Chapter 9: The Rise and Fall of China’s Corporate Dragon: Kelon and its Old and New Owners
Guy S. Liu and Pei Sun
Guy S. Liu and Pei Sun INTRODUCTION The collapse of corporate empires in contemporary capitalist economies tends to be no less dramatic than the vicissitudes of political empires in history. While the political ones often slipped into a less than envious position through a gradual process, in which the decline could be discerned widely by both outside political observers and ordinary people, the sudden collapse of corporate dinosaurs nowadays can take even the closest, longterm corporate analysts by surprise. Unfortunately, this was the case in the example of Kelon, a domestic household appliance manufacturer that once enjoyed the honour of being cited as a typically successful case study on Chinese ﬁrms in international business schools. Entitled Kelon: China’s Corporate Dragon,1 the study regarded it as an exemplar of dynamic Chinese ﬁrms rising from China’s embracing of the market economy during the 1980s and 1990s.2 The timing of the publication, namely the year 2001, could not have been more embarrassing for both the authors and business school students. Guangdong Kelon Electrical Holdings Co. Ltd shocked investors and equity analysts alike by reporting an unprecedented net loss of RMB 1.5 billion (HK$17 million) in the same year, with appalling scandals of the controlling shareholder’s expropriation of company assets. The rise and fall of Kelon is deeply rooted in its corporate governance system, which was developed when China’s economy was under a complex transition that induced block shareholders to play a dual role – of helping on one hand and appropriating on...
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