Tiger Woman on Wall Stree

by Junheng Li

  Two Johnnie Walker and green teas later, he grew even more candid, confiding that one of the local sportswear merchandisers his firm invested in was in fact struggling. Sales objectives were met by channel stuffing—forcing products into retail channels so that the company could book the revenue, even though there was no customer demand for the products. The stores ended up stockpiling the goods or getting rid of them at a steep discount, sometimes by sending them back to the company or by unloading them on a gray market. In any case, the retailers rarely returned to the company for more orders, as the company’s subsequent quarterly earnings demonstrated.

  I couldn’t help but think back to the IPO lunch scene at the St. Regis in New York. Nick wouldn’t have been in business if it hadn’t been for the insatiable demand for Chinese stocks. The demand came from such eager yet ill-informed American investors like Brian and those attending GET’s IPO lunch. It started to make sense to me—a lot of sense.

  I began to suspect, as I met with more and more people in Shanghai, that the entire financial food chain was laced with fraudulence. U.S. investors were sitting behind Bloomberg terminals daydreaming of striking gold but were either too lazy, too blind, or too hopeful to dig up the dirt and examine its contents. They would buy almost any stock from China, making the bankers seem like geniuses for financing the IPO.

  But the real malfeasance involved the supply side—the sometimes fraudulent, sometimes immature companies that private equity partners and investment bankers churned out as IPOs. It began with the delirious demand for all stocks Chinese, which drove enterprising bankers into China’s less traveled regions in search of IPO candidates. There they found companies that were in need of capital but that also had unsophisticated management teams, limited operating histories, no earnings, and no government backing—and therefore no way to list domestically or in the United States. These companies were willing to pay the bankers’ commission because having a New York listing gave them bragging rights in China. Several reverse-merger companies confided in me that after the fees to bankers, lawyers, and stock marketers, little of the IPO proceeds were left to grow their businesses.

  Private equity had a similarly suspicious role in setting up fledgling private companies for IPOs. Bankers were pursuing companies, suitable or unsuitable, to cut them a check that would allow them to get listed in the United States.

  When a hot investment theme begins to feed on investor greed, ignorance, and laziness—and is further inflated by unscrupulous, opportunistic investment banks—ugly things tend to happen. The Red Party was clearly a gold mine of shorting opportunities.

  Beyond that, it prompted more questions. If Chinese stocks were mostly hyped-up myths, was the larger Chinese economy also not what it seemed?

  Escaping New York for Shanghai this holiday season had turned out to be another rabbit hole of due diligence, and I couldn’t resist jumping in. I had to learn more, the rank cigarette smell and coarse manners of these Chinese businesspeople notwithstanding. I figured there was one way I could begin to find out. I called my sister and asked her to pick me up. I needed to talk to her and my dad. I needed an inside perspective—the truth about the reality of modern China.

  CHAPTER 10

  The New Chinese Reality Check

  AS I WALKED OUT OF THE FOUR SEASONS, MY SISTER, JASMINE, pulled up in her brand new Mercedes—her second car. Jasmine, a marketing manager at the Shanghai office of a New Zealand dairy company, lives a typical Shanghai upper-middle-class lifestyle. She and her husband, a purchasing manager at an American multinational machinery company, take home healthy paychecks; they bought an apartment several years ago without taking out a mortgage.

  Like most of her friends, Jasmine loves to drive to work, even though it means an hour’s commute each way instead of the 20 minutes it would take by subway. Rather than fight through the crowds that swarm the trains and buses at rush hour, Jasmine prefers the luxury of sitting in the car, texting on her iPhone, and eating a tuna sandwich from Starbucks for breakfast. Because of the glut of cars that has recently appeared in China’s big cities, it’s often faster to walk than drive during rush hour. For locals, however, the novelty of such luxury more than offsets the inconvenience.

  Sliding into Jasmine’s front seat, I noticed a yellow tassel dangling from her rearview mirror with a Buddhist pendant promising lifelong protection. “When did you start to believe in Buddhism?” I asked.

