The Fall of D'Long
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ICMR HOME | Case Studies Collection
Case Details:
Case Code : BENV009
Case Length : 13 Pages
Period : 1996-2007
Pub Date : 2007
Teaching Note :Not Available
Organization : D' Long Group
Industry : Diversified
Countries : China
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Introduction Contd...
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The scandal had a ripple effect that was felt not only across the entire group
but also by the Chinese economy as a whole. It turned the spotlight on the rigid
banking structure in the country and the banks, which did not extend loans to
private corporate investors (Refer to Exhibit I for a note on financing private
companies in China). With only limited sources of finance being available to
them, several private companies in China resorted to obtaining finances through
trusts and investment companies to run their businesses. The Chinese government,
on its part, tried to bail out D'Long by providing loans amounting to US$ 1.8
billion.
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According to David Chen, former chief of Hartcourt Company's4, investment arm,
"The government should take the blame. It's time for policymakers to
consider why this has happened - lack of transparency for investors and lack
of scrutiny into bank lending."5
Background Note
The origins of D'Long date back to the year 1986, when four brothers (Tang
Wanchuan, Tang Wanxin, Tang Wanping, and Tang Wanli) in Xinjiang Uyghur
Autonomous region in the northwest of China, started a photograph
development service. The brothers traveled from Xinjiang to Guangzhou, where
developing photographic films and printing photographs was cheaper.
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During each
trip, they got hundreds of rolls developed and were able to earn a
significant amount as profits. In 1986, the brothers incorporated
Xinjiang Delong Company (XDC), which was the parent company of the
group. Wanxin was named the CEO and Tang Wanli the Chairman of XDC.
In the year 1992, the Tang brothers moved to Xi'an Shaanxi province, and
began buying up the shares of local companies. In 1994, the brothers
acquired a discotheque in Beijing called JJ's. The profits they earned
from the discotheque were used to fund their subsequent business
interests in making tomato paste, building truck engines, cement
production, and manufacturing electrical equipment... |
Excerpts >>
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