Draft:Money Machine: A Trailblazing American Venture in China

Money Machine: A Trailblazing American Venture in China, authored by Weijian Shan, is an account of one of the most important deals in private equity history: the acquisition of a Chinese national bank by a foreign investor, marking a first in the history of such financial endeavors. The narrative delves into the complexities and innovative strategies employed to achieve this unprecedented acquisition, highlighting the navigational challenges within China's regulatory and financial system.

About the Author
Weijian Shan, born in 1954, is a prominent figure in economics, business, and literature, based in Hong Kong. Serving as the Executive Chairman of PAG, a major investment firm focusing on the Asia-Pacific, Shan also holds positions as a Trustee at The British Museum and as an independent board member at Alibaba Group.

He has penned several autobiographical and analytical works, including "Out of the Gobi: My Story of China and America" (2019), which details his experiences during China's Cultural Revolution. His other notable works are "Money Games: The Inside Story of How American Dealmakers Saved Korea’s Most Iconic Bank" (2021), and "Money Machine: A Trailblazing American Venture in China" (2023), both providing insights into significant financial dealings and ventures.

Synopsis
Money Machine: A Trailblazing American Venture in China (2023) is a story of Newbridge Capital acquiring control of Shenzhen Development Bank (SDB), a nationwide Chinese bank, transforming it into one of China's healthiest and most profitable banks.

Set amidst post-World Trade Organization (WTO) China in 2002, the book depicts a period where Chinese banks faced insolvency despite government-controlled deposit and lending rates, effectively granting them a "license to print money," hence the title of the book. SDB, a mid-sized nationwide bank, was amongst the weakest and relied on a continuous influx of deposit, akin to a Ponzi scheme, to stay afloat. When the Shenzhen municipal government decided to divest its controlling stake in SDB, Shan, Co-Managing Partner of Newbridge, seized the opportunity.

The book provides a rare and unfiltered look into the inner workings of private equity buyouts and the Chinese bureaucracy, illustrating that policymaking often involved considerations beyond economic rationale. Shan describes the challenge of dealing with enigmatic figures within the system and discerning between their stated objectives and hidden agendas. He notes that the Chinese decision-making process, which often sought unanimous support, effectively granted veto power to each agency involved and, when combined with the tendency to wait for other departments to act first, made approving complex transactions exceedingly time-consuming and difficult. The lack of communication and siloed operation between different echelons of government and regulatory agencies further complicated the process. Shan unveils the intricate details of backroom dealing and power struggles within the Shenzhen municipal government, particularly amongst key figures.

When delving into the specifics of the deal, Shan meticulously recounts its progression through an endless cascade of negotiation rounds, offers, and counteroffers. Amidst this, he confronted significant hurdles in raising bank capital and implementing share reform due to conflicting policies issued by different regulators. Under the leadership of Frank Newman, a veteran American banker and turnaround specialist, a division was created to segregate and manage non-performing loans. The new management team prioritized competence over nepotism when hiring and tied executive compensation to performance. To enhance portfolio quality, only credit officers, not the CEO or branch managers, were authorized to approve loans. To broaden their customer base, the team focused on mid-sized corporates overlooked by the larger State-owned banks.

In the end, after having transformed the bank into a healthy and much larger institution, Newbridge exited it for a staggering sum. Newbridge’s and Shan's legacy as a trailblazer in Sino-American finance is etched in history.

Reception
Shan has discussed his book at notable venues, including The Foreign Correspondents’ Club in Hong Kong and Asia Society Hong Kong.