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Zhong Shanshan has turned water into gold.
Zhong, chairman of Chinese bottled water empire Nongfu Springs, has become the sixth richest person on the planet as shares in his company has soared nearly 20% since the beginning of 2021. Zhong’s net worth currently stands at $91.7 billion, just behind Facebook founder Mark Zuckerberg ($103 billion) and higher than American investor Warren Buffett ($86.2 billion), Google founder Larry Page ($82 billion) and Indian tycoon Mukesh Ambani ($75.9 billion).
Zhong’s fortune is now the largest in China. His wealth has surpassed that of Chinese tech tycoons like Pinduoduo founder Colin Huang ($66 billion), Tencent founder Pony Ma ($58.2 billion), and Alibaba founder Jack Ma ($51.5 billion).
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Yet among these billionaires, Zhong is an oddity in that he makes the majority of his money not from technological break-throughs or well-timed investments, but through a relatively simple business: bottling water and selling it en masse.
Who is Zhong Shanshan?
Zhong was born in 1954 in China’s eastern city of Hangzhou. Growing up amid China’s tumultuous Cultural Revolution, Zhong left school in fifth grade and spent roughly a decade doing odd jobs in carpentry and construction, according to Chinese media.
When China’s Cultural Revolution ended, Zhong got a degree in journalism from a local university and worked as a reporter in the early 1980s. After a five-year stint as a journalist, Zhong attempted to go into business for himself, selling a variety of goods, from mushrooms to nutritional supplements derived from turtles.
In 1996, Zhong turned his entrepreneurial pursuits to water. (He’d previously worked as a salesman for another bottled water company.) He launched Nongfu Springs in his hometown of Hangzhou by selling water bottled from a nearby reservoir to local vendors.
Zhong’s business capitalized on the fact that China’s tap water was—and still remains—mostly undrinkable. In 2016, China’s own Ministry of Water Resources said that more than 80% of the country’s groundwater was unsafe for consumption.
At the same time, China’s bottled water market has skyrocketed alongside the country’s economic boom. The International Bottled Water Association estimates that in 2013 China consumed 39.5 billion liters of bottled water, compared to 2.8 billion liters in 1997.
Zhong’s success can also be attributed to his ability to convince Chinese consumers that Nongfu’s water had a higher quality than its competitors. He boasted that Nongfu only sold natural water and his company’s slogan “Nongfu tastes a bit sweet” became known in households across China.
“Chinese consumers believed sweet water is better water,” Chinese state media wrote in 2016.
But Nongfu’s claims of having better water came under scrutiny in 2013, when China’s top regulator accused the company of having safety standards for its bottled water that were less stringent than those of the nation’s tap water. In response, Zhong accused his competitors of cooking up the scandal.
Later that year, the government deemed Nongfu’s water safe after conducting tests at its factories, and Nongfu’s sales continued to climb. In 2018, Nongfu was China’s top bottled water seller, controlling a 26% share of the country’s bottled water market. Zhong added other products, like energy drinks and vitamin waters, to the company’s portfolio, and in September 2020 brought the bottled water behemoth to the public market.
Nongfu’s success this year can be attributed, in part, to investors seeing it as a safe bet amid a turbulent economic climate. “Its businesses are immune to any global economic shock and U.S.-China tensions,” Vincent Wen, investment manager at KCG Securities Asia, told the Wall Street Journal in September.
Zhong’s other investments also have paid off.
In April 2020, Zhong took public Beijing Wantai Biological, a vaccine maker he founded in 1993 as part of a nutritional supplements business. Beijing Wantai now has a market capitalization of roughly $17 billion on the Shanghai stock exchange.
Zhong has long been nicknamed a “lone wolf” by Chinese media for his reluctance to speak to press or socialize in elite circles. So far, his newfound status as one of the ten richest people on Earth hasn’t changed his low-profile persona.
“I don’t like making friends with business-people,” Zhong told China Daily in 2016. “In the business world, I want it to be just business.”
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In support of political contributions
Most Americans don’t want CEOs involved in politics. A poll conducted last week by Golin and Ipsos found only 41% favored CEOs weighing in on disputed elections, and only 43% wanted them speaking out on impeachment. On the other hand, 74% say CEOs should call for unity and a peaceful transfer of power, and 57% believe it was appropriate for CEOs to speak out after the January 6 insurgency at the Capitol. That pretty well tracks with the way most CEOs and business groups have behaved since election day. They kept their powder dry until all legitimate avenues for disputing the election were exhausted, then came out strongly endorsing the election results and attacking efforts to undermine them. Relatively few have backed impeachment. (You can see the poll results here.)
