Mr. China (2 page)

I was shown into an office behind a frosted glass wall. There were matching leather sofas, a full-length map of China on the wall and a spectacular view of the harbour. Behind the vast black
polished desk there were shelves lined with ‘tombstones’, those little perspex blocks that investment bankers keep as trophies for their deals, with miniature copies of the public
announcement of the latest buyout or merger inside. A framed copy of the front page of the
New York Times
hung on the wall. It reported comments about the Black Monday crash from prominent
players on Wall Street. There were two photographs on the front page: one was of Rockefeller, the other was of Pat.

‘How y’doing?’

An enormous figure strode into the room, squeezed my hand and gestured towards the low table near the windows. Tanned and relaxed, he looked like he was in his mid-forties. Difficult to tell: he
was fit, I thought, that was for sure, powerfully built, a real bruiser in fact; the only clue to his age came from the slightest frost at the temples. After the small talk and the exchange of name
cards, he leaned back in the chair, threw his arm over the back, and, with one foot on the edge of the glass coffee table, started out on his story.

‘Let me give you a bit of background and go through what I’m doing out here,’ he said.

The story that unfolded over the next hour instantly seized my attention. The son of a steelworker from Pittsburgh, Pat had been on Wall Street for twenty years. His athletic appearance must
have come from his passion for American football in earlier years and his conversation was still laced with references to the sport that I couldn’t always follow. He told me that he had
majored in American history at Yale and, after graduating in the early 1970s, he joined one of the top investment houses on Wall Street. ‘All the smart guys go into investment banking,’
he said, ‘that’s where all the money is.’ After a few years, he went to study for his MBA at Harvard Business School and graduated with high distinction.

When he went back to Wall Street, he joined one of the mid-tier investment banks that looked as if it was on the way up. He said that joining a mid-tier bank had helped him learn the ropes and
stand on his own two feet. ‘At the top-tier banks, you’d just be part of a machine and rely on the brand-name rather than your wits to win the deal.’ It seemed as though it had
been a smart move; the more conservative establishment banks might have been tough going for someone with his background. He worked on M&A at the bank.

‘Mergers and acquisitions,’ he said, ‘taking smart ideas to the CEO, persuading him to buy up another business and then raising the capital to do it.’

He was good at it and ended up running the whole investment banking division. In his first year as head of investment banking, revenues doubled and, by the end of the great bull run of the
1980s, Pat had a seat on the Board and had collected his millions on the way up. ‘Yeah,’ he said with a huge laugh, ‘I had the Jag, an apartment on Park and houses up-state, just
like all the other buffoons on Wall Street.’

By that time, the bank was poised for further growth but didn’t have the money to compete with the real Wall Street heavy hitters: it needed a big capital infusion to take it to the next
level. Pat had led the protracted and complex negotiations with a big Japanese investment house to recapitalize the business. He eventually signed the deal that brought nearly three hundred million
into the bank to fund the next level of growth. He was a hero. But by then he’d climbed to the top of the ladder and he was looking for something new.

‘You know, Wall Street goes in phases,’ he continued. ‘It’s a question of getting there first and being ahead of the curve; creating the leader in whatever’s gonna
be the next big story. Just like Milken did with junk bonds.’

‘Junk bonds? How?’ I asked.

‘Well, basically he realized before anyone else did that if you took low-quality paper – you know, debt securities of mid-sized companies and so on – and you securitized it at
a fat discount, you could end up creating a whole new market.’

‘Right,’ I said, smiling but not having a clue what he was talking about.

‘The same happened in the LBO business. You see, KKR were first movers for LBOs and once they got a hold on the market, no one else really got a look in.’

‘KKR?’

‘Yeah.’ A quick glance my way. ‘Dominated the LBO market in the mid-eighties.’ He looked curiously at me again. ‘LBO, yeah?’

LBO. LBO. ‘Leveraged buyout,’ I said triumphantly.

‘Right!’ A second sixty-decibel laugh exploded in my ear. They were infectious, those laughs, I thought. This could turn out to be fun.

He told me that while he was at the investment bank he had raised a lot of money for one of America’s big media moguls. John Kleaver had come to him when he needed money to build up his
company, MediaStationOne, by buying up radio stations all over the country. ‘The scheme was so successful,’ said Pat, ‘that a few years later, when Kleaver sold out, he was worth
about three billion.’

‘Three billion?’

‘Yeah, so I set up an LBO firm with Kleaver. He provided the capital but I ran it. Still, we were a bit late in the cycle,’ he continued. ‘The LBO business was getting
competitive. We did a couple of deals but it didn’t look like it’d work out long term so I started figurin’ out where the next big movement of capital would be. The smart people
figure out where the money flow will be and get there first. It’s a question of riding the next wave and that’s why I’m in Asia.’

I pieced together the next bit of the story from an article I found in the
Asian Wall Street Journal
a few weeks later. It seemed that Pat had teamed up with an ex-colleague from the bank
who ran the risk arbitrage department. Bill was one of Wall Street’s best arbitrageurs or take-over stock traders. The rumour was that he quit the bank after a row when they only paid him an
annual bonus of twelve million dollars. Bill was convinced that the Asian economies were on the way up and decided that Hong Kong would be one of the best places to make money over the next decade.
He convinced Pat to join him and the two of them had made several trips out to Asia to ‘kick the tyres’. They had toured Japan, Korea, Indonesia and the Malaysian peninsula. It seemed
as if Asia was on the way up and that it would need huge amounts of capital to build the roads and the power stations and the car plants to modernize the economy and develop new markets. Billions
of dollars, maybe; and the only place that could provide that kind of money was Wall Street.

