The Wanxiang Group donates all its assets to set up a charity foundation

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It has been announced that the Wanxiang Group, a Chinese automotive components-manufacturing company headquartered in Hangzhou, has set up a charity foundation.

Over the years, the Wanxiang Group has grown from being a pure auto parts manufacturer to a modern multinational enterprise group with revenues exceeding RMB 100 billion and profits of over RMB 10 billion. Its business covers new energy vehicles and auto parts, modern agriculture and financial technology. The total market value of the company is close to 200 billion yuan. Lu Guanqiu, the founder of the enterprise, came from a rural background and is a representative of the first generation of township enterprises in China. In 1969, the 24-year-old Lu Guanqiu led six farmers to raise 4,000 yuan. He started from an 84 square-meter “blacksmith shop” and then founded the “Ningwei Commune Agricultural Machinery Repair Factory” dealing with automobiles, agriculture, energy and real estate.

On October 25, 2017, the 72-year-old Lu Guanqiu passed away. In November of the same year, his only son, 46-year-old Lu Weiding, took over as the party secretary and chairman of Wanxiang Group. On the 8th of July 2019, during the celebrations for the 50th anniversