Photo montage by Adam Connors
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Up,
Up And Away
By ALLEN T. CHENG and YULANDA CHUNG
The view is truly awe-inspiring. From his penthouse office 70 stories above
Central district, Li Ka-shing commands sweeping vistas of Hong Kong's fabled
harbor on one side and its equally renowned Peak on the other. The entire
territory -- this dazzling financial and trade hub of Asia, gateway to the
emerging economic powerhouse of China -- lies literally at the magnate's
feet.
Even figuratively, few in Hong Kong would dispute that premise, especially
after the stellar performance of Li's five listed companies in the past
year. The eye-popping deal by his younger son, Richard, to acquire the territory's
top telephone company for $38 billion only augments the father's mystique
and aura of power. And when Li's major Internet venture, China portal Tom.com,
listed in March, eager subscribers formed some of the longest queues Hong
Kong had ever seen.
Indeed, there is not a single major economic sector in Hong Kong or China
in which "Superman" (Chiu Yan, in Cantonese) isn't a big player. He has
stakes in property, telecommunications, retailing, media, investment banking,
the Internet and infrastructure. And Li's empire has spread far beyond.
His Hutchison Whampoa Ltd., which controls 18 major shipping ports, is now
the world's largest private port operator. In Canada, the company controls
Husky Oil. In Europe, Hutchison owns 3.5% of telecom giant Vodafone/AirTouch
and recently won a third-generation mobile-phone license for $6.8 billion
in Britain. And it is preparing for a G 3 license bid in Germany. During
the past year, Li demonstrated not only an unparalleled power to dominate
markets -- and influence politics -- in Hong Kong and abroad, but also a
pacesetting ability to capitalize on the global high-technology revolution.
For that, he heads our Power 50 ranking this year.
All that clout has landed Li and his family in some controversy. Richard
Li's purchase of Hongkong Telecom (HKT), in which Li is thought to have
played a key behind-the-scenes role, was criticized as making the clan too
dominant in the local economy. Today, Li-linked companies account for 21%
of the Hang Seng Index's market capitalization. When the HKT deal is completed
next month, the figure will rise to 26%. The Li family was thought to be
worth $12.6 billion last year, 26% up from 1998.
Local legislator Li Wah-ming complains about the tycoon's close ties to
Hong Kong Chief Executive Tung Chee-hwa. Shipping scion Tung has been a
Li friend and occasional business partner for two decades. "Tung was elected
by a small circle and Li has ample influence," says the lawmaker. "Li has
voiced his support for Tung's re-election [in 2002]. Their cozy relationship
is self-explanatory." Both the Lis and the Hong Kong government have denied
any preferential treatment.
China-born Li arrived in Hong Kong in 1939. The eldest child of a school
principal, he started a plastics factory in 1950. Fifteen years later, he
entered the property business through his flagship company Cheung Kong Holdings.
But Li didn't hit the big time until 1979, when he became the first Chinese
to buy one of the British hongs (trading companies) that dominated the local
economy. His purchase of a controlling 22% stake in Hutchison surprised
many at a time when real estate was king. But Li's strategic foresight would
be vindicated later, as the conglomerate not only allowed him to diversify
but helped him become a global player.
Even the tycoon's stumbles have a way of turning into opportunities. In
1992, Hutchison had invested in a British cordless-phone operation called
Rabbit; it lost $183 million by the time Li closed it a year later. But
the venture allowed Hutchison to gain a toehold in Britain's mobile-phone
market by launching Orange, a company Li sold to Mannesmann AG last year
for $14.6 billion (which included a 10% stake in the German telecom giant).
When Britain's Vodafone/AirTouch took over Mannesmann, Li gained a 5.2%
holding in the new entity. Last month, he sold a third of the stake for
$5 billion.
Li's Midas touch has continued at home. Tom.com, oversubscribed 669 times,
immediately gained a market cap of $2.8 billion. As grandmothers and taxi
drivers battled for places in the subscription queues, a housewife and veteran
investor in Li's companies gave voice to the prevailing sentiment: "There
is a saying in Hong Kong -- You cannot lose with Li Ka-shing."
In China, Li has worked hard to nurture guanxi (personal relationships).
He has donated nearly $400 million to charities in Hong Kong and the mainland,
including a third of that toward the construction of Shantou University
near his hometown of Chaozhou. Li refused university officials' attempts
to name the school after him, saying he only gave out of the goodness of
his heart. Then-premier Li Peng was so impressed that he visited the campus
in 1991. Hong Kong lawmaker Li is more skeptical: "Li Ka-shing is not running
a charity organization, he's responsible to his shareholders. Anyone with
economic knowledge would not believe what he said about investing on his
conscience alone."
Beyond doubt is the strength of Li's ties in Beijing. He is known to talk
directly with President Jiang Zemin and Premier Zhu Rongji. After Li's eldest
son Victor was kidnapped by notorious gangster Cheung Chi-keung in 1996,
the tycoon was said to have put in a word at top levels in Beijing. (Li
himself brushed off the suggestion.) Mainland police caught Cheung, put
him on trial and executed him. During Jiang's two presidential visits to
Hong Kong -- for the 1997 handover and the opening a year later of the Chek
Lap Kok airport -- he stayed at Li's Harbor Plaza Hotel in unfashionable
Hunghom district, a unique honor.
The Beijing relationship did hit a bump in the mid-1990s. Li's Oriental
Plaza, a vast shopping complex in the capital's heart, was chided for infringing
planning rules. Li scaled it down and completed it anyway. Today, the enormous
glass-and-granite edifice symbolizes the new market-driven China.
Li's Beijing links have sparked unease in Washington. In the past year,
some American congressmen portrayed Hutchison's winning of two 25-year contracts
to manage Panama Canal ports as a threat to U.S. national security. The
company said that the deals were strictly business. True or not, the allegations
are further testimony to Li's expanding impact.
What more can the tycoon achieve? "Li will not rest until both his sons
have their own empires," a Hong Kong investment banker predicted a couple
of years ago. Now that Victor is taking control of Cheung Kong and Hutchison,
and Richard runs his own Internet conglomerate Pacific Century Cyberworks,
Superman is finally in a position to think about hanging up his suit. But
don't count on it. As his sons rise, Li Ka-shing will be freed to take on
even bigger things. To him, Hong Kong is but a platform. The world is his
ultimate stage.
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