  “After having consumed enough, one desires some spiritual fulfillment,” she said. “In China, there isn’t much to believe in.”

  Sitting under the dangling tassel in a new Mercedes, I couldn’t help but smirk at the hypocrisy. “Don’t Buddhists believe in minimalism?” I restrained my tone so as to not offend, but she didn’t seem to care.

  “We buy fish from the wet market and release them in the river every Saturday,” she said. “Buddhism has become really popular among the upper middle class.”

  The traffic in downtown Shanghai was total gridlock. We sat among shiny Buicks and BMWs at an intersection with Nanjing West Road, an ultracommercialized section of the city. Nanjing Road has long been a heavily populated, neon-lit shopping street, even when I was little. But only in the past few years have the world’s most high-end luxury retailers taken over the boulevard’s shops, turning this thoroughfare into an outlet for Shanghai’s new spending power and the city’s growing taste for ostentation.

  The glitzy distractions were entertaining: fancy Cartier window displays, flashing movie screens with dancing Chinese characters, fashionable Shanghainese women sporting Louis Vuitton bags of questionable authenticity. Raggedy-looking salespeople twirled light-up toys on the pavement or hawked cheap scarves and sunglasses out of suitcases. Massive neon signs competed for the attention of potential consumers, the pedestrians laden with shopping bags who hustled around the hawkers with the exuberance and panic of Black Friday shoppers.

  This was the China that grabbed the world’s headlines. Its GDP growth and new wealth formed a sharp contrast with the aging infrastructure and mounting debts in the developed markets of America and Europe, which were still struggling to heal deep wounds sustained in the financial crisis.

  The car continued haltingly past a patterned Miu Miu store and then a gigantic, 100-foot-tall Louis Vuitton poster of a suitcase behind which the company was constructing a new store. I turned to Jasmine, eager to get her take on the growing luxury market, a perpetual area of interest for many U.S. investors. “Is it true that the Chinese are obsessed with foreign brands? Is it because the Chinese are so concerned with face?” I asked, using the Chinese term for keeping up appearances.

  “Not entirely,” she said thoughtfully. “A big part of the brand obsession is because the new rich are eager to show off their success. But part of the reason is also because the Chinese equate foreign brands with quality and reliability. Either you pay a very high price for quality, or you get knock-offs that fall apart a few months after you buy them. There’s almost nothing in between.”

  The car came to a stop next to a digital advertisement showcasing a rare caterpillar fungus—a powerful traditional Chinese medicine. “Does that work?” I turned to my sister.

  “Who knows?” she said. “Even locals like me can’t tell the difference between fake and real products. So we just don’t buy medicines outside of the major pharmacies. Don’t drink Chinese milk or any dairy products, either. If you eat any fruit, make sure to first peel off the skin.”

  “Wow,” I said. “It was a lot safer when we were kids. Remember we used to eat pan-seared pork buns from the street cart?”

  “You can’t do that anymore. They use oil from the gutters to save money. Chinese vendors think they have to cut costs in every way possible, or else they’ll be out of business in no time.”

  It seemed counterintuitive. China had delivered impressive economic growth since I was a child. One would think that as a country gets richer, its people would no longer need to fight for their livelihoods. Should
n’t they therefore hold themselves up to higher moral standards, like the honor code we had at Middlebury?

  Jasmine stopped the car on a narrow street, breaking my train of thought. “Where are we?” I asked.

  She pointed to the street sign. “Tai Xing Road.”

  It was the street where we had grown up, a place I hadn’t visited since we moved in 1993. The neighborhood had been completely altered: 20-story apartment buildings had replaced almost all the low-rise, plain concrete houses with corrugated roofs. And yet familiar vestiges remained: the clotheslines strung across the street, the same notice board with public announcements tacked up. Our old building was almost exactly the same, except for a new coat of paint and a few air conditioners sticking out of the apartment windows—signs of status in the new Shanghai.