They came out on three trips and met with bankers and big business leaders all over the region. Pat said that he was amazed how receptive people had been. ‘It was just like we’d walk
in off the street and people would see us. No one would do that back home unless they were pretty desperate for capital.’

All this had convinced him of two things. First, that there was an enormous need for money but no one was really in the market for providing it; second, that the real action was going to take
place in China.

Everywhere Pat went, people were talking about China; whether they were enthusing about the opportunities for new markets or were nervously looking over their shoulder and fretting about the new
entrepreneurs with their factories and cheap labour up the coast, they were talking about China. So Pat had taken a few trips up to Shanghai and Guangzhou – and he had liked what he saw.

‘It’s amazing what’s going on up there – it’s really buzzing. The timing’s just right because they’ve started off but there’s no way for them to
get capital up there. And it’s not like India. India is dominated by a few powerful families, it’s a real clique and they’ve already got money. Just like Japan and Korea. Why are
any of these guys ever gonna give you a place at the poker table unless it’s just to take your money? China’s different. I reckon there’s a way in for an outsider. The economy
grew up on the lines of a planned economy so government officials control it rather than big families like in India. I just figure that if these officials have a chance to get capital to grow their
businesses, they’re gonna grab the opportunity.’

I agreed.

‘So, anyway,’ he continued, ‘what’s your story?’

Five years earlier, I’d arrived as a blank sheet of paper.

As I flew to Hong Kong from London for the first time, I had no idea where it was. I didn’t care. Flying in from on high in the late afternoon, I gazed down on a scattering of islands that
looked like pebbles thrown carelessly into the South China Sea. I could pick out a rocky peak half hidden by heat haze and surrounded by a belt of glass spikes. Ten minutes later, after a momentary
shudder through the dense patches of cloud lower down, the plane took the last-minute hairpin to the right. As we bounced to a halt on the tarmac, the smell was in the cabin before the doors
opened. Damp heat.

I still remember vividly the taxi ride from the airport to the seedy hotel in Wanchai. Night had fallen and neon characters of every size and description leered at me through the taxi window. It
was a new world. The streets were teeming. Nobody slept.

Over the coming weeks, new sensations seeped into me. The smells, the dress, the food, the sounds, the written word. Wherever I looked, the Chinese were bargaining, unloading from boats,
hammering in tiny factories. I couldn’t believe that such a concentration of human life could exist in a state of perpetual motion. The pace of life was so relentless that I became swept up
by its momentum. I soon felt like a part of some vast machine.

As the days passed, I quickly grew to like the place and started to take in more of the surroundings. I often went up to the little path near the summit of Hong Kong Island that winds around the
Peak from the tram station. After about half a mile in the shade of the India-rubber trees with their roots trailing out of the branches down to the ground, round a bend the leaves suddenly clear
and the path opens out on to the sky from the cliff face. On first sight, the view over the harbour to the mountains on the other side quite catches your breath, it is so dramatic: a vast modern
city with glass towers and spikes set in a huge natural amphitheatre with the ocean as its floor. I stared out over the harbour, breathing in the atmosphere as the city churned below, counting the
scores of ocean ships in the port and the planes queuing up to land at Kai Tak from the west. I could see a tiny trail of smoke from the green and white funnels of the Star Ferry as it inched its
way across the harbour. A distant roar rose up to the skies from far below: the sound of a thousand engines, the clatter of trams, the hammering of piledrivers, the occasional shout from a worker
perched high on the bamboo scaffolding around the next half-built glass tower.

From any direction, the geography of Hong Kong draws the eye towards the mainland. The island seems to wrap itself around the tip of the peninsula opposite like a giant horseshoe, so that from
any point the view focuses on the row of nine hills behind the mist on the other side. Whenever I went over to Tsim Sha Tsui, I took the Star Ferry and sat on the polished wooden seats with the
spray on my face, taking in the smell of oil and the sound of the ropes creaking as they strained against the vast iron stubs anchoring the ferry to the quayside. As I sat there on the ferry,
gazing ahead through the heat haze, I found myself wondering about China, wondering what it was like behind those nine hills beyond Kowloon on the other side.

Hong Kong had never really seemed English to me. Sure, there were the bars in Lan Kwai Fong where, if it weren’t for the heat, I might pretend that I was in Fulham. There might be the odd
judge hurrying along in his wig and red coat-tails near the High Court and plenty of pinstriped bankers in Central, but that was only on the surface. Scratch below that and everything that mattered
was Chinese.

The papers were full of stories about some huge power struggle up in Beijing but I couldn’t figure out exactly what had been going on. The names were all so similar (and back to front)
that I could never quite see who had done what and to whom. There were photographs of a dour-looking man with thick glasses, an unconvincing smile and collars that were slightly too big who seemed
to be the Prime Minister. But the country was ruled by an eighty-year-old recluse who did little but play card games; that and control the Army. I found an old guidebook in a second-hand bookshop
in Hollywood Road and, as I thumbed through the disintegrating pages, I was amazed at the size of China: vast areas of uninhabited frozen wastelands in the west, huge deserts further north and then
an incredible crush along the coast. The faded sepia pictures of pavilions and sweeping tiled roofs in the Forbidden City caught my imagination and I wanted to see them for myself. I knew that
parts of China had been open to foreigners from the early 1980s and when I met the odd person who had been there I questioned them eagerly. Some seemed lost for words, almost annoyed by the place:
‘Don’t go there, it’s absolute chaos.’ Others seemed puzzled in an amused sort of way: ‘Of course, it was all very interesting, but the people were a bit odd. They
always pretended that they didn’t have train tickets when you knew that they did, or that the restaurant was full when you could see that it was empty.’ But for some it was in their
blood. They seemed possessed. And when they couldn’t explain exactly why, it fed my curiosity.