo Guangchang

Photograph by Eric Piermon/AFP/Getty Images

Guo Guangchang

Twice a week in the winter of 1987, students living in the No. 5 dormitory of Shanghai’s Fudan University would hear a familiar knock close to midnight. A slight, bespectacled philosophy major was making his rounds selling bread door-to-door. The student, Guo Guangchang , earned about 30 yuan ($4.80) a month to help support himself through college. “I had a government subsidy then, but living costs were high,” he says.

Guo has plenty of dough these days. Chairman of Fosun Group, an investment company with assets of $48 billion, he’s China’s eighth-richest person, with a personal fortune estimated at $5.7 billion by the Bloomberg Billionaires Index. In contrast to state-owned companies that typically buy resources such as mines and oil fields to supply the country’s burgeoning economy, Guo, 47, looks overseas for brands, technology, and financial assets that cater to the nation’s growing ranks of the affluent. “Our focus going forward is on sectors where the life of China’s middle class can be upgraded: health, travel, leisure, education, and the Internet,” he says. “We call it marrying China’s growth with global resources.”

Borrowing from the approach used by Warren Buffett’s Berkshire Hathaway (BRK/A), Fosun buys financial companies such as insurers to secure long-term funding it can use to invest in consumer brands and other businesses. Since 2010 it has invested more than $3.4 billion overseas, buying JPMorgan Chase’s (JPM) 60-story tower, One Chase Manhattan Plaza, in New York, and stakes in French resort operator Club Méditerranée (CU:FP) and Raffaele Caruso, an Italian maker of $3,300 suits. “Many people talk about being Buffett in China, but few can pull it off,” says Eugene Qian, Citigroup’s (C) head of global banking for China. “Fosun is the closest in our view.”

At Fudan University, Guo developed an interest in philosophy as China was becoming more open to Western ideology. After graduating, he worked at the university’s Communist Party Youth League for three years. In 1992, when late Chinese leader Deng Xiaoping called for the nonstate-owned economy to prosper, Guo took up the challenge. “China’s economy and governance had made big strides in openness, and there were a lot of opportunities,” Guo says in a 13th-floor conference room in Fosun’s headquarters facing Shanghai’s Bund waterfront. “So I got together a few friends, some of us graduated, some not, and we decided to take the plunge.”

Photographs by Alamy

They started with 38,000 yuan of their own money. Fosun, whose Chinese name Fuxing means “stars from Fudan University,” got its first break in 1993 when it made 100 million yuan selling a diagnostic kit for hepatitis antibodies with research help from Guo’s alma mater. The next big opportunity came in the early 2000s as China started privatizing state-owned companies. In 2002, Fosun invested in Shanghai Yuyuan Tourist Mart (600655:CH), a jeweler and department-store operator formerly controlled by the city government. The next year, Fosun participated in the privatization of the company then known as Nanjing Steel Group, previously owned by the Nanjing municipal government.

As Fosun’s founders planned their overseas expansion, they considered different business models—from the conglomerate built by Li Ka-shing, Asia’s richest man, to buyout titans such as Carlyle Group (CG) and Bain Capital Partners that use leverage to bolster returns. They settled on Buffett’s approach. “We thought of longer-term solutions to fundraising, and then we thought of insurance and the Buffett model,” Guo says. Since then, Fosun has invested in Xi’an-based Yong An Insurance and Peak Reinsurance of Hong Kong. Insurance now accounts for about 40 percent of Fosun’s assets.

Fosun’s first overseas deal came in June 2010, when it paid €41 million ($56 million) for 10 percent of Club Med, the resort owner with operations in 40 countries. It has since amassed minority holdings in companies including Folli Follie (FFGRP:GA), a Greek jewelry and handbag retailer, and German private bank BHF-Bank.

$56m

Amount Fosun spent to acquire 10 percent of Club Med

Fosun plans to at least double its assets in the next five years and is on the lookout for health-care, tourism, and fashion acquisitions, Guo says. He likes companies with brands that can be introduced on the mainland or expertise that can be used to help businesses that serve China’s growing middle class. Club Med, for example, opened its first resort in China six months after Fosun’s initial investment, according to Fosun’s website. It plans to open five resorts in China by 2015, making the country its largest market outside France.

The sheer diversity of Fosun’s businesses will probably work against Guo’s attempts to achieve scale, according to Joel Backaler, the author of China Goes West: Everything You Need to Know About Chinese Companies Going Global. Although each business may do well on its own, he says, the “balancing and the portfolio approach to managing their business” require sophistication and experience that Fosun doesn’t have.

To keep Fosun growing rapidly without losing its footing, Guo has turned to tai chi, the ancient Chinese martial art in which practitioners seek to achieve harmony between the opposing forces of yin and yang. Introduced to tai chi by Alibaba Group founder Jack Ma, Guo created an area in Fosun’s Shanghai offices where executives can practice. “Keeping the balance of fast-growing and smooth-growing is always important,” he says. “It’s almost an art.”

The bottom line: Using Buffett as a model, Guo has built Fosun into a $48 billion company and amassed a $5.7 billion fortune.


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