  “Are any of the old neighbors still there?” I asked Jasmine.

  “Most of them. Let’s go say hi to Grandma Yangyang,” she said, referring to our old neighbor whom we called grandma as a term of endearment. “Last time I stopped by she asked about you.”

  “I thought everyone got rich in China and moved to nicer homes,” I said, scanning the drab apartment blocks.

  “Not all of them. Only 1 percent, at most,” Jasmine explained as she skillfully maneuvered the car down a narrow lane. “But you Americans think the 1 percent is the whole of China,” she added, with a slight smirk.

  We got out of the car, and I followed Jasmine into our old apartment building, one of the only old-fashioned ones that remained in the neighborhood. We climbed the familiar stairs to a door on the third floor. The door to Grandma Yangyang’s apartment was open, but we knocked to let her know we were there.

  The inside of her apartment had been renovated, but it was still the same small one-bedroom apartment, about 300 square feet. The kitchen was so tiny that the half-size refrigerator stood in the living room, next to the TV stand. The decor was plain, just some faded curtains and an uncomfortable wooden sofa and chair in the traditional Chinese style. An assortment of plants that Grandma Yangyang had carefully grown from seeds was perched in the windowsill, brightening the room.

  Grandma Yangyang greeted us warmly from her bed. She was reduced to skin and bones, and her mind seemed to drift in and out of her surroundings. Beside her on the bedside table was an assortment of pill bottles.

  I sat by her bed for a while, listening to her stories. She informed me in a weak voice that her husband had died of cancer the previous year. She had been in perfect health until then, but just a few months after her husband’s death, she too had become bed-ridden. Her five daughters, all in their forties, took turns staying over, feeding her, bathing her, and giving her medicine—not a cheap or easy endeavor. Medicines had become very expensive in China, and they cost more than Grandma’s entire retirement income, so the daughters split the remaining cost.

  This was a story not likely to be heard in America, where Grandma would probably be sitting alone in a home. People in China who send their parents to a nursing home, whether five-star or not, are often condemned by their extended family and communities. Taking care of one’s parents is still viewed as an absolute duty in China, with some crimes of filial impiety punishable by law.

  Her home was a reality check in more ways than one. I realized that, like many Americans, I had been misled by the glitzy Park Hyatt on the Bund and the proliferation of luxury flagship stores along Nanjing Road. That was not the average Chinese life. My old neighbors, with their rundown apartments and frugal lifestyles, were the real Chinese middle class.

  The construction boom since 1980 had provided a portion of Chinese people with new apartments, washing machines, and refrigerators. But while their homes may have had new appliances and a coat of paint, most people were living in the same drafty buildings, with unpredictable plumbing and fuses that blew as soon you flipped on a hair dryer.

  Compared with the people who now occupied the highest strata of Chinese society, people like Grandma and her family did not feel much better off than before. Grandma’s family had some new possessions, but the major difference was that, unlike 30 years ago, they had far wealthier people around to compare themselves with. For the first time, they felt that they had been left behind.

  CHAPTER 11

  Walking with My Father

  Phuket Beach, Thailand, January 2011

  AFTER A MONTH IN CHINA, MY LUNGS ACHED AND MY SKIN was breaking out. The oppressive pollution was enough to make me crave the pristine air, water, and amenities of New York; yet something was blocking me from booking my return ticket. Since the first dinner in Shanghai, Dad hadn’t lectured me, even once. We were all being very cordial to one another, but I knew the trip would feel incomplete if I didn’t allow him to say his piece.

  In a masochistic impulse, I considered taking him back to New York with me, but just then an epic snowstorm buried the city. We needed a less harsh environment, without snow or pollution or traffic jams.

  “Make sure you take a ferry to Phi Phi Island,” my friend recommended when I asked her about Thailand, thinking a warm destination on a beach resort would be relaxing. “The water is calm and warm with beautiful coral. It’s perfect for snorkeling.”

