APRIL 14, 2000 VOL. 26 NO. 14 | SEARCH ASIAWEEK
Taiwan billionaire Sheen Ching-jing still uses the street-smarts he developed as a youthful gangster
By ALLEN T. CHENG Taipei
The days of strong-arming shop owners and fighting bloody gang wars are long gone for Sheen Ching-jing. You can still glimpse something of the past in the leathery lines of Sheen's face and hear it in his gravelly voice and no-nonsense manner. But look again. Aren't the lines what you'd expect from a typical 53-year-old? And wouldn't any wealthy tycoon and chairman of a group of 35 companies with net assets exceeding $2.3 billion act the same? Find more ambiguity in Sheen's eyes. One second, they are bright and full of laughter as he recalls his days as a swashbuckling property developer; a moment later they are yielding tears from the memory of when he was jailed as a teenage gangster.
No one can accuse this man of avoiding his past. In 1998 he wrote an autobiography, The Fateful Journey of an Economic Warrior, about his passage from angry triad youth to successful establishment businessman. But make no mistake, the elder Sheen is at war with the youthful one, especially in the way he conducts business. He knows his criminal record requires him to be more honest than anyone he deals with: "I always stick to my word in business, because given my gang and prison background no one will offer me a second chance."
Sheen today is worth at least $1 billion. Having risen from teenage criminal to government clerk to the owner of Core Pacific Group, a conglomerate with 35 operations across Asia, Sheen can't help but look back. "Do you think there's any other tycoon today who was like me, a gangster in a past life, imprisoned, reformed and later fabulously rich?" His climb has not been smooth. He's been in jail, beset by creditors and shunned by investors. You might think he'd want to forget the most unsavory pieces of his past. But Sheen recognizes that many of the old lessons are too valuable to ignore. The world is changing, and Sheen needs the street-smarts of youth to adapt a sprawling, old-economy company.
Sheen was born on the mainland in 1947, eldest son of an officer in the Kuomintang army. He moved to Taiwan the following year as the KMT forces, led by Chiang Kai-shek, began to retreat from the advances of Mao Zedong's communists. The KMT regulars were not popular in Taiwan, where many natives considered them an invading force. Children like Sheen were ready targets for the animosity. Weak and scrawny, Sheen formed a gang with other "mainlanders" for protection. Over time, similar groups, often started by the sons of KMT military fathers, morphed into Taiwan's biggest and most notorious crime syndicates. The triad tradition of secret societies goes back hundreds of years among Chinese, but the strongest organizations in Taiwan today are typically less than 50 years old.
Sheen's central life-altering episode came when he was still a teenager. He was sent to jail in 1969 at the age of 19 for leading a chopping attack on a Taipei merchant. At the time, some members of his Four Seas Gang wanted to muscle in on a rival gang's turf and begin extorting protection money from small businesses. One gas station owner refused to pay. Sheen says he and at least a dozen other gang members went to "teach the shopkeeper a lesson." The targeted merchant survived and went to police, who arrested Sheen. He was convicted of assault with a deadly weapon and sent to prison for three years. Today, Sheen regrets the incident but insists that he never started fights as a young tough but only fought in support of others. "I had a terrible habit," he says. "I used to always mind other people's business."
In jail, Sheen spent his time reading business magazines and reflecting on his violent past. He resolved to leave the triads behind. When he was released from jail, he joined the army for a mandatory two-year enlistment. And after that ended, he stayed away from Taiwan. He worked as a sailor on cargo ships shuttling to North America. At the time, Taiwan citizens of all classes and backgrounds were going overseas to escape the island's erratic economy, oppressive government and violent underworld.
Sheen returned to Taipei in 1974. His timing was perfect. As the oil shock forced developed economies like the U.S. to look for lower-cost manufacturers off-shore, Taiwan surged. Sheen landed as a clerk in a government agency that regulated textile exporters - handing out export quotas. Seeing an opportunity, he passed the exam for a broker's license and set up his own company to buy and sell textile quotas. He was 27 years old. Within two years, he had become Taiwan's export quota "king." That year, 1982, he made about $250,000 (at the prevailing exchange rate). It was a fortune, especially considering that a house in central Taipei then cost little more than $300.
This was the beginning of Sheen's business empire. In the mid-1980s, he gambled his export-quota profits on property and stock. Taiwan in the mid-1980s thrived, and his risk-taking paid off. Rudy C.L. Ma, chairman and chief executive officer of Taiwan's largest brokerage house, Yuanta Securities Group, says Sheen seemed to have a gut instinct for making money. "He was known as one of the top 'four kings under the heavens' of [investors]," says Ma, who was Sheen's broker in those years. "He used to come in every day and play the markets like he owned them. Markets moved when Sheen played."
As a teenager, Sheen's aggressiveness had landed him in jail. Later, it may have been responsible for the biggest business setback of his career. In 1988 he conceived a plan to build a $784 million, 290,000-sq-meter shopping mall in downtown Taipei. But the project, called Core Pacific City, required a zoning variance from the city council. The plan was caught up in a property slump and a city council desire to make Sheen pay dearly for the variance. The necessary permits were withheld - for 10 years. For any developer, such a delay can be ruinous.
