One of China’s most prominent technology tycoons, Zhao Weiguo, has mysteriously vanished, having apparently fallen foul of Xi Jinping’s government, according to Chinese business site Caixin.
Zhao, 54, led the now cash-strapped chipmaking giant Tsinghua Unigroup for a decade, says the Financial Times. But he has been “out of contact” since mid-July after “being taken from his home by authorities”. According to local media, he is “under investigation by officials in Beijing”.
Zhao’s downfall marks the latest “in a series of epic corporate collapses” featuring aggressive Chinese dealmakers, who rode a decade-long, debt-fuelled international acquisition spree, and have now been jailed or detained – usually on corruption charges. The difference with Zhao was that, rather than chasing prestige investments such as property, his aims were in line with one of Beijing’s core industrial policy ambitions – semiconductor self-sufficiency.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
A drive to the cutting edge
The quest to free China from its dependence on foreign-made chips made Zhao one of the most powerful of the country’s new barons. “No one epitomises Beijing’s vision better,” remarked Forbes in 2015. “The goal,” he said, was to use “foreign know-how as a shortcut to building an advanced chip sector for China”. And he proved a master at delivering.
In just two years, Zhao’s state-backed company shot from an obscure role peddling scanners and herbal medicine to become the “champion of Beijing’s chip ambitions”. Zhao drove Unigroup “to the leading edge of China’s semiconductor industry”, says Nikkei Asia, starting off in style with the $1.7bn acquisition of Nasdaq-listed Spreadtrum. Several of the country’s most promising chipmakers evolved from “Tsinghua’s stable”, says the FT – notably Yangtze Memory Technologies, which has more than tripled its production to nearly 5% of the global market since its launch in 2016.
Zhao always dismissed assumptions that he acted on behalf of the Chinese government, describing Tsinghua Unigroup as “a market-oriented company” – a claim endorsed by big-name investors such as Intel, which bought a 20% stake in 2014. Nonetheless, Beijing poured huge funds into the group, which was also well-connected politically. Zhao was particularly close to the former Chinese president Hu Jintao and his son Hu Haifeng, who helped run Tsinghua Holdings.
The last hoorah
When Xi took power in 2013, the cash spigot continued until about 2017, when Unigroup secured $22bn from state investors to fund acquisitions. It was a last hoorah.
As the company’s debt mountain grew, so did its political alienation. Zhao’s standing in Beijing was “clouded by tensions” between Hu and Xi, says the Financial Times. Meanwhile, the Americans had wised up to the threat posed, prompting the failure of multi-billion tilts on tech groups Micron and Western Digital. Tsinghua’s finances began unravelling. In 2020, when it shocked investors by defaulting on a domestic bond, total liabilities were estimated at more than $31bn.
Zhao’s descent, following the forced “restructuring” of his group, was swift, says The Japan Times. But he certainly found his voice – slamming a low-ball $9bn rescue offer by a state-backed fund as “an attempt to commit a crime”. Zhao’s outcry “ignited a public spat” that state censors allowed to flourish. “There’s no reason why I can’t win this case,” he insisted. But in February, he was effectively ousted from the group, says Nikkei Asia. Now he has disappeared from view completely. Whatever his fate, Zhao Weiguo didn’t intend to go quietly.
Jane writes profiles for MoneyWeek and is city editor of The Week. A former British Society of Magazine Editors editor of the year, she cut her teeth in journalism editing The Daily Telegraph’s Letters page and writing gossip for the London Evening Standard – while contributing to a kaleidoscopic range of business magazines including Personnel Today, Edge, Microscope, Computing, PC Business World, and Business & Finance.
She has edited corporate publications for accountants BDO, business psychologists YSC Consulting, and the law firm Stephenson Harwood – also enjoying a stint as a researcher for the due diligence department of a global risk advisory firm.
Her sole book to date, Stay or Go? (2016), rehearsed the arguments on both sides of the EU referendum.
She lives in north London, has a degree in modern history from Trinity College, Oxford, and is currently learning to play the drums.
December 2023 NS&I Premium Bond winners - check now to see what you’ve won
If you hold money in NS&I Premium Bonds, you can check from today (2 December) to see if you have won in the December prize draw. Here’s how to check.
By Vaishali Varu Published
OpenAI – corporate drama unleashed
OpenAI, the firm behind ChatGPT, was in uproar as its boss was booted out, briefly snapped up by Microsoft and then brought back again.
By Dr Matthew Partridge Published
UK wages grow at a record pace
The latest UK wages data will add pressure on the BoE to push interest rates even higher.
By Nicole García Mérida Published
Trapped in a time of zombie government
It’s not just companies that are eking out an existence, says Max King. The state is in the twilight zone too.
By Max King Published
America is in deep denial over debt
The downgrade in America’s credit rating was much criticised by the US government, says Alex Rankine. But was it a long time coming?
By Alex Rankine Published
UK economy avoids stagnation with surprise growth
Gross domestic product increased by 0.2% in the second quarter and by 0.5% in June
By Pedro Gonçalves Published
Bank of England raises interest rates to 5.25%
The Bank has hiked rates from 5% to 5.25%, marking the 14th increase in a row. We explain what it means for savers and homeowners - and whether more rate rises are on the horizon
By Ruth Emery Published
UK wage growth hits a record high
Stubborn inflation fuels wage growth, hitting a 20-year record high. But unemployment jumps
By Vaishali Varu Published
UK inflation remains at 8.7% ‒ what it means for your money
Inflation was unmoved at 8.7% in the 12 months to May. What does this ‘sticky’ rate of inflation mean for your money?
By John Fitzsimons Published
VICE bankruptcy: how did it happen?
Was the VICE bankruptcy inevitable? We look into how the once multibillion-dollar came crashing down.
By Jane Lewis Published