  She didn’t need to say more. I booked the flights and hotel immediately. Dad loves swimming and so do I, although how I learned is an unpleasant memory.

  It was a vacation of early bedtimes. Dad paddled about in the water every day as I watched from the beach, my head swirling with thoughts about education companies in China and the noisy crowd of businesspeople at the Four Seasons. By the third day, the roiling had subsided to a controlled flow, and my thoughts started to organize themselves. On the fourth day, I woke up so early that it was still dark out. I could see from the glowing line under my door that the sky was turning a deeper shade of rose by the minute. That meant it would a good beach day, so I texted my father, not knowing if he was up.

  “Would you like to have a walk on the beach with me?” I asked.

  It was a postcard scene. The white sand stretched into green hillside, and the bay yawned into an endless horizon. As I looked out over the scene, it was hard to tell where the sand became the water and the water became the sky. Strolling down the beach, I kept scanning back and forth, from water to stars, hills to sun, taking it all in. It must have put Dad in a pensive mood, because he suddenly recited a traditional Chinese saying:

  “As long as there is life, there is hope, and a good man knows when to yield.” He wasn’t absorbed in the scenery as I was, but looking steadfastly at the sand beneath him, hands clasped behind his back.

  I smiled at the quote. It’s from a famous Chinese poem that we were required to memorize in high school.

  “Success is never a straight line,” Dad continued. “Deng Xiaoping was sent to the rice paddy, demobilized, dismissed by Mao, and then he came back to shape up the country and become one of the most respected leaders in Chinese history.”

  I looked back into the glowing horizon. His voice was not its usual didactic tone, not even matter-of-fact. It was soft. “How were your meetings in Shanghai?” he asked, changing the subject.

  “Interesting, to say the least,” I told him. “For some reason, I’m much more skeptical than my American colleagues who worship China for its hypergrowth. Maybe it’s easier for them to dismiss America and look to the East for inspiration when things are tough there.”

  “America will recover sooner than people think. Talented people around the world still rush to that country, Chinese included. More Chinese parents are sending their kids to the U.S. now that they can afford it, unlike 15 years ago when one had to rely on scholarships.”

  He began talking about the nouveaux riches in Shanghai who were rushing to buy homes in America. Government officials too were leaving China in droves. Investing upward of $100,000 in a U.S. company or homestead ensured a fast-lane ticket to U.S. residency, and those who had money needed a safe place such as the United States for their cash. Most people, includin
g those who worked for the Chinese government, knew that investments in China were not totally safe from the arbitrary whims of the state.

  At the age of 64, Dad was as aware and well informed as ever. A lack of formal college education has never held back his intellect. The gold-mining Wall Streeters would do well to sit down with him for tea.

  “That’s exactly what I’ve heard,” I broke in, excited to share these thoughts with someone at long last.

  The wind had not woken up; everything was still, as if out of respect for the sun’s triumphant return. For a moment, everything about this morning was utterly peaceful. Then Dad broke the brief silence:

  “Junh, I apologize for being harsh with you when you were little. I hope you know that when I was beating you I still loved you. I didn’t know a better way of making you strong. I didn’t know I had any choice. I didn’t know how to show you my love.”

  For a second, I thought about Andrew and my constant struggle to translate the language of love to him—one language I could never seem to master, just like my father.

  “Your sister told me that you cried in her car the other day. It pains me to see you suffering this much from the loss of your husband. I was talking to your mother the other night. I told her if I could do anything, anything, to take the pain away from you, I would.”

  His words started to choke in his throat. I hadn’t expected this. The zombie days, weeks, and months after Andrew left were still so fresh that I couldn’t forget, no matter how hard I tried. I was walking in paradise, but it didn’t assuage the dull throb of that wound.

  “You are resilient, just like America. You’ve got the best education and training that both the worlds have to offer. You will come out of this tough patch feeling wiser. Americans will come out of this recession stronger. I know that.”