Huawei’s side businesses keep it all in the family

The Huawei-owned 5-star Amber Prime hotel in Shenzhen. (Reuters)
Updated 12 October 2019

Huawei’s side businesses keep it all in the family

  • CEO and founder Ren Zhengfei has insisted that none of his relatives working in the company will succeed him as boss
  • Huawei employs more than 180,000 people worldwide

SHENZHEN, China: On a hot summer morning at Huawei’s new European-themed campus outside of Shenzhen, a man resembling a younger version of company founder Ren Zhengfei was dressing down two subordinates.

“Use your brain to think!” he scolded, apparently dissatisfied at how they were handling visitors at the lavish facility, which features replicas of European cities and monuments.

The man was Steven Ren Shulu, 63, the younger brother of Ren Zhengfei, who joined Huawei in 1992 and is supervisor of the board. The encounter was witnessed by chance by a Reuters reporter during a visit to the campus in August.

Huawei may be one of China’s most global companies — with more than 180,000 employees in more than 170 countries running a telecommunications and technology business that generates more than $100 billion annually — but it still has elements of a family firm, with members of Ren’s family playing key roles in a web of side businesses, many of which have nothing to do with telecoms.

Often those side businesses, which range from hotels to food, cater mainly to the Huawei employees and customers.

The role of Ren’s daughter, chief financial officer Sabrina Meng Wanzhou, is widely known, especially in the wake of her arrest in Canada last December on US charges relating to sanctions violations.

Far less visible are Ren’s brother, son and wife, but all play big roles within Huawei’s subsidiaries.

The 74-year-old Ren Zhengfei officially owns just 1.14 percent of privately held Huawei, but retains absolute authority, according to insiders at the firm, where he holds veto powers and where his speeches are regularly circulated to all staff for study.

With the title of chief logistics officer at Huawei, younger brother Steven Ren’s broad brief includes overseeing construction, catering and hospitality.

That includes the final phase of the lavish new Songshan Lake campus in Dongguan, with offices for 25,000 employees, as well as a new apartment block for employees near Huawei’s Shenzhen headquarters that is expected to be completed by 2023. Huawei declined to answer questions on the scope of its housing benefits for employees.

It is not uncommon for large Chinese state-owned or private corporations to build infrastructure including housing for employees and to provide hospitality for visiting potential customers, said Colin Hawes, an associate professor at the University of Technology Sydney, who specializes in Chinese corporate governance.

Ren Zhengfei’s son, 44-year-old Ren Ping, is now the boss of Shenzhen Smartcom Business, a Huawei subsidiary whose holdings include more than a dozen hotels and serviced apartments in China, Thailand, Saudi Arabia and South Africa. The hotels also mostly serve Huawei employees and clients, though some — such as the Amber House in Nanjing — can be booked by anyone online.

At the 5-star Amber Prime Hotel in Dongguan, next to Huawei’s new campus, the stylish rooms come with Huawei AI speakers and a special TV channel with clips of Huawei executives’ recent speeches.

Huawei declined to make Steven Ren, Ren Ping or another Smartcom executive available for interview.

Ren Ping is also president of Shanghai Mossel Trade, a subsidiary where Ren Zhengfei’s wife also works, according to Chinese company registration records. Named after Mossel Bay in South Africa, the company sells imported foods from around the world including Huawei-labelled premium beef and fine rice, according to its website.

Most of its patrons are internal, though Mossel’s e-commerce platform and bricks-and-mortar stores on Huawei campuses are open to outside customers too. Huawei did not respond to questions about why it set up Mossel in 2010, though a story in the Guardian newspaper in April quoted a spokesman saying it arose after the company took part-payment in the form of beef from an Argentinian customer seeking to avoid currency controls.

Some employees told Reuters they found the Mossel goods too pricey, though others said they liked its high-quality selection of wines and foods from around the world — and that the Huawei logo on the products make for good corporate gifts.

Huawei’s leisure travel subsidiary, HWTrip.com, another part of Ren Ping’s Smartcom business, appears to have fallen victim to the US government’s campaign against Huawei: A notice on its website says it closed in August as Huawei needed to “focus on its main channel during war times.”

Hawes said Huawei’s family connections were nothing out of the ordinary for private firms in China.

“It’s partly an issue of whom the CEO can trust, and also a Confucian-style sense of obligation to share one’s success with family members,” Hawes said.

Ren has stated on multiple occasions that none of his family members, including Sabrina Meng, would succeed him as Huawei CEO.

Interviews with nearly a dozen employees turned up no signs of resentment about the role of Ren’s family members.

