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According to Hays (1), Huang Guangyu, also known as Wong Kwongyu was born 24th June, 1969 in Chaoyang District, Shantou City, Guangdong Province in China. Huang Guangyu’s personal story that epitomizes his entry into China’s economy is dated back to his younger age when he spent most of his time trolling through trash bins in search of usable goods. After this, he began selling plastics and newspapers through collaboration with his brother. With just a 9th grade education and $500 he had at the age of 16, Guangyu set up a roadside stall in Beijing where he sold radios and electronic gadgets which he purchased from nearby factories (Hays, 1). Guangyu’s first formed his business idea when he moved from Guangdong: a place riffed with pirated goods to Mongolia, a region where everything was in short supply. It is in Mongolia that, in 1987, Guangyu founded and set up GOME, an appliance distribution firm at a cost of $4, 400.
In countering his rivals, Guangyu made the firm’s appliances with cheap prices, which enabled it to expand more quickly with little competition in 1990s. The low-cost strategies for small electrical appliances shop that GOME envisaged was a branding strategy that brought a lot of repeated customers to the firm (Hays, 1). This made Huang become a fabulously wealthy entrepreneur as his company floated the Hong Kong stock market especially in 2004. This enabled him to invest in real estate and stock in the country. In the mid 2000s, GOME was listed as successful Electrical Appliance Holding that had a distribution of 420 stores with employment capacity of more than 300, 000 people. Specifically, in 2006, Gome Electrical Appliance was listed as the top retailer in China with annual sales of about $10 billion. It is from such wealth turnout that Huang Guangyu became the richest man in China in 2005.
While Guangyu’s wealth can be projected as massive, his trouble began in 2006 due to illegal acquisition of businesses to amerce wealth. This led to controversy over the legality of the means through which the entrepreneur acquired his wealth. It is in this regard that this paper further discusses the controversial means used by Huang Guangyu in acquiring his wealth.
Huang Guangyu’s Controversial Means of Acquiring Wealth
From the onset of his venture into business, Huang pioneered retail development model that is not only essential but suppressive, as well. The term capital accumulation cannot be missed in understanding the controversial means through which Huang acquired his wealth. As defined by Canterbury (44), accumulation of capital refers to gathering of objects of value that denotes increasing wealth capacity through concentration, or more importantly, creation of wealth base. Consequently, capital is termed as money or financial asset that is invested purposely for making more money (Canterbury, 44). This can be in terms of gaining capital or other kind of returns either through profit, interest, rent, or royalties. However, this system of economic capitalism if not properly structured can result into irregular acquisition of wealth at the expense of the general population. This was evident in the case of Huang Guangyu.
Huang’s capitalistic nature that governed his retail development model, which resulted into his acquisition of wealth, involves both net addition and redistribution of wealth. This raises the concern of who really benefits most from such systems. While Gome’s low-cost strategies justified its increase in capital base, especially by creating more consumer base, it amounted into accumulation of wealth to the company at the expense of the others thereby shifting the wealth from total society stock to Huang’s wealth aggregation. While this accumulation of capital can be understood as Huang’s ability to seize the money-making opportunity, the greed and desire to capture more wealth is what brings out this controversy. This greed and desire stem from the ability to design a system that could keep the small minority in wealth control thereby making the common people consume more than they can produce. It is understandable that the only way to get rich is either to sell financial assets for a price higher than the one at which they were bought, or sell high and buy it back at a low price.
Huang invested in non-productive physical asset such as residential real estate that continuously appreciates in value. For instance, in 2004, they amounted to annual 23.8 billion returns (McDonald, 1). This means that he continued to accumulate more wealth as the value of real-estates was appreciating annually. While this was evident and created massive wealth, in 2006, Huang was investigated, even though cleared, on charges stemming from shady real estate and loan deals that were made in 1990s. Among the charges, was the fact that Huang obtained almost $167 million loan from the Bank of China Beijing branch without following normal procedures. While the case was cleared, it raises the concern on how procedural systems that should carter for everyone equally tend to place other members of the society on the upper hand. This is the social inequality that plays a key role in accumulation of wealth by few members of the society.
