CITIC: China's high-flying conglomerate Chairman is quite happy to deal with capitalists

April 07, 1991|By Robert Benjamin | Robert Benjamin,Beijing Bureau of The Sun

BEIJING — Beijing--With its subdued wood paneling, the bronze ashtra bearing the seal of the U.S. Senate and the big TV monitor flickering with on-line headlines from around the world, there is little to distinguish Rong Yiren's spacious office from that of any other chairman of the board of a multinational corporation.

But then there is the centerpiece of his office's decor: A large color photograph of Mr. Rong shooting the breeze with his ultimate boss, China's paramount leader, Deng Xiaoping.

Nimbly balancing such contradictions is old hat for Mr. Rong, the 74-year-old head of the sprawling conglomerate known as the China International Trust and Investment Corp. (CITIC), which for the last dozen years has been communist China's premier player in the world of international capitalism.

"I am a former capitalist who believes that socialism can work here," Mr. Rong says with an at-peace demeanor belied only by his constantly fidgeting hands.

The scion of wealthy Shanghai industrialists and still one of the richest men in China, Mr. Rong did not flee with much of the rest of his family following the 1949 communist revolution, patriotically opting instead to apply his financial expertise to the cause of rebuilding China in a socialist mold.

Two decades later, during China's disastrous Cultural Revolution, this decision earned him menial jobs in which he is said to have suffered intense humiliation.

But, with China's reopening to the rest of the world in 1979 under Mr. Deng's new economic reforms, Mr. Rong was resurrected and given instructions from Mr. Deng himself to be "boldy creative" in forming CITIC to lure foreign capital and technology into China.

Since then, Mr. Rong has rapidly built CITIC from scratch into a widely diversified, worldwide holding company with assets of more than $5 billion; more than 20,000 employees around the globe; investments in more than 300 projects, a quarter of them outside mainland China; and, despite increased competition from other Chinese companies, an enduring reputation as the most Westernized, competent and flexible business group in China.

Blessed with a direct tie to China's State Council along with an unusual degree of freedom, CITIC was the first communist Chinese company to set up projects in China with foreign capital and the first to enter into joint ventures with foreign partners. It also was the first Chinese organization to float bonds overseas.

And it came to be the first stop for large Western investors looking for the right connections and clout in China's heavily politicized, often cloudy business environment.

CITIC owns glitzy hotels and dozens of heavy industrial plants in China, major shares of the phone company and two airlines in Hong Kong, and all or major shares of an aluminum plant in Australia, a pulp mill in British Columbia, a timber company in Washington state and a steel mill in Wilmington, Del.

It has its own banks in China and Hong Kong; makes Peugeot autos in the southern provincial capital of Canton and Otis elevators in the northern port of Tianjin; peddles military weapons internationally; dabbles in Arizona real estate and California venture-capital deals; and leases Cadillacs, Mr. Rong's favorite car, in Beijing.

And in the process, CITIC has served as something of a mirror for the larger Chinese economy, in which out-of-control growth for the first decade of economic reforms forced an abrupt, painful retrenchment that began in late 1988 and that was compounded by the debacle of the June 1989 slayings of pro- democracy protesters near Beijing's Tiananmen Square.

The central government's continuing effort to get a grip on China's overheated economy -- via strict lending and import controls, corruption and nepotism investigations, and increasingly stiff regulations -- sunk or severely constricted the operations of many of CITIC's high-flying followers, smaller regional foreign investment and trading companies often called "baby CITICs."

CITIC has suffered as well. Western businessmen here, who typically will talk about their dealings with the company only anonymously, say that CITIC has had a much hardertime raising capital domestically during this economic downturn. After the Tiananmen crackdown, its Moody's bond rating was dropped a notch, though that ranking still compares favorably with those of some of the largest U.S. banks.

Whereas CITIC once would trade in almost any commodity that promised a profit, it now has been forced to noticeably pull in its reins, the Western business sources say. On the investment side, it has shifted from high-profile hotels and real estate endeavors to less clamorous energy and natural resource projects more in line with China's newly restated national development priorities.

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