From a rundown office tower in downtown Shanghai, wedding dresses are sold to the US, wristwatches are shipped to France and cheap trainers are sent to customers in the UK.
Dozens of websites and apps operate from the 23-floor Greenland business building, where employees sit in offices that are completely unmarked, apart from the words “Self Confidence” pasted to their glass doors.
One man is behind all these ventures, 40-year-old Colin Zheng Huang, the billionaire founder, chairman and controlling shareholder of one of this year’s biggest sensations, the online shopping app Pinduoduo, whose shares have risen by 261 per cent since January.
But alongside Pinduoduo, which is now worth $170bn, Mr Huang has set up a wide network of other ecommerce and gaming groups in Shanghai together with a tight-knit group of colleagues, making him the city’s undisputed internet king.
Some of these ventures are more famous outside China than Pinduoduo. One of the apps, Vova, is one of Europe’s most popular online shopping services, ranking in the top 10 shopping apps in France and Italy this past quarter, according to Sensor Tower.
The hub of ecommerce and gaming businesses at the Greenland building provided early employees for Pinduoduo, and helped the breakout business with its sales and marketing.
Pinduoduo previously told investors that Mr Huang founded, or was connected to, some of the companies, but in records registered with Chinese regulators they were owned by his associates.
Known as baishoutao, or “white gloves”, it is not uncommon for wealthy Chinese to ask friends or relatives to hold their shares in companies to lessen their personal risk and shield their holdings from public scrutiny.
Mr Huang has only occasionally held shares in his own name in China. Even at Pinduoduo, he signed over all his shares in its Chinese business ahead of the company’s 2018 initial public offering to Chen Lei, Pinduoduo’s chief executive, who he studied with at the University of Wisconsin-Madison.
One apparent stand-in shareholder, a 69-year-old woman from a rural area of inner China known for its Goji berries, held a 90 per cent stake in several of the companies until the Financial Times asked about her identity.
Pinduoduo has told investors in its Nasdaq-listed shares little about the web of companies. Instead it calls Mr Huang a “serial entrepreneur” and says he founded “Xinyoudi Studio” in 2011. No company with that name has ever existed, although xinyoudi.com was once registered.
Chinese media have described Mr Huang as mysterious. It is not even known if he is married. The secrecy extends to Pinduoduo, where employees use nicknames and two former employees said it was rare to know their colleagues’ real names.
Pinduoduo did not respond to a list of questions for comment.
Mr Huang was born in Hangzhou, the hometown of online shopping giant Alibaba. Both of his parents were factory workers and he studied computer science at Zhejiang University before heading to the US in 2002.
He joined Google and worked at Google China before striking out on his own, in the pursuit of both “making money” and “making me a little bit cooler”.
Cashing in his Google stock, he started Ouku, a consumer electronics website and sold it for $2.2m in 2010. His next venture, Leqee, was already under way, with Mr Chen and an Ouku intern registering the company with authorities in 2009 as its founding shareholders. Pinduoduo later told venture capitalists that Mr Huang “successfully founded” Leqee in 2009, according to documents seen by the FT.
Leqee helped big brands run their shops on China’s biggest internet shopping platforms, Alibaba and JD.com. It also became an informal holding group for the succession of new businesses set up in the Greenland building.
Two years later, the group set up another project, Lebbay, which was again owned on paper by Mr Chen and the now former intern. Using the skills Mr Huang learned at Google, Lebbay built a series of online shopping websites that aimed to get to the top of the search rankings for their offerings.
“Building one site only takes a week,” said a former manager, noting the websites’ funnelled orders into the same back end system for fulfilment. Mr Chen had run the operation, reporting to Mr Huang, the employee said.
Another profitable foray began life a few floors above Lebbay. Under the name Shanghai Xunmeng, Mr Huang’s team developed online games such as Joyspade Texas Holdem Poker, targeting south-east Asian gamblers, and Girls X Battle, where players collect an army of girlfriends to fight for them.
Then Mr Huang landed on the idea that would become Pinduoduo. In 2015, he asked his team to build a “social ecommerce” venture. Called Pinhaohuo, shoppers got a better price if they could persuade a friend to buy the same product. The site started with selling fruit, and at one point Mr Huang redeployed 100 employees from Leqee to help out.
A few months later, Mr Huang’s gaming team created a second app applying the same group-buying model to an online marketplace, where any merchant could list their goods. It was named Pinduoduo and 20 key gaming employees shifted to focus on the venture, Mr Huang told local media.