But how about political contributions? That’s the question raised last week, as a host of companies—Marriott, AT&T, American Express, Best Buy, Cisco, Comcast, Dow and Amazon among them—suspended campaign contributions to members of Congress who challenged the election results. Another large group—Microsoft, Boeing, Blackrock, Coca-Cola, JP Morgan, Ford, GM, UPS, Goldman Sachs and Citigroup—temporarily halted all political contributions to members of both parties. (Quartz has a more comprehensive list of what companies did here.)
Some business leaders are even contemplating permanently shutting their political action committees and exiting the money game altogether. But absent a broader overhaul of campaign finance—which is unlikely anytime soon—I think that’s a mistake. Most big companies remain balanced players in the money game, dividing their dollars roughly equally between members of each party. Walmart, for instance, has kept its contributions at exactly 50-50. Their strategies have less to do with trying to influence outcomes, and more to do with assuring they have access to whoever wins.
The more important question for 2021 is how big business uses that access. There are a host of issues where business has the potential to help broker positive outcomes for the U.S. economy and society: economic stimulus, infrastructure, worker training, climate change. On each of these, business leaders occupy the center, and can help bring the parties together to solve urgent problems.
But on tax and regulatory issues, in particular, corporations will be playing defense. And they’ll be tempted to use what influence they can muster to seek tax breaks and regulatory exemptions that aren’t in the broader public interest. That’s where the commitment to stakeholder capitalism will be tested. The nation desperately needs business involved in government. But business, now more than ever, needs to use its influence to focus on solving long-term challenges.
Why Big Tech regulation is good for private equity, according to one CEO
Increased scrutiny of Big Tech’s power may have some shareholders sweating it. But not so for private investors.
With a new Biden administration and recent threats to crack down on some of the biggest tech behemoths (from Facebook to Amazon), there seems to be support for more regulation. And according to alternative investment manager Hamilton Lane’s CEO, Mario Giannini, that might be good news for the private equity industry.
“Reducing the dominance of large technology companies…is probably not great for some portions of the industry, but good for private equity,” Giannini tells Fortune. In Congress, which now maintains a slim Democratic majority, “I think everyone is interested in saying, ‘Amazon is too powerful, Google [is too powerful],’ pick your name,” he says, arguing there’s bipartisan support for more regulation.
As to what lawmakers do about it, “I’m not sure,” says Giannini, but “to the extent that they do anything to diminish the power of those companies, that’s good for private equity because it creates opportunity for smaller companies.”
To be sure, government scrutiny of large tech companies is a tale as old as time, but lately regulators appear to be turning up the heat on the biggest names: Facebook was recently hit with an antitrust lawsuit alleging it has squashed competition, while players like Amazon and Apple, big winners of the pandemic era, have found themselves the subject of government ire over antitrust concerns. Google, meanwhile, is in hot water once more for its search and search advertising practices. And companies like Facebook and Amazon could be facing their own headwinds in Europe, too.
According to Giannini, whose firm has $73 billion in assets under management and advises on $474 billion in additional assets, the dominance of those FAANG names has been top of mind for private equity firms when scouting for deals.
“Right now, when any private equity [firm] does a deal, …if it’s not their first question, it’s one of their top three questions: ‘Is Amazon going to enter this space, yes or no?’ And that has a huge impact—’Is Google in this space?’” he says.
It isn’t just an issue in tech. Companies like Amazon are moving into health care, for instance, by launching online pharmacies. “If all of the sudden the government [would] say, ‘I’m not going to allow Amazon to encroach in certain areas,’ then I think for private equity, oddly enough, that becomes a net positive because you do then have an opportunity with other companies,” says Giannini.
Though some on the Street argue the threat of sweeping legislative changes to hamper Big Tech’s reach is still minor, the new (albeit slim) Democratic majority in Congress poses “a clear negative for Big Tech as…we would expect much more scrutiny and sharper teeth around FAANG names,” Wedbush analyst Dan Ives wrote in a recent note.
For private investors, says Giannini, that just “creates different opportunity sets.”
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