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 Empire of Silver, Conflict and Confusion |
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fund_of_fun
头衔: 海归少尉
声望: 学员
加入时间: 2008/12/20
文章: 3
海归分: 3905
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作者：fund_of_fun 在 谈股论金 发贴, 来自【海归网】 http://www.haiguinet.com
Empire of Silver, Conflict and Confusion
In China, when a man reaches the age of 40, he is said to have reached the age of “No confusion” (不惑 “Bu Huo” in Chinese), meaning that he has got a mature idea of the world and life and is no longer confused by the doubts and questions they ponder about in their youth.
But for Kang San, a man barely 30 years old and the third son in a wealthy banking family, there appear to be so many confusions to dismiss from his mind: A dwindling Qing Dynasty swaying in the tides of growing influences and invasion of European culture and religion, the luxury life of his rich family surrounded by the miserable poor refugees just outside his family’s tall and awesome building, and most of all, a foreign language teacher that he had been in love with now becomes his step-mother. Unable to find any solution to these complex and depressing issues, he chooses to indulge himself to drunkenness and keeps himself sway from the daily affairs of the family business.
His destiny, however, certainly lies not in the taverns. In a family mishap, his elder brother is paralyzed while his younger brother becomes mad. As the only son in the family that is physically and mentally capable to inherit the family business, Kang San is forced to take the role as the successor and learn the business under his domineering father, Kang Ye. In this tough transition, he has to face the excruciation of the deserts, and witness the changes that are dramatically reshaping the Chinese society in the early 1900s. By pitching Kang San against many tough issues that he is not willing to confront, Empire of Silver presents us the Chinese banking industry in the critical transitional period of modern Chinese history.
The movie, directed by Taiwanese director Christina Yao, is a film dedicated to “Jin Shang” (晋商), a business group located in Shanxi Province. It is sponsored by the famous Taiwanese businessman Terry Gou, Chairman and CEO of the EMS giant Hon Hai Precision Industries. It is stared by Aaron Kwok, a prominent Hong Kong singer and movie star, Zhang Tie Lin and Hao Lei, two mainland movie stars. Interestingly, Christina, Terry and Aaron all have their family roots origined in Shanxi Province, a province that is now famous for its massive depository of coal resources and the riches these coal mines bring to the upstarts. But 200 years ago, the province was even richer, with many banking corporation in the province issuing bank notes, facilitating financial transaction, collecting part of the fiscal revenue for the central government and even providing war-time financing to the Qing government. It was practically the “Wall Street” of China at that time.
To better understand the movie, one needs to know some background of the banking industry in Shanxi Province. The province was originally not a rich province as it lacks arable lands. But coming into the Ming Dynasty (1386-1644 A.D.), the province gradually started to benefit from trading with the Mongols and Russian and by providing logistics supplies to the military troops based at the frontier against the Mongols troops. At that time, doing business with the Mongols and other foreigners is a high-risk-high-return business. One has to travel across the vast desert to transport merchandizes, facing constant threat of starvation, bandits and wolves. With limited prospects from farming, many enterprising Shanxi people chose to take the risks. Many lost their lives on the road, but a lot many survived and prospered, thanks to their endurance, acute business senses and mostly importantly, their trustworthiness.
As these entrepreneurs grew stronger, they became a very influential business group in China. They effectively had a monopoly in trading of tea and other merchandized between China and Europe. To facilitate money remitting and to leverage on their extensive business network, the innovative Shanxi people invented certificates of deposits as the commonly accepted currency in business transactions. The money remitting operations constituted the very primitive forms of merchant banking in China.
As Shanxi banks gained credibility in the market, they further expanded their business into wholesale banking for local government and private banking for high-level or promising government officials. The close affinity to government gave these banks specially advantage over other similar institutions. At their heydays, the Shanxi banks even acted as quasi central bank for the Qing government.
Beside banking notes, Jin Shang also achieved another breakthrough in business management, that is the creation of professional manager. These professional managers, call Zhang Gui (掌柜) in Chinese, can have full discretion in their daily business decision making without the interference from shareholders. They, however, need to report to the shareholders at the annual year end meeting, when their performances are evaluated by the shareholders. These managers are also given shares in the company as incentive schemes. The payoff from the incentive shares can be quite substantial. Usually a top-level manager can make 100 times the salary of the mid-level government officials. But to become a manager, one has to go through a career path of more than 10 years, starting as an apprentice that does every leg work from toilet cleaning to luggage carrying. After the apprenticeship, one was given more advanced tasks of book keeping and sales. To reach the top level, one needs not only to be very smart, but also needs to be ethical and have a flawless track record in his personal life. Through this stringent training and screening system, shareholders put their capital into the most capable and reliable hands, thus minimizing the agency problem that often exists between shareholders and managers.
