One Billion Customers - James McGregor [37]
Lim’s meeting with Zhu was friendly. It started with discussions about how China’s financial sector could be further reformed, a topic that led naturally to Lim’s idea of a joint-venture investment bank. Zhu liked it. He had long encouraged joint ventures among Chinese and foreign manufacturers as a way to transfer technology. The same could be true of financial knowledge, Lim told him. The Chinese could use a joint venture as sort of an apprenticeship to learn how sophisticated finance works. Zhu promised his support.
A Meeting of Minds
Jack Wadsworth had thought he understood Asia. In Japan, answers to questions weren’t the straightforward “yes” or “no” that Western businesspeople expect. Everything was nuanced and understanding the nuances was the key to dealing with the Japanese. But as Wadsworth flew from his Hong Kong headquarters to Beijing and Shanghai to meet with executives of the various government banks that were emerging from China’s reforms, he was shocked. There was no nuance here. Many of the officials clearly had no clue about sophisticated finance. Others were either intimidated by Wadsworth or tried to bully him. More than a few were so smarmily evasive and focused only on their personal gain that Wadsworth felt an urge to take a shower after such meetings. But amid those disappointments Wadsworth kept hearing the same name: Wang Qishan. Wang was reputedly the financial fix-it man for China’s leadership and a straight shooter.
Wang Qishan was a forty-four-year-old vice-president of the China Construction Bank, a huge state-owned bank whose main role was funding the development of China’s infrastructure. The son of university professors, Wang became part of the Communist Party aristocracy when he married the daughter of Yao Yilin, the vice-premier in charge of finance and economics. In the early 1980s, Wang was one of a group of young policy advisers known as “the Four Gentlemen,” who served as consultants to reformist Premier Zhao Ziyang. Eventually the other three fell by the wayside, the result of impatience or impertinence. But not Wang. He even survived the downfall of Premier Zhao after the 1989 Tiananmen Massacre. He knew when to push for changes, when to lay low, and how to frame step-by-step reforms in terms that made party leaders comfortable. He taught party leaders that capital markets and stocks were tools for getting money from foreigners without giving up control.
In the spring of 1992, Wadsworth drafted a letter to Wang Qishan. In it he outlined his idea for a joint venture between Morgan Stanley and the China Construction Bank. It called for a fifty-fifty partnership that would give Morgan a shot at financing many of the gigantic infrastructure projects that China was undertaking while showing the Chinese how modern financial methods could tap capital from around the globe.
Wang Qishan responded quickly, inviting Wadsworth to meet with him. Wadsworth liked Wang from the outset. He was indeed a straight shooter, willing to talk openly about China’s many financial problems and to listen to Wadsworth’s ideas about how those problems could be overcome. But before negotiations could become serious, one of those very problems ended the discussions. China’s central bank, the People’s Bank of China, needed to clean up the country’s foreign exchange trading system. Government bankers across the country were playing foreign exchange markets like a casino and losing a bundle. Wang Qishan was called to the central bank to untangle the mess.
Wadsworth was disappointed. If he had done a deal with the China Construction Bank, Morgan Stanley could have generated millions in fees by raising capital for dams, airports, and highways. The firm would also have a ringside seat to watch the development of China’s fledgling stock markets and perhaps help underwrite and sell Chinese shares