“These were two different roads, Pinhaohuo was pushing to build warehouses and fulfilment, like a JD.com (akin to Amazon) for fresh produce, but the employees from the gaming company didn’t see it as viable,” said Mr Huang.
Pinduoduo’s business model quickly won out and swallowed the Pinhaohuo team. But the web of companies in the Greenland building were tangled tightly together. Lebbay was used to register Pinhaohuo’s social media accounts, which were key sales channels, and brought in a quarter of the combined company’s sales in 2016. Leqee was listed as Pinhaohuo’s operator on its website. Shanghai Xunmeng, the gaming arm, ran Pinduoduo.
When outside investors ploughed $50m into Pinduoduo in 2016, the ownership of the group of companies began to change. Xunmeng’s 90 per cent owner on paper, 69-year-old Gu Yanping from rural Ningxia province, transferred her stake to the entity that American investors buy into today. Pinduoduo later said in its prospectus that Xunmeng was “controlled by the Founder (Mr Huang) since its establishment.”
Ms Gu immediately set up a second company for the spun-out gaming assets. One early Pinduoduo investor acknowledged that the web of companies were tied to Mr Huang. “The other companies are just making a little money, they don’t have any impact,” the person said. With Pinduoduo “he wants to make a great company,” the investor said.
“Every company has its own employees and has its own team, he has to be responsible to them, he can’t just shutter the companies,” the person added.
This past year the gaming business has enjoyed sales of $489m, according to data from Sensor Tower. Together with Pinduoduo, it has moved to a gleaming new tower called the Shanghai Arch, where employees wearing anime costumes and bright blue wigs to match the characters in their games, write code a few floors beneath Pinduoduo’s fast-growing team.
The other ecommerce ventures remain in the Greenland building. But the lines between the companies are still blurred.
Six current and former employees at Vova and the other ecommerce sites told the FT that while they were recruited by Lebbay or Leqee, their paychecks came from the company Ms Gu set up in 2016 to take over the gaming assets being spun out of Pinduoduo. “It was always a mystery, they never told us why,” said Ice Chen, a former software developer for one of the sites.
After the FT asked two of the companies about Ms Gu’s identity this summer, she transferred almost her entire stake in both firms to a man, who has also set up an investment partnership for Pinduoduo this year, business records show.
It was the latest of a raft of share transfers Mr Huang and his acquaintances have made, with most carried out in the spring of 2018 as Pinduoduo prepared for its Nasdaq listing.
The most consequential share transfer came in May 2018 when Mr Huang transferred majority ownership of Pinduoduo’s main Chinese operating entity, known as a variable interest entity, to Mr Chen.
Other Chinese tech executives, such as Pony Ma of Tencent or Richard Li of Baidu, have kept tight control of their onshore companies, which run their businesses and hold crucial licences. But Mr Huang holds no shares in Pinduoduo’s VIE.
“Colin must really trust Chen Lei or it’s a scary situation, for both Colin and US investors,” said Jesse Fried, a corporate governance expert at Harvard Law School.
Additional reporting by Nian Liu in Beijing and Wang Xueqiao in Shanghai
Regulators close ranks on crypto
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Regulators are continuing to step up their scrutiny of cryptocurrencies, with central banks and South Korea’s tax authorities demonstrating fresh concerns.
In a report published on Wednesday, the Bank for International Settlements, the global body for central banks, argues that digital tokens such as bitcoin have few redeeming features and “work against the public good”. It also dismissed stablecoins — a link between crypto and conventional assets — as an “appendage” to traditional money.
Perhaps unsurprisingly, the BIS did endorse the development of digital currencies backed by central banks, saying they could be a tool to achieve greater financial inclusion and lower the high costs of payments. “Central bank digital currencies . . . offer in digital form the unique advantages of central bank money: settlement finality, liquidity and integrity,” it said.
In contrast, bitcoin wasted energy and cryptocurrencies were “speculative assets rather than money, and in many cases are used to facilitate money laundering, ransomware attacks and other financial crimes”.
South Korea has acted against the financial crime of tax evasion, with more than Won53bn ($47m) of bitcoin, ethereum and other cryptoassets confiscated from 12,000 people. Officials said it was the largest “cryptocurrency seizure for back taxes in Korean history” and noted that local exchanges had allegedly been used to conceal assets because they did not collect the resident registration numbers of account holders. Many of South Korea’s 60 crypto exchanges are battling to meet regulatory conditions to operate beyond September.