“I don’t care what the boss’s family does as long as I get my pay and dividends,” said one employee-shareholder who declined to be named.


Saudi Arabia’s 2020 budget focuses on fiscal stability: Review

Updated 16 December 2019

Saudi Arabia’s 2020 budget focuses on fiscal stability: Review

  • It aims to transit the economy away from the country’s dependency on oil by developing the private sector

RIYADH: Saudi Arabia’s 2020 budget announced on Dec. 9, 2019 is progressive and focuses on balancing fiscal stability and economic growth despite oil market volatility this fiscal year, according to a review released by KPMG Al Fozan & Partners (KPMG Saudi Arabia), the leading provider of audit, tax and advisory services in the Kingdom.

The latest budget continues to support diversification efforts, transitioning the economy away from its dependency on the oil sector by developing the private sector and enhancing its contribution to achieving Vision 2030 goals and targets.

Budgeted revenue is expected to reach SR833 billion ($222 billion) in 2020, 62 percent of which is driven mainly by oil revenue, while budgeted expenditure is projected at SR1.02 trillion. Fiscal deficit stands at SR187 billion (6.4 percent of estimated 2020 gross domestic product) compared with SR131 billion (4.7 percent of GDP) in 2019.

Public debt is anticipated at SR754 billion, 26 percent of the estimated GDP in 2020, growing 11.2 percent compared to the previous year. 

Commenting on the budget, Dr. Abdullah Hamad Al-Fozan, chairman of KPMG Saudi Arabia, said: “The proposed budget focuses on maintaining fiscal stability and sustainability, improving the diversification of revenue sources, and taking measures to advance the economic and social development of the country.” 

He added: “Despite the oil market volatility, which had some impact on the expenditure, the government has made notable progress on the Vision Realization Programs. In addition, the allocation of over SR1 trillion budget expenditure for 2020 demonstrates the government’s commitment toward driving economic growth.” 

Meanwhile, the total real GDP growth is expected to reach 2.3 percent in 2020, as a result of relatively stable oil prices, implementation of Vision 2030 programs, and increased spending on infrastructure.  

Non-oil revenue is expected to touch a new high of SR320 billion in 2020, compared to SR315 billion expected in 2019, an increase of 1.6 percent, supported by the government’s continued efforts to develop non-oil sectors with higher economic and social return.

HIGHLIGHTS

• Budgeted revenue is expected to reach SR833 billion ($222 billion) in 2020, 62 percent of which is driven mainly by oil revenue, while budgeted expenditure is projected at SR1.02 trillion.

• Fiscal deficit stands at SR187 billion compared with SR131 billion in 2019.

• Public debt is anticipated at SR754 billion, 26 percent of the estimated GDP in 2020, growing 11.2 percent compared to the previous year.

Dr. Hussain Abusaaq, chief economist and head of research at KPMG Saudi Arabia, said: “The forecasted general budget figures of higher expenditures over expected revenues, illustrates the government’s efforts of diversifying the economy through continuous implementation of Vision 2030 programs. The key focus of the 2020 budget is to maintain the balance between growth and fiscal sustainability while increasing spending efficiency.”  

Oil is expected to remain a major contributor to the Kingdom’s revenue, though it is expected to decline by 14.8 percent to SR513 billion in 2020 from SR602 billion in 2019, primarily due to volatility in oil prices owing to trade war.

Likewise, non-oil revenue is expected to reach SR320 billion in 2020, an increase of 1.6 percent over an expected SR315 billion in the previous year. The surge in non-oil revenue reflects the government’s ongoing efforts to diversify its income streams and reduce dependency on oil. 

At SR200 billion in 2020, tax revenues are projected to be 1.2 percent lower than last year’s value of SR203 billion. Taxes on goods and services provides the largest share of non-oil revenue at 44.4 percent.

Ismail Daham Alani, public sector head at KPMG Saudi Arabia, commented: “A number of Vision Realization Programs under the Saudi Vision 2030 initiative have entered the execution phase and achieved a good level of progress in 2019. The positive impact of these programs will be reflected in the medium term.” 

In addition,  the Kingdom’s debt-to-GDP ratio is expected to equal 28 percent by 2021, compared to 25 percent predicted last year, due to volatility in the oil prices in 2019. Despite debt increasing in 2019, the Kingdom’s debt-to-GDP ratio remained significantly lower than many of its peers.

“The government’s efforts and focus on achieving sustainability and fiscal balance is expected to be beneficial for businesses and public policy planning. We expect Saudi Arabia to continue progressing toward achieving its Vision 2030 objectives since volatility in oil prices are likely to decrease this year,” Al-Fozan concluded.