The Jin Shang group, with their good management system and close relationship with the Qing government, became one of the most powerful business groups in modern China. But after the Opium War, the Qing Dynasty suffered foreign invasions and domestic rebellions and gradually lost its political power. China was forced to open free trade zones at Shanghai, Guangdong and other cities. With more ports opening for seaborne trades, Jin Shang gradually lost their competitiveness to the more modernized business groups in the coastal regions. A change to Jin Shang’s hundreds-year-old business model and management style seemed inevitable.
Kang San embarks on a mission, albeit involuntarily, to navigate his hundreds year old family business. He needs to deal with the changing society. Moreover, he needs to choose between what he feels right and what he was told by his more experienced father.
The old-fashioned father, Kang Ye, is played by Zhang Tie Lin who is renowned for playing roles of Kings. Zhang is an excellent pick for the role as Kang Ye is mostly domineering and cunningly calculating. He sticks to the old principles of handling the business he inherited from his ancestors. His picking of managers closely resembles the selecting of ministers by a King: Using not the most capable, but the most obedient. He would let a not so capable manager perpetrate a bit, sack him but remake him the manager after many years to gain his allegiance. His belief in old principles is also reflected in his personal life, but to an absurd extreme. He married his sons’ young foreign language teacher when he is already old enough to be a grandfather, not out of love, but just to give births to more heirs to the family business.
His efforts, however, did not turn out to be as fruitful as he has expected. The manager he sacked and renominated eventually betrayed him after knowing that he would not be promoted to the top manager. His wife, the language teacher, refusing to be a birth machine, aborted their child and took out her womb forever in a church hospital.
The young, beautiful and stubborn wife, played by Hao Lei, is educated in Europe. After she came back to China, she was engaged by his father to Kang Ye for an exchange of business favor. At heart, she is craving for freedom and real love, but at surface, she has to succumb to the feudist rules of absolutely obedience to her father and her husband. She fell deeply in love with Kang San, who now becomes her step-son. The impossibility to pursue the true love leads her into helpless self-sacrifice and destruction. Hao Lei’s right-to-the-pounce performance invokes audience’s deep sympathy toward this tragic role, especially in the scene when bids farewell to Kang San before the leaves for America. There are so much hope, despair, love and sadness in her eyes.
Kang San, played by Aaron Kwok, is the pivotal role in the movie. He has his own understanding of human and listens to his heart. His attitude to life was probably influenced by his teacher and lover, but such an attitude is clearly in conflict with his father’s. While trying to avoid direct confrontation with his father, he still makes a few decisions that deviate from his father’s guidance. He pushes through the development of retail banking business in several cities, hoping to diversify customer sources. He also promotes the most capable branch manager to the top manager, despite his father’s warnings. And finally to his father’s biggest surprise, he makes the unfathomable decision of digging out his family’s secret silver reserves under the ground and dispensing the silvers to depositors to compensate their losses that he is not actually responsible for. (This is quite like in 1963, American Express insisted on voluntarily compensating creditors of Allied Crude Vegetable Oil Refining for the latter’s salad oil fraud.) Kang San believes that business should not be run for its own sake, but rather for the wellbeings of the people. Aaron Kwok should be well credited for his role as Kang San, a challenge for a Hong Kong actor. His masterful depiction of Kang San captures every detail of the inner workings of Kang San, his struggles, doubts and hurt feelings.
Beside the refined actings from the leading actors, the scenery settings of the movie is also meticulously designed to give an authentic picture of Jin Shang in the early 1900s. Many items used in the movie are real antique pieces. In a scenery setup, art designers worked on a background wall for five days, painting it, peeling part of the dried wall paper off the wall and repainting it using a slightly different color. These strenuous efforts were just to yield an effect that matches Shanxi styled home decoration. And how long does this wall appear in the movie? Just two minutes! The budget for the movie was repeatedly exceeded and final cost reached over USD 10 million, a huge sum by mainland movie standard. But the visual relish it brings to audience also exceeds their expectation.
The movie is full of humanity and warmth. When a manager committed suicide after his love affair with a prostitute was exposed, Kang San didn’t blame him for violating the rules, rather thought the rule of not allowing managers to bring their families with them is too inhumane. People working in the financial industry might feel disappointed with the simple plot, though. The ending of the movie is especially too uneventful. While, I came out the theatre feeling also the same. But as Jin Shang is a very broad and complex topic, this is probably the best way to present the legend of Jin Shang to the world. For a business group with such a long history and diversity, any conclusive statement would be unavoidably biased.