The changing behavior of Chinese entrepreneurs such as Huang not only surround new devices and e-commerce but on the concept of collaboration, as well. Collaboration is another means through which such an entrepreneur can controversially accumulate his wealth. It is noted that, through his company Gome, Huang collaborated with foreign manufacturers for the advertisement of its products in order to improve the consumption rate towards their products. By relying on Web-based tools offered by zoho.com, Gome, the source of Huang’s wealth was able to create flexible and efficient online real-time collaboration with various agents that increased its sales output (Hays, 1). However, relying on such technology has seen Gome, just like other companies, breaching the intellectual property and rights of other company thereby benefiting in expense of the same.
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Additionally, Huang Guangyu acquired his wealth through manipulation of the market and other crimes related to share trading violations. In any business environment, investors normally own the money while entrepreneurs are entitled to make real-life decisions. In this aspect, as an investor, one will be pitched differently, however, in wealth-building, as opposed to income-producing, it is important to acquire an asset at a much lower price so that one can sell it at a profit. This, in turn, results into market manipulation. On November 2008, Huang was detained for bribing five senior tax and police officials. He was also found to have illegally converted almost $117 million into foreign currency, of which through stock trading, he netted about $45 million (Hays, 1). His actions were not justified because when he was able to acquire large blocks of stocks, he then dumped it on public for huge gains, which for a fact affected the investment opportunity of other people. It is noted that in November 2008, the investors of Huang’s Gome company were economically affected as the shares of the company was suspended from the Hong Kong stock list with court further ordering the freezer of $214 million of assets (Hays, 20).
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On the other hand, Huang Guangyu seemed to have controversially acquired his wealth from political favoritism. Through Marxist analysis of politics, political favor via state intervention in markets has not only resulted into misallocation of resources, but as well acquisition of wealth beyond the recommended mutually beneficial and voluntary exchange within a free market (Canterbury, 47). In 2008, Huang was charged for paying almost $680, 000 as a bribe to five top tax and police officials in order to be helped in resolving tax disputes (Hays, 1). His corporate style of resolving economic dispute resonate the modern China where entrepreneurs seek political favor and protection as a business tactic rather than an act of wrongdoing. By this, it is a controversial means of acquiring wealth. However, this path did not justify the means of having more wealth as he lost more money.
Moreover, other controversial means that Huang Guangyu used is by presenting himself as one of the philanthropist from China. With a nation whose GDP approaches $2.7 trillion, one-fifth size of U.S. economy, China has unprecedented personal wealth of which wealthy Chinese entrepreneurs see as their ultimate expression of their wealth. Various organizations such as Hurun Report, Journal, and Reuters have reported mega-gifts and pledges placed by Huang Guangyu of giving more than $350 million for health care and fight against poverty (Dobrzynski, 1). While he used this as a way of appealing to the society in order to make more money, this has done little in resolving the past anomalies that he engaged into during acquisition of his wealth. For instance, in 2008, Gome Electrical Appliances Holdings, apart from benefiting from philanthropic image created by Huang, sued him over share repurchase (Hays, 1). To the company, Huang’s action had breached the trust it had in him. This resulted into drop in company’s shares. This is a clear illustration that Huang’s action did little in reemerging the company image that he had created.
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In conclusion, Huang Guangyu is a reputable and refurbished Chinese entrepreneur whose actions emulated growth and success. However, through his controversial actions that rendered him as greedy, dishonest, and insolvent business entrepreneur, he has continued to lose investors’ and societies’ faith in resolving the past anomalies even from his charitable actions. It is, therefore, imperative for entrepreneurs to stick to the ethical business codes and conduct that genuinely establishes their wealth creation means.