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Fallen founder still pulls strings

By Meng Jing (China Daily) Updated: 2015-08-25 08:07

Fallen founder still pulls strings

A GOME outlet in Yichang, Hubei province. [Liu Junfeng / For China Daily]

Huang Guangyu has increased his stake in the GOME electrical appliance chain, despite serving a 14-year jail sentence

Disgraced business tycoon Huang Guangyu might be in prison, but it has not stopped him from tightening his grip on China's leading electrical appliance chain.

The founder of GOME Electrical Appliances Holding Ltd has been behind bars since November 2008 after being handed a 14-year jail sentence in 2010 for bribery, illegal foreign exchange activities and insider trading.

Also known as Wong Kwongyu, his Cantonese name, the 46-year-old managed to increase his stake in the Hong Kong-listed GOME, despite sitting in a Beijing prison cell.

"The group is clearly under the control of Huang," Wang Xiaoxing, an analyst with Beijing-based Internet consultancy Analysys International, said. "He may not sit in head office but those who do still receive orders from him."

Before his fall from grace, Huang used to stride the business world like a colossus and topped the Huran Report rich list for three years with a personal fortune of $6.3 billion in 2007.

After being forced to resign as chairman in 2009, his reign at GOME looked to be over. But six years later, Huang still appears to be the power behind the throne after increasing his stake in the company from 32.43 percent to 55.34 percent.

In a complicated deal, GOME Electrical Appliances Holding Ltd last month bought 578 stores that were not included in the Hong Kong listing from another Huang company, GOME Management Ltd, for HK$11.3 billion ($1.46 billion). With an estimated 15 percent share in the home appliance market, GOME dominates the sector with about 1,700 stores in China.

"The move will further strengthen GOME's total retail value chain and fuel its expansion in second-and third-tier markets, and e-commerce development in particular," Wang Junzhou, chief executive officer of the group, said in a prepared statement.

But speculation has been rife in the Chinese media that the deal will pave the way for Huang's early release and a return to the GOME boardroom. When approached by China Daily, the company declined to comment on the issue.

"Despite being convicted of insider trading, he will still be able to run the company when he is released," Hong Daode, a professor with the China University of Political Science and Law, said.

Whatever happens, Huang will continue to be a driving force within the group. Born into a poor farming family in southern China's Guangdong province, he dropped out of school when he was 16 years old and started selling cheap electrical goods in Beijing with his brother Huang Junqin.

From there, he built a business empire. And even though he is now behind bars, Huang still controls the firm through his wife Du Juan, who holds senior positions within the parent company GOME Holdings Group, and his sister Huang Xiuhong, a director at GOME Electrical Appliances.

Earlier this month, Li Juntao was made head of the company's online operation in a move to fend off rival e-commerce competitors. He was brought into the group by Huang Guangyu and has held various senior roles.

"The appointment of Li, who has been with Huang (Guangyu) since joining GOME in 1988, is a sign that the integration of the company's online and offline business is moving into a high gear," All View Cloud, or AVC, a Beijing-based consultancy specializing in the home appliance market in China, said.

Since Huang was officially running GOME, online shopping companies, such as JD.com and Alibaba Group Holding Ltd's Tmall Marketplace, have sprouted up to challenge traditional chain stores.

Data from CCID Consulting Co Ltd, the county's largest IT research service company, showed that overall online sales of home appliances, not including mobile phones, jumped by 56 percent to 61.1 billion yuan ($9.56 billion) in China during the first half of the year, compared to the same period in 2014.

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