‘Wahaha Princess’ reveals China’s uncommon prosperity

Shuli Ren, Bloomberg

In a country where the government is short on fiscal income and its people are worried about layoffs and salary cuts, $2 billion raises a lot of eyebrows.

Kelly Zong, chief executive at one of China’s largest beverage empires, is embroiled in an inheritance dispute. Three plaintiffs, identified by their lawyer as her “half brothers and sister,” are seeking an injunction in Hong Kong to prevent her from dealing with assets worth about that amount. The feud surfaced just a year after the heiress won a battle for control of Hangzhou Wahaha Group following her father’s death last February. As Bloomberg News reported, until now, Kelly Zong was the only child the public had known about. Her lawyer says she doesn’t accept the evidence and that her father Zong Qinghou’s directives were not given to her.

According to the plaintiffs, Zong Qinghou, founder of the privately-held beverage empire, had asked his subordinates to help set up trusts for them at HSBC Holdings Plc in Hong Kong, promising $700 million each. The alleged half-siblings are also pursuing legal action in a Hangzhou court to secure their rights to these trusts.

The lawsuit is changing how the Chinese view the mega rich. Kelly has been nicknamed the “Princess of Wahaha.” The patriarch was known for leading a simple and frugal lifestyle, wearing his signature black cotton shoes and working long hours.

It turns out succession and inheritance at Wahaha are anything but simple. There are two main debates over the Zong family wealth.

First, how ironclad are family trusts? Often, these entities are set up by a parent to give to a child who may not be in an appropriate position to receive an inheritance. In this case, the logic may apply if the alleged half-siblings have not established their legal relationships with their father. A trust would then allow the patriarch to peel off some of his assets before leaving the rest to Kelly.

The plaintiffs are certainly worried the money the father had promised may no longer be there. About $1.1 million had been transferred out of the HSBC account as of last May, one of the legal filings showed. The account had about $1.8 billion as of early 2024. They are suing Kelly Zong to prevent her from disposing of, dealing with or diminishing the value of the assets in the HSBC account.

This brings us to the second and more important question: Is the $2 billion Zong Qinghou allegedly promised his to give? Founded in 1987, Wahaha is a product of China’s so-called mixed-ownership reform. An investment arm of the Hangzhou government owns 46%, while the Zong family has a 29% stake, with Wahaha employees holding the remaining 25%.

Until recently, this uncommon corporate structure worked. The patriarch was the undisputed person in charge, while the local government happily acted as a passive shareholder despite being the biggest. The status quo may have to change, however, now that the Zong family drama is dominating the national spotlight.

For its part, the Hangzhou government might be reluctant to weigh in.

Ordinary Chinese have known for years that their country has produced a lot of rich people, but few have a sense of just how rich because a lot of family-run businesses are not publicly listed and therefore not subject to financial disclosures. By failing to settle a personal dispute, the Princess of Wahaha is laying bare her family’s wealth to public scrutiny. People are now asking who owns what, and whether those billions belong to the Zongs.

[Abridged]

Courtesy Bloomberg/Shuli Ren