China’s Unknown Housing Magnate

Yang Guoliang used to plant rice seedlings, tend cows and

mix cement in a poor village in Guangdong.

He never wore a new shirt until he was 18. But in a week’s time, the company he

created is expected to make his daughter the richest person in China.

Yang’s Country Garden Holdings aims to raise HK$12.9 billion

from a listing in the Hong Kong market on April 20, the largest Hong Kong

initial public offering by a mainland property company ever and probably Hong Kong’s biggest this year.

Despite recent press reports on the jumbo IPO, few people had

ever heard of Yang, the founder and chairman, until relatively recently and he

remains a reclusive figure. Apparently mindful of how many of the new richly of

the post-Mao era have ended up dead, on the run or in prison, Yang, 52, has

kept an extremely low profile, never giving an interview to the media and

releasing no public information about his company.

In 2005, he transferred his entire holding in the

company ‑ 9.52 billion shares, to his second daughter, Yang Huiyan. At a

maximum offer price of HK$5.38, the stake could be worth HK$51.2 billion,

making her far wealthier than China’s

richest person, Zhang Yin, whose fortune is founded on collecting waste paper

in the US and shipping it to


Her fortune is estimated at US $4.7 billion.

While Yang may now be known for his ability to cover

southern China with houses,

his style is a throwback to pre-Communist China, when rich families,

well-connected to the government, controlled the economy. He has built up a

network of former government officials in his native Beigu township in Xunde,

including the former mayor, who is now Country Garden Holding’s president. Many

other former township officials work in the company. Two other hugely wealthy natives

of Xunde – both now Hong Kongers ‑ , Lee Shau-kee, chairman of Henderson Land,

and Cheng Yu-tung, chairman of New World, have each bought a large stake in the

firm. Yang has also brought in three other institutional investors – CITIC Pacific, Singapore’s

Temasek Holdings and Hong Kong’s Kerry

Properties. These five together control 35 per cent of the share issue.

A thoroughly traditional tycoon, Yang has built in his

township an ancestral hall with a panel showing the history of his family, and

a large-scale model of his native village 300 years ago. He also paid for a

secondary school named after his elder brother, who died young.

Asked why he gave his daughter his entire stake, Yang was

quoted saying: “Even if I reach the age of 100, I am going to give it to her

anyway. She is family and I have faith in her.”

Yang’s rural father is said to have gambled heavily and lost

what assets the family had, delivering Yang to a poverty so grinding that as a

boy he wore second-hand shirts or no shirt at all. In his early teens, he worked

as a cement mixer in a local construction firm. At 23, he married a bricklayer

in the same construction brigade and they had three daughters. The eldest

developed fever but the family had no money to pay for medical treatment and

the disease left her brain-impaired.

At 24, he started to work in a local property company and

within six years was running its construction team. By 1989, he was general

manager of the Beigu Construction and Engineering Firm.

Yang’s big break came in 1992, when Beijing was promoting the sale of thousands

of state firms, especially those at the township level. He and four partners

paid 33.95 million yuan to buy the firm from the township and created Country Garden. The next year, he paid 80

million yuan to take 60 percent of the company, with the share of the other four

falling to 10 percent each.

Starting with 87 hectares of farmland in Beigu, he went on

an acquisition spree, acquiring land in smaller cities in Guangdong,


richest province, paying 25 to 850 yuan a square meter. He studiously built

connections with local officials who control access to land, often offering

them jobs in the company.

He has built up the fourth largest land bank of any

developer in China, with an

estimated 18 million square meters, most of it is in Guangdong. He built cement and brick

factories to provide his own materials and developed a large round-the-clock


Yang’s property strategy was high volume and low margin,

offering prices below market level and relying on fast turnover to keep the

money coming in. He built his empire in Guangdong, the province with the largest influx of money

from foreign investors and overseas Chinese and the least control by Beijing.

His slogan, “Giving you a five-star home,” appealed to the

middle class desire for a luxury villa. He targeted the boom towns of the Pearl

River Delta, where he has built thousands of units. In addition, many Chinese

buy homes which they never use, betting on a rising property market and an

appreciating yuan, believing it a better investment than bank deposits or

treasury bonds. His showcase project is

the Country Garden Development in Xunde, a complex of villas and up-market

homes, complete with club house, golf course, medical clinic, man-made beaches

and rigorous security.

To this, he added an international school to appeal to the wealthy

and Hong Kong residents who want to send their

children to study overseas. The fees are 300,000 yuan a year and its alumni

include a grandson of Deng Xiaoping.

Yang’s lifetime in the building industry has given him a

detailed knowledge of the construction process. When he has nothing to do, he

stands in a corner of the sales office and listens to conversations between

potential customers and his staff.

According to Morgan Stanley, which is arranging the share

issue with UBS, the company has 27 projects under development, with an average

gross floor area close to 900,000 square meters each, 87 per cent of them in Guangdong. Its estimated

profit in 2007 is expected to reach US$3.9 billion, more than double 2006, and

US$5 billion in 2008. Ninety per cent of the IPO is reserved for international

institutional investors up to April 12 and the rest will be sold to retail

investors in Hong Kong.

The intense interest among institutional and retail

investors in the share issue ensures that Country Garden

will raise the money it wants. But analysts see challenges. Until now, it has

been a secretive, family-run firm concentrating on second- and third-tier

cities in Guangdong.

Will it adapt to becoming a national company, operating in new and unfamiliar

cities, with a greatly expanded scale of operation? Will Yang be able to

introduce a management system that can run such a company?

Despite this new wealth and fame, Yang’s wardrobe still

resembles the days of his youth. He only wears suits to meet clients and

otherwise dresses like a farmer. While his wife has a Mercedes and his daughter

an Audi, he prefers a modest Shanghai-made Volkswagen.

There’s no use attracting the attention of China’s leaders with a flashy car.