My thoughts on Weiqiao

The recent debacle on Weiqiao’s power generation business has attracted quite some media attention on this once low profile company. The state-owned electricity monopoly says that Weiqiao’s power grids are illegal, unsafe and not environmental. I believe all these reasons are just crafted by the monopoly to stop more efficient competitors. But why did the government create such a controversy in 2012 on this decade old electricity plant? Is it politically motivated? Is it because Weiqiao refused to sign paper works to legally transfer power to other users due to hefty costs? Is it because they operate too efficiently? Is it because core businesses operations are down significantly so they have to sell more power to make ends meet therefore taking a larger market share? Is it because state-owned power plants are suffering severely in a slowing down economy, and always being less competitive, they just have to create inefficient market barriers?

Regardless of what the reasons are, looking at the history of Weiqiao Group, this is not new to them at all. Weiqiao Textile was built on market fundamentalism. It used to be one of those lesser textile factories because it was not owned by the state. The state created these incomprehensibly unproductive tests that cotton textile factories must meet. Weiqiao could not pass any of them because they did not need to. They could produce better quality at lower costs. The founder believes that market forces are far more powerful than sucking up to irregular regulations formed by anybody, in this case the state. Now Weiqiao is the largest cotton textile company in China and all those state-owned enterprises are more than dead long ago.

This is what history tells me of how the group has emerged to this position today. I think the electricity debacle is some sort of replay in history. This might be a new challenge for the founder’s daughter, being the CEO of 2698.HK right now, but the founder is still on the board in his 60s. I just hope that Weiqiao will come out stronger than ever and be more known in the financial world. I don’t think most people in the securities business know about 2698.HK’s power generation business at all. I think a lot of finance people think this is another state owned enterprise due to its mammoth size. How long will it take to defeat the monopoly? Who knows, but this, I believe, is one high quality company with very astute management.

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