SUN WUKONG
Quake opens responsibility fault line
By Wu Zhong, China Editor
HONG KONG - The Wenchuan earthquake on May 12 has had a profound impact on the
Chinese people, who now tend to judge a person by what he or she said or did in
relation to this natural disaster that claimed tens of thousands of lives and
left millions homeless.
Hollywood actress Sharon Stone was one unlikely victim of this reaction.
Another is Chinese property tycoon Wang Shi, who heads the country's biggest
listed property developer and now finds himself targeted by the Chinese media
along with Stone as a controversial figure for his response to the Wenchuan
earthquake.
Stone fell foul of public opinion for her suggestion in a May 24
interview with a Hong Kong television station that the earthquake might be a
consequence of "karma". Stone, the only foreigner on the media hit-list, finds
herself in pretty bad company, including a primary school teacher who ran for
his own life leaving his pupils to be buried when the school building collapsed
in the earthquake.
Also up there as a subject of public opprobrium is a county Communist Party
secretary who knelt down to beg sad and outraged parents, whose children were
buried in a collapsed school building, to stop their street demonstrations
demanding an investigation into what they claimed was shabby construction of
the school.
Wang, chairman of China Vanke, is being lambasted because of his comments on
donations to help disaster relief in the earthquake-hit areas. His conduct has
directly or indirectly affected the public image of his Shenzhen-based company.
On May 12, when the 8.0-magnitude earthquake struck, Vanke promptly announced a
donation of 2 million yuan (US$288,000) to help disaster relief. The gift
immediately angered Chinese citizens, who on blog sites accused Wang of being
too miserly and demanded Vanke significantly increase its donation.
Vanke, capitalized at more than 100 billion yuan, at the time was the biggest
listed company on the Shenzhen stock exchange. Its net income jumped 110% last
year to 4.8 billion yuan, as housing sales soared 146% to 52.36 billion yuan.
Wang took three days to respond to the criticism in his blog. "China is a
disaster-laden country," he wrote. "Charity donations for disaster relief
should become a routine. Donations must not become a burden for enterprises, so
that donation activities could become sustainable for them." With the same
reasoning, he also asked his employees to donate no more than 10 yuan each.
His response further outraged bloggers, who then called for a boycott on buying
Vanke homes and shares in the company.
Wang until then had enjoyed great popularity for his honest and clean image and
for the outstanding business performance of Vanke under his leadership. For
many years, Vanke has been named as one of "China's Best Corporate Citizens" by
the influential 21st Century Business Review and 21st Century Business Herald,
earning the nickname "the good citizen". Now he has gained another nickname -
"Mr Ten-Yuan Wang".
To be fair, Vanke was the first property developer to make a donation for
earthquake relief and the amount was the largest of the first batch of such
corporate handouts. Even so, the public had their eyes on developers'
reactions, given the staggering profits they have garnered and sharp increases
in housing prices in the past several years.
By noon of May 15, the amount of money donated by more than 100 property
developers totaled just 255 million yuan. By May 19, that had grown to 460
million yuan. That appeared very small compared with the response from the rest
of the country. A benefit performance hosted by Central China Television in the
evening of May 18 raised 1.8 billion yuan, and by end of May donations from
home and abroad were worth more than 40 billion yuan.
An undertow of speculation argued that the developers' relatively small
donations reflected their dissatisfaction with the government's efforts,
through tax and other measures, to curb increases in house prices. So in a
silent protest against government policy, according to the speculation, the
developers were unwilling to make disaster relief donations, seeing such relief
as a government responsibility.
Whatever the case, Wang then announced on May 21 that Vanke would donate
another 100 million yuan to help post-disaster reconstruction. He also paid a
visit to a quake-hit town and took the opportunity to make a public apology for
his previous comments, admitting that he had "said inappropriate words in an
inappropriate time".
Following Vanke, SOHO China, a commercial property developer based in Beijing,
which last October raised HK$13 billion (US$1.67 billion) through an initial
public offering in Hong Kong, said it would donate another 20 million yuan,
after offering 2 million yuan right after the earthquake.
It was then announced that Vanke was awarded a contract for a post-disaster
reconstruction project. So residents now questioned whether Wang had made the
additional large donation with the ulterior motive of securing a bigger bite of
the huge cake of post-disaster reconstruction. This sparked a fierce debate as
to whether commercial property developers should be allowed to participate in
the rebuilding efforts.
Thus, despite their best efforts, the images of Vanke and Wang seem to have
been damaged.
A survey by a research center under the Chinese Academy of Social Sciences on
May 24 found that 70% of respondents would buy shares of listed enterprises
that had made generous donations to help earthquake disaster relief, and 65%
said they would consider selling shares of "miser" companies.
Coincidentally, with a drop in value of its yuan-denominated A shares, China
Vanke lost for the first time its No 1 capitalization ranking on the Shenzhen
exchange. By June 3, its market value was 134.55 billion yuan, less than the
150.92 billion yuan of Angang Steel Company Limited.
The company's shares, which soared from 18.20 last June to a peak of 40.78 yuan
on November 1, have tumbled this year in line with a broader market collapse,
falling below 20 yuan in April before staging a brief recovery to about 25 yuan
before the earthquake. They closed at 19.58 yuan on June 3. Trading was
suspended on Thursday because of a general shareholders meeting. In his opening
address, Wang apologized to shareholders: "Vanke has made great efforts in
helping disaster relief, which however are not recognized by society. This is
largely because of my inappropriate reply on my blog to netizens. Here I
unconditionally apologize to our shareholders."
Market analysts believe the recent performance of Vanke's shares have more to
do with the sluggish market in general and with weakening house prices in
particular due to Beijing's macro-controls, rather than disillusionment by
retail investors.
Housing prices in Pearl River Delta cities, one of Vanke's key
profit-generating regions, plunged by between 20% and 50% in April from a year
earlier, led by Shenzhen. Analysts say investors are concerned Vanke's core
business income and profits will be significantly affected.
Whatever the factors behind the fall in Vanke's share price, the furor over the
company's earthquake-related donations suggests an increased public awareness
of corporate social responsibility. Whether charity donations are an apt
yardstick to measure this, it seems investors now must take corporate social
responsibility into consideration when doing business in or with China.
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