But Sheen stuck with the project even as Core Pacific sunk to the edge of bankruptcy in 1995. At the same time, a public spat between Sheen and the then-CEO of BES Engineering, a listed subsidiary of Core Pacific, destroyed the confidence of investors and further pushed Sheen's company into the danger zone. Sheen's assistant, Juliana Liu, is emotional about the toll this took on her boss: "He almost committed suicide." Fortunately, Sheen had friends in high places. He was karaoke buddies with Liu Tai-ying, chairman of the KMT's asset investment arm, China Development Corp., which controls $6 billion worth of assets. "[Liu] helped me by going to all the banks and giving me a good recommendation," says Sheen.
Finally, four years ago, Sheen secured the zoning approval he needed by agreeing to build an $8.2 million traditional puppet museum next to the mall. In the end he was forced to take on a dozen investing partners to develop the project. The mall is under construction and scheduled to open in 2001.
The Core Pacific Group, however, still has serious problems. The group's four listed subsidiaries lost a combined $26 million last year on $1.3 billion in revenues. The Asian Crisis has hurt the company's sales especially from outside Taiwan. Sheen blames himself for being slow to recognize how companies and economies around the world are changing: "Because of my ignorance, I lost a lot of money last year. However, I'm restructuring. If I'm successful in my restructuring, I believe my group will not only earn more money, it'll serve more people throughout Asia."
One of his first restructuring moves borrowed a page from his underworld past. Back in the 1960s, Sheen had seen how frequent turf battles among too many small gangs hurt both the winners and losers. As the 16-year-old leader of a smallish gang that called itself South Eagle, he helped forge a merger with a bigger rival called Universal Gang. He then engineered an even bigger merger with Four Seas Gang, which is now the second-largest triad in Taiwan with tens of thousands of members. The mergers transformed the landscape for triads and began the process of turning them into potent political and economic forces.
A similar problem afflicted Taiwan's securities companies in recent years. Wu Tang-chieh, secretary general of the island's Securities and Futures Commission, says regulators have known Taiwan is over-brokered since 1997. A year ago, the commission helped push through legislation amending laws to allow all companies - not just brokerages - to merge for the sake of improving market efficiencies. Last November, Sheen negotiated a deal to combine his own group's Core Pacific Securities, Taiwan's third-biggest brokerage, with No. 1 Yuanta. He has also taken steps to grow beyond Taiwan. In 1998, he bought the Hong Kong arm of failed Japanese broker Yamaichi for $80 million.
Since the merger deal with Yuanta was announced, more than two dozen other Taiwan securities firms have confirmed similar combinations. One key factor is Taiwan's pending membership in the World Trade Organization, which could happen as early as this year (depending on when China joins). That will entice large, global players. Hsu Daw-yi, president of Core Pacific Securities rival National Securities Corp., says his company has no choice but to follow Sheen's lead: "Hopefully, we can be among the top five houses in Taiwan. If you don't have enough branches, you cannot achieve economies of scale."
While competitors in the securities industry are focused on survival, Sheen has moved on. In the merger between Core Pacific Securities and Yuanta, the chairman will be Ma, Sheen's former broker. Sheen will be vice chairman. He believes the lesser role will allow him to concentrate on remaking the rest of Core Pacific. BES Engineering is building a business-to-business web portal. Another unit, China Petrochemical Development, is planning to sell plastics on-line. The group's property development arm will focus on providing broadband Web connections for apartment buildings, the so-called "last mile" of Internet wiring.
It all adds up to an intuitive transformation, accomplished by a man who never went to college, has no technical training and can barely even use a personal computer. "[Sheen] is starting to learn the PC," says Dennis Hou, the group's e-commerce specialist. "It's tough for him, but his effort is earnest. Not all tycoons are willing to change." In fact, Sheen seems to crave change. He has spent virtually his entire adult life in perpetual transformation. He is now interested in moving on. For him, change is the thing. These days, as the Internet demands that companies adapt to it, that is a useful trait.
Sheen is born in Nanjing, the first son of a captain in the Kuomintang army. A year later the family moves to Taiwan
Mao Zedong's army achieves stunning victories as it moves out from its northwest China stronghold. Eventually, some 2 million KMT soldiers and supporters flee to Taiwan, where they are greeted as an "occupying army"
Age 15, an undersized Sheen joins the Sea Snake Gang. He begins to engineer a series of triad mergers
Especially in Taipei, the sons of KMT supporters form gangs to protect themselves. KMT leader Chiang Kai-shek cracks down on pro-independence supporters in what will be known as the "White Terror" campaign
Sheen begins serving a three-year prison term for leading a gang attack on a gas station owner who refused to pay protection money
Taiwan's gangs grow stronger with the proliferation of illegal gambling dens. The business sector picks up as factories crank out cheap exports
Sheen joins the military for two years. Upon his discharge, he goes to work at sea to escape his gangland past
Though the economy is improving, many Taiwan residents still leave to find work as laborers, domestic helpers and even prostitutes
Returning to Taipei, Sheen works as a government clerk. He then starts a business trading textile export quota credits. By 1982, he is Taiwan's undisputed "king" of the credits
The economy shifts into high gear pumping out garments, shoes, plastics and toys for mainly Western buyers
Sheen founds Core Pacific as a real estate development company. Three years later he starts Core Pacific Securities
In 1987, Chiang Ching-kuo, son of Chiang Kai-shek, ends 38 years of martial law. The economy soars as major sectors are liberalized
Sheen's group runs into trouble with the development of a major Taipei mall but is bailed out with KMT help
The island's property market nears the end of a devastating slump
Sheen sets about restructuring Core Pacific into a dotcom player
Taiwan and all of Asia are doing the same
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