Guo Guangchang: Building Private Equity in China

May 21, 2015

Guo Guangchang dismisses being called the "Chinese Warren Buffett" by the Financial Times and others.

"There are a lot of Warren Buffetts these days in China," he said.

But as founder and chairman of the Fosun Group, an $18 billion conglomerate, Guo is one of the country's most visible private equity investors. He's a rock star of the industry. Cell phone cameras were held aloft across the hall when he stood up at the Duke International Finance Forum at Duke Kunshan University to speak about his experience launching a private equity firm in China.

Guo said many foreign companies would not accept investment from an overseas firm when the Fosun Group was first listed on the Hong Kong Stock Exchange in 2007. He said his first three attempted deals all failed. But times have changed.

"It was a very difficult beginning for us," Guo said. "Now we are hammering out a cross-border deal every other month."

Now people sometimes mention his name in association with deals in which he has no involvement.

"Their actions are our best advertising," he said. "Now the people come to us."

Quoting Sun Tzu's Art of War, Guo says Chinese firms must compete by their strengths, not their weaknesses. He said Fosun aims to become a world-class investment group and is expanding fast, into industries including securities, insurance and tourism.

Guo attributes his success to leveraging China's growth, which currently accounts for half of all economic development in the world.

"The driving force in China is growth," he said. "The biggest growth in the world is under your feet."

International firms, he said, are recognizing that companies like his can help them grow in China. But the growth brings challenges of its own.

"When you see a lot of opportunities in the market, that will also be the time with the greatest bloodshed," Guo said. "Now you can get the money, but it's harder to find a good company, a good investment."

Ultimately, whether in China or anywhere else, in private equity the fundamental questions remain the same, Guo said: Where the money is coming from, the type of investment and whether the company seeking investment is sound.

"We want to have a global mindset," he said, "but we still have to answer those questions."

The key to a successful investment, Guo said, is "standing on the floor of values." He defines that as understanding the fundamentals of a company and managing it through cycles.

"If you want to run a business, you need to know the concept of cycles," he said. "Companies, managers and employees all have cycles; it's like a human body, growing then dying. However you manage your company, you cannot escape the cycle."

For private equity firms, it's important to carefully select those companies best equipped to survive the down cycles.

"Capital is serving industry, not vice versa," Guo said. "You have to serve the industries that can really create value."

Guo separates the ideal industries into three categories: Health care and financial services; relaxation and entertainment; and commodities and mass products.

As investors, Guo said, "we like to say we want to be the integrator. If you cannot keep up with the change, you are out."

Contact Info

Gregory Phillips
Duke University
The Fuqua School of Business
100 Fuqua Drive
P.O. Box 90120
Durham, NC 27708-0125

Tel: 1.919.660.7801
Email: gregory.phillips@duke.edu

Erin Medlyn
Duke University
The Fuqua School of Business
100 Fuqua Drive
P.O. Box 90120
Durham, NC 27708-0125

Tel: 1.919.660.8090
Email: erin.medlyn@duke.edu