Business, like politics, is a complex system and there is no absolute right or wrong in it. In Jin Shang’s history, some banks actually did voluntarily compensate their customers for losses they are not responsible for, as Kang San did in the movie. They did it to uphold their principles, but such chivalry, unfortunately, only leads to their own demise. On the other hand, there are also some Jin Shang, taking advantage of their customers’ trust, betrayed their principle for personal benefits, similar to what the Ponzi Scheme runner Bernard Madoff did.
Here I mention Madoff because he is Jewish, and Jin Shang are often referred to as the Jews in China for their honesty and smartness in business. But a management system purely based on trust is inadequate. To be fair, the Jews have an even higher moral standard in honesty than Jin Shang group since the Jews are spiritually bound by their religion to honor their promise with whatever cost. Whereas Jin Shang’s adherence to honesty has a more mundane intent, i.e. to gain bigger benefits in the long run by sacrificing smaller benefits in the short run. But however self-disciplined the two business groups are, history has proved that a system based on self-supervision is prone to fraudulence. The belief in self-correcting free market mechanism has just been proven wrong in the recent financial crisis and governments around the world are moving into tighter regulations and supervision. But how tight should regulators watch over the institutions? How should managers be motivated without encouraging them to take excessive risks? And what can be done to restore the relapsed moral standards in the financial industry? These are tough questions and there can be no clear answer, because conflicts always and forever exist. Empire of Silver certainly does not strive to make a philosophical inquiry into these questions.
In real world, many conflicts are much more complex than people think. One good example is the healthcare system reform currently ongoing in the States. It’s essentially conflicts between the current and future generations of U.S. citizens, between the commercially run and publicly run healthcare systems, and between the need for better drugs and the high cost of finding drugs that improve living conditions. So should the future generation bear the burden of research and development of new drugs that will also benefit themselves in future? We don’t know since we cannot decide for them.
In China, the answer to this question is probably easier to find. Unlike the States, whose healthcare system is costing the country a sum equivalent of 17.5% of its GDP and still rising, China’s healthcare cost is just around 6% to its GDP. While the States is annually spending USD 650 billion more on healthcare than its wealth allows (estimated by Mckinsey) and majority of the excessive spending goes to the treatment lifestyle and behavior induced diseases, such as obesity, China is clearly underspending in healthcare with many only a quarter of its population properly cover by healthcare insurance. The very basic medical facilities and medicines are still lacking in many rural regions in China, that is why China is allocating RMB 850 billion (USD 124 billion) for a sweeping healthcare reform to increase the quantity and quality of medical facilities, improve pharmaceutical research and development and modernize hospitals. With the country’s demographic aging faster than rest of the world, the potential for healthcare is unnegligible.
One of the companies that could benefit from this structural trend is Sino Biopharm, a leading pharmaceutical manufacture and developer in China. The company has consistently put efforts in research and development of medicine for Hepatitis B, a disease affecting about 10% its population and other hard to cure diseases such as cancer. Through these efforts, it has established a strong foothold in the hepatic and cardiovascular drugs. It is spending around 5% of its revenue on R&D, a lower proportion and much much lower absolute amount compare with the global pharmaceutical majors. But it is already one of the top R&D spenders in China. One should understand that one dollar input in R&D can yield much more returns in China compared with developed countries, given China’s unique healthcare regulatory and patent protection framework. The company has a net cash of around HKD 1.8 billion, or roughly 60 cents per share. It is now traded at 16.5 times 2008 earnings, or 11.0 times ex-cash. Consensus earnings growth for 2009 is 25%, which looks achievable, and the stock is the very few mid-caps that I know pay out a quarterly dividend! At this valuation level, the stock is a good opportunity for investors who are keen to capitalize on the increasing healthcare spending in China.
Disclaimer: This author does not work is the film-making industry and is by no means qualified for film commentary. The views expressed are only personal and may be subject to factual errors. Readers are advised to watch the film and form their own opinions. Meanwhile, the comments on investment choices are also subject to possible factual errors and misjudgments. Readers are advises to take great caution and prudence regarding such comments and do their independent research when making investment decisions. Feedbacks and Suggestions are most welcome!
作者：fund_of_fun 在 谈股论金 发贴, 来自【海归网】 http://www.haiguinet.com
标签: 白银帝国,晋商,郭富城,
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 Empire of Silver, Conflict and Confusion -- fund_of_fun - (17038 Byte) 2009-9-09 周三, 15:33 (1524 reads)
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