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The Sons Are Rising In The East


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THE SONS ARE RISING IN THE EAST

The father makes the money, goes the Cantonese proverb, while the son spends it. A nice old saying, but for many overseas Chinese tycoons a different adage seems to apply: The father makes the money, while the son works hard to make even more.

Consider 27-year-old Richard Li, who studied economics and computer engineering at Stanford. He developed the Star-TV satellite network for Hutchison Whampoa Ltd., the holding company of his father, billionaire Li Ka-shing. Last summer, the company sold Star-TV, which broadcasts five channels across Asia, to Rupert Murdoch's News Corp. for a staggering $525 million.

Or take Ronnie C. Chan, 43, who lived for 16 years in America and got his masters in business from the University of Southern California. After the death of his father, T.H. Chan, in 1986, he inherited one of Hong Kong's mightiest property companies, the Hang Lung Group. Far from running it into the ground, he has aggressively expanded its real estate business in Hong Kong and China. The group's current market capitalization: $6 billion, up from less than $1.7 billion in late 1990, right before Chan became chairman.

PRODIGAL SONS. Li and Chan are just two of the scores of overachievers gradually gaining control over the business empires of their fathers. Often educated abroad, this new breed is quietly incorporating professional management techniques, financial expertise, and technological savvy into their family companies. "The kids are saying, 'Dad, it's time to do things differently,'" says William H. Overholt, managing director of Bankers Trust Co. in Hong Kong.

Certainly, not all of these fortunate sons turn out to be excellent managers of family enterprises. Indonesian-Chinese mogul William Soeryadjaya, founder of P.T. Astra, a billion-dollar, heavy-industrial conglomerate, was forced to surrender control over the company earlier this year because of poor business decisions by his son, Edward. And Thomas Fok, son of Hong Kong-based real estate tycoon Henry Fok, was charged in 1991 with trying to bring 15,000 AK-47 rifles into the U.S. without a license. He eventually served a six-month sentence and paid a fine of $100,000.

But black sheep aside, most of the tycoons' sons are levelheaded businessmen intent on preparing their family businesses for the 21st century. Chan, for example, relies on his knowledge of East and West and his fluency in English, Cantonese, and Mandarin to "unscrew my [Chinese] head, put it in my briefcase, and screw on my American head" whenever need be.

When he's in American mode, Chan tackles the challenge of turning Hang Lung Group into a modern corporation without losing its entrepreneurial spirit. For instance, Chan is finding jobs that play to the strengths of his father's loyal staffers rather than their weaknesses. "We're not Americans who just fire people left and right," he says. "But be assured: If some people are not good, they will no longer be in a position of importance."

The new generation is also more open to exploring new ways to raise funds to expand their business. Chan, for example, just raised $300 million by issuing convertible preferred shares. The older generation, leery of debt, would shy away from such offerings.

That is all quite a contrast from the old-fashioned overseas Chinese conglomerates, often founded by men who learned their business skills by surviving chaos and war in China and Southeast Asia. Mindful of how fast fortunes could vanish in those tumultuous times, most tycoons of the older generation value such tangible assets as real estate and eschews long-term planning. Looking for quick deals that can raise cash, they operate on instinct, call all the shots, and value loyalty more than skills in their employees.

"SHARED VISION." Having prospered from Asia's boom times, however, these companies have grown far beyond original expectations. So the first generation is leaving behind sprawling conglomerates that can no longer be micromanaged by a single leader. When Peter Kwong-ching Woo succeeded his father-in-law, the shipping magnate Sir Y.K. Pao, as head of the family empire in 1986, the Columbia MBA inherited a huge but secretive company that was largely closed to the outside world.

So Woo, 47, took Wharf Holdings and made it in-to a modern corporation. He systematically marketed its extensive but ill-used property portfolio. Woo also decentralized management of the company's 18,000 employees worldwide. "How can I manage a hotel in New York?" he says, referring to the company's Omni hotels group in North America. Meanwhile, back in Hong Kong, he has forged a management team with "a shared vision" of the company's future in hotel and property management as well as telecommunications.

Richard Li, meanwhile, is borrowing from American and Japanese management the idea of research and development for the long term. While remaining vice-chairman of Hutchison, he has formed his own Pacific Century Group, a startup devoted to adapting the latest technologies in telecommunications and health care for use in the Asian market. The young Li even makes a startling admission about the Star-TV sale by his father's company: "If I were the investor, which I wasn't, I would have kept it." Holding on to Star for the long haul would have guaranteed Hutchison a dominant position in Asian media, he explains, even though the venture would have lost bundles initially. Instead, Hutchison opted to give shareholders a quick return on the investment by selling early.

Some old-timers, of course, wonder if these new-fangled business practices are all they're cracked up to be. Gordon Y.S. Wu, 57, managing director of Hopewell Holdings Ltd., says he'll cut a deal with other members of the Chinese elite simply based on their good word. "Some young ones do not honor tradition," laments Wu, whose company has a market capitalization of $5 billion. "We don't use lawyers, we use a simple handshake. They use all the fine print." But Peter Woo says he's not about to sign a megabuck deal without reading the contract details. "Personal friendship," he says, "should not be confused with a business transaction."

REACHING OUT. Yet unlike their fathers, these second-generation tycoons increasingly must work outside the close-knit world of overseas Chinese. Chan, for example, has hired management pros in the U.S. and Europe to oversee his private company, Morningside Group, which seeks investments far from Hong Kong. In the U.S., Morningside owns the largest centrally monitored home- security-device company, for example, while in France it runs the country's largest wholesale auto-parts company.

But the sons are not ignoring their ancestral home either: Many see the rosiest opportunities in China itself. In Fujian province, Hong Kong-based Lippo Ltd. has a deal with the local government to develop a 25-square-mile tract into a deep-water port, power plant, industrial estate, and tourist complex. "They are giving land to us almost free," says the U.S.-educated Stephen J. Riady, 33-year-old chairman of Lippo Ltd. and son of Mochtar Riady, founder of Indonesia's Lippo banking empire.

Likewise, Morningside Group is buying into printing and packaging companies throughout China, with plans to link them up in a major corporation someday. "I take a long-term view of things," says Chan.

As they take that view, it's obvious that ambitious heirs like Chan, Li, Riady, and Woo will be at the heart of deciding how Asia manages its wealth and where that wealth is deployed. No one claims that they will lose touch with China or the Chinese way of doing things. In fact, members of the new generation are confident that they will be the ones who see Chinese-speaking Asia attain its rightful place in the world. But to do that, they recognize that they will have to borrow some Western financial concepts and management techniques. In that sense, they hope to combine the best of both worlds.Joyce Barnathan in Hong Kong


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