This week’s #techAsia newsletter asks whether the death knell is being sounded for cryptocurrencies. That could be the case in China, where it is scaling up tests of its official digital renminbi, and appears serious about stamping out the crypto industry on its soil. Bitcoin fell below $30,000 on Tuesday following the latest regulatory crackdown, but it has recovered to be worth more than $34,000 today.
The Internet of (Five) Things
1. Migrant workers locked up in Taiwan
With Taiwan under pressure to increase manufacturing output to ease global shortages, particularly of semiconductors, electronics groups including Japan’s Canon and Innolux, an affiliate of Apple supplier Foxconn, have been accused of locking up migrant workers amid an outbreak of Covid-19. Some companies have forbidden migrant workers from leaving the dormitories where they live except to go to work.
#techFT brings you news, comment and analysis on the big companies, technologies and issues shaping this fastest moving of sectors from specialists based around the world. Click here to get #techFT in your inbox.
2. SoftBank not a ‘one-man show’, says Son
Masayoshi Son has told shareholders that SoftBank will not prioritise short-term trading gains as the company behind the world’s most aggressive technology fund was grilled over governance failures after the collapses of Greensill and Katerra. At its annual shareholder meeting, the 63-year-old billionaire founder defended the Japanese conglomerate’s governance structure, saying the board was not “Masayoshi Son’s one-man show”.
3. Toshiba’s ’dark arts’ and dirty tricks
Today’s Big Read sets the stage for Japan’s most contentious annual shareholder meeting in decades. At its centre is the fate of Osamu Nagayama, the widely respected chair of Toshiba who faces being swept away by a mass shareholder revolt that could — in a single vote on Friday — sack the entire board of one of Japan’s most famous industrial names.
4. ‘Amazon effect’ hits US wages
Companies struggling to find workers as the US economy reopens have blamed higher unemployment benefits, limited immigration, childcare challenges . . . and Amazon. The ecommerce leader recruited aggressively last year, hiring 500,000 people worldwide, while in the US, it paid at least $15 an hour before benefits, double the federal minimum wage.
5. US takes down Iranian websites
US authorities have seized dozens of websites linked to Iranian groups, including the Revolutionary Guards, accusing them of spreading misinformation and operating in the country without licences. The Department of Justice said 36 websites had been taken down, 33 of which were operated by the Iranian Islamic Radio and Television Union.
Tech tools — Brave and Vivaldi push privacy
Pro-privacy browser Brave has launched a global beta of its own-brand search engine Brave Search, reports Techcrunch. The non-tracking search engine is being offered as one of multiple search options that users of the browser can pick from (including Google’s), but Brave says it will make it the default search later this year. Meanwhile, a 4.0 version of Vivaldi, which offers similar browser privacy features, was launched this month. It has now added translation and the options of adding an email client, calendar and RSS reader.
China bolsters ties with Myanmar junta despite international condemnation
Trade and diplomatic ties between Myanmar and China are normalising in the face of intense domestic opposition and international condemnation of the military junta that seized power in February.
Beijing has strengthened relations with Myanmar’s military leaders despite a series of violent attacks against Chinese business interests in the country after Aung San Suu Kyi’s government was toppled.
Yun Sun, an expert on Myanmar-China relations with the Stimson Center, a US think-tank, said Beijing had already made a “fundamental assessment” that Myanmar was moving into another prolonged period of military rule.
“I think the Chinese can see that this military coup is successful and is here to stay,” she added.
The resumption of state-level engagements and economic activity signals that Myanmar is reverting to its traditional economic reliance on China. The country has used its larger neighbour as a buffer against international sanctions and divestment by foreign investors, who have announced plans to quit the country or shelved projects.
Since the coup, 875 people have been killed by the junta and 6,242 arrested, according to the Assistance Association of Political Prisoners (Burma), a human rights group. The country’s economy and public services were severely disrupted by mass protests in the three months that followed the putsch, and have only partially recovered.
The resumption of bilateral trade will fuel the widespread suspicion among anti-coup resistance groups that China was prepared to support the new military regime.
The cumulative value of China’s imports from Myanmar for the first five months of the year was $3.38bn, up from $2.43bn in 2020 and $2.56bn in 2019, before the coronavirus pandemic, according to official Chinese customs data.
Exports to Myanmar for the same period have not recovered to the same extent, however. By the end of May, goods valued at $4.28bn had been shipped to Myanmar, compared with $4.56bn and $4.79bn in the two previous years.
