Based in Hong Kong, Citic Pacific has been involved in a broad range of businesses, from steel manufacturing and iron ore mining to property development.
The firm dates to 1987, when Yung – who was born Yung Chi Kin – became general manager and vice chairman of Citic. Under his leadership, Citic (Hong Kong) acquired 49 percent of a little-known, listed company in 1990 by injecting assets, including a 38.3 percent equity stake in the airline Dragonair and two industrial plazas. Yung became the chairman of what became a new company and renamed it Citic Pacific.
Yung is the only son of legendary Chinese capitalist Yiren Rong (in Mandarin spelling), who ran fabric and flour factories in Shanghai before the Communists took power in 1949. Entering politics, the elder Yung was named vice mayor of Shanghai in 1957.
The father earned the nickname “red capitalist” after taking the helm of Citic Group, which was established as China International Trust Investment Co. in 1978 as part of former Prime Minister Deng Xiaoping’s economic reforms. He ran the business on the mainland until 1993, when he was named vice president of China in charge of economic development.
Against this backdrop, the younger Yung – now 66 -- and Citic Pacific have cultivated a deep relationship with the Communist Party leadership.
Before Britain handed over Hong Kong to China, Citic Group used Citic Pacific as platforms for financing as well as strategic acquisitions. The firm focused on mainland businesses but also facilitated the merger of Hong Kong’s Dragonair and Cathay Pacific airlines.
Among other deals, Citic Group’s subsidiary Citic Hong Kong handed Citic Pacific a 12.5 percent equity stake in Cathay Pacific and a 20 percent stake in Macaw Communications. The Yung family acquired 36 percent of the Macau-based communications company CTM as well as a 36 percent stake in Dah Chong Hong Holding Ltd. via Citic Pacific before turning it into a wholly owned subsidiary.
In the mid-1990s, Yung rose to become one of the richest men in China. He now owns 29 percent of Citic Group and 19 percent of Citic Pacific. The rest of Citic Pacific is controlled by institutional and retail investors.
Meanwhile, Citic Pacific increased its steel and iron ore industry investments. After acquiring equities in several mainland steelmakers, Citic Pacific obtained the rights to mine billions of tons of iron ore in Western Australia, with potential annual production of 23 million tons of refined ore – enough to supply the firm’s specialty steel companies in China through 2010.
The firm’s mid-2008 financial statement said specialty steel, logistics and airlines had contributed 59 percent, 15 percent, and 11 percent of the company’s revenues, respectively.
Citic Pacific has been getting involved in steel, infrastructure, real estate and other businesses for 20 years. Its search for expansion has been motivated by soaring liquidity from profitable mainland businesses bumping up against limited room for growth in the Hong Kong real estate and airline sectors.
Nevertheless, a Hong Kong markets expert who asked to remain anonymous said the firm remains a mere investment company lacking management skills in these industries.