The Chinachem Code: Can it be Cracked?

Related Stories:

Goodbye Nina

Enduring Tower Block Mystery

The unexpected death of Nina Wang, the Chinachem boss who was widely touted as Asia’s richest woman, raises the question: what exactly is Chinachem and how much is it worth? Perhaps some answers will now be forthcoming as Wang’s estate comes up for probate and her will (assuming she left one) becomes a public document. But don’t count on it.

One great advantage of being a private group is that you don’t have to publish any accounts and the media is free to make up all kinds of numbers of fabulous wealth. For some in Hong Kong, the mysteries of Chinachem recall Carrian, a property company that had several listed entities but was able to keep its bubble aloft for a long time thanks to the belief shared by public and bankers alike that the private holding company at the top of the pyramid was fabulously rich. In the end it proved fabulously indebted.

The Hong Kong-based Carrian of course had a lifespan of only six years, flaming out as one of Asia’s biggest houses of cards and leaving behind it a trail of debt, suicide, murder and intrigue that led all the way to the top of Malaysian politics. Chinachem, on the other hand, has been around since the1960s and has long been in the property business, so it must be assumed to have profited immensely from the enormous increases in Hong Kong asset prices over that time, increases which have created its richest men, Li Ka-shing, the Kwok’s of Sung Hung Kai Properties, Lee Shau-kee of Henderson Land etc.

Nonetheless one has to wonder both what it is really all worth and whether there are minority interests in the group held by people who prefer to keep a low profile on account of their original sources of funds or the nature of their other businesses.

The most widely quoted figure for Wang’s wealth comes from Forbes magazine which listed it as HK$32.7 billion. This number appears to have been arrived at by totting up the estimated current market value of Chinachem’s known property assets. As a gross figure that is probably fair enough. But it is only the asset side of the balance sheet. How much debt is also on the books, hidden away in subsidiaries or secured on guarantees from offshore companies?

A few months ago Asia Sentinel told the bizarre story of one of Chinachem’s biggest projects, an apartment building in up-market Repulse Bay. In 1997 it paid a record HK$5.55 billion for the site and then another HK$ 2.5 billion or so (excluding interest) on a creation supposedly designed by world famous British architect Norman Foster. But 10 years later and four years after being given an occupation permit it stands empty while Chinachem seeks permission to convert it into a hotel, an unlikely business proposition given the location. Is it serious, or does Chinachem have an ulterior motive for keeping this costly structure off the market? There is only a small mortgage on the building itself – HK$868 million as of March 2005 – but who knows what other loans are secured on related companies?

When she died, the flamboyant Wang was also in the middle of building what may prove to be another white elephant, Nina Tower, in down market Tsuen Wan. This was originally planned as Hong Kong’s tallest building but after innumerable delays and failures to get planning permission it has become two smaller towers.

When Wang’s husband Teddy was ruled dead several years after he disappeared, his estate was valued at a mere HK$1 billion. For sure, property values rose sharply in the 1990s, and have now recovered most of the ground lost following the 1997 Asian crisis. But that does not explain how she should now be worth HK$32 billion, particularly considering the amount of company funds squandered on the Repulse Bay project which, if sold at today’s residential market prices, would show a loss even on the assumption that it was largely equity financed.

The other possibility is that Teddy Wang’s relatively modest estate reflected the fact that there were other big shareholders in Chinachem of whom nothing is publicly known. Were the Wangs fronting for some sort of consortium? If so, that might explain the internecine warfare which erupted between Nina and her father in-law following Teddy’s presumed murder. Nina was accused of forging Teddy’s will and only finally won a long legal battle over it last year.

If there is a battle over the inheritance, or a need to break up the company, or the real estate market cracks and banks lunge to grab their security, the real story of Chinachem may emerge. But otherwise fanciful numbers and speculation will continue to be grist to the mill for journalists who likely fear that it may not pay to dig too deeply.