In a further sign of strengthening diplomatic relations, Chen Hai, China’s ambassador to Myanmar, met coup leader and military commander-in-chief Min Aung Hlaing in Naypyidaw, the capital, in June. In a subsequent statement, Chen referred to Min Aung Hlaing as the leader of Myanmar.
China was among the countries that abstained in a UN general assembly vote last week calling on the international community to halt the flow of arms to Myanmar and release Aung San Suu Kyi and other political detainees.
Beijing had good relations with the government of the deposed leader, who is in detention facing multiple criminal charges. However, it has refrained from criticising the military, fanning anger among the mass protest movement that sprang up after the coup.
Beyond being Myanmar’s biggest trading partner, China also has strategic infrastructure investments in the country, including energy pipelines that give Beijing a critical link to the Indian Ocean.
James Char, a Myanmar expert at the S Rajaratnam School of International Studies in Singapore, said many people in Myanmar still blamed the Chinese government and business interests for complicity in supporting the military’s decades of rule before the transition to democracy.
“The Chinese, themselves, are very clear about [public sentiment in Myanmar],” Char said.
Attacks on China-linked businesses in the wake of the coup culminated in an explosion at a Chinese-backed textile factory west of Yangon on June 11, according to reports from local Myanmar media, as well as junta-controlled information services and Chinese state media.
Beijing’s wariness of inflaming Myanmar protesters would probably slow Chinese direct investments and the resumption of planned larger-scale developments that formed part of President Xi Jinping’s Belt and Road Initiative, analysts said.
Additional reporting by Sherry Fei Ju in Beijing
Australia calls Great Barrier Reef warning politically motivated
Australia has labelled a draft decision by the UN’s World Heritage Committee to include the Great Barrier Reef on its “in danger” list as politically motivated.
The committee, which is chaired by Tian Xuejun, China’s vice-minister for education, and selects Unesco World Heritage sites, proposed adding the world’s largest collection of coral reefs to the danger list because of the damaging impact of climate change and coastal development.
The designation could ultimately lead to the reef losing its World Heritage status, although officials said listing was intended to prompt emergency action to safeguard a living structure that stretches 2,300km along Australia’s eastern coast.
But Sussan Ley, Australia’s environment minister, said the government had been “blindsided” by the committee’s finding and alleged there was a lack of consultation and transparency. She added that Canberra would challenge the draft decision.
“When procedures are not followed, when the process is turned on its head five minutes before the draft decision is due to be published, when the assurances my officials received and indeed I did have been upended, what else can you conclude but that it is politics?” she said.
That the World Heritage Committee is chaired by a senior Chinese official has stoked suspicions in Canberra that it had been singled out over its diplomatic and trade clash with Beijing.
China-Australia relations have soured following Canberra’s call last year for an inquiry into the origins of Covid-19 and Beijing’s imposition of tariffs on Australian wine and barley imports.
Ley said she and Marise Payne, Australia’s foreign minister, had already spoken with Audrey Azoulay, Unesco director-general, to complain about the draft decision.
But scientists downplayed the suggestion that the “in danger” listing was politically motivated. Three mass bleaching events in five years demonstrated the need for the government to do more to tackle climate change, they said.
“I’m seeing some press coverage saying this is all a plot by China not to buy wine, lobsters and to screw the Barrier Reef. I think that’s pretty far-fetched given that the draft decision released overnight will be voted on by 21 countries,” said Terry Hughes, professor of marine biology at James Cook University.
The controversy will heap further international pressure on Canberra, which has been pressed by the US, UK and others to commit to a national target of net-zero emissions by 2050.
In a draft decision due to be voted on next month, the committee urged Canberra to “provide clear commitments to address threats from climate change, in conformity with the goals of the 2015 Paris Agreement, and allow to meet water quality targets faster”.
It noted the loss of almost one-third of shallow-water coral cover following a “bleaching” event in 2016 — a process linked to warmer than normal water that can lead to a mass die-off of coral.
The row over the “in danger” listing occurred at a difficult time for Australia’s conservative coalition, which is embroiled in internal squabbling over climate policies.
On Monday, Barnaby Joyce, a climate sceptic and supporter of coal mining, ousted Michael McCormack to become leader of the National party, the junior coalition partner to the Liberal party, and Australia’s deputy prime minister. Joyce is expected to oppose any move to commit to net zero by 2050.
Where climate change meets business, markets and politics. Explore the FT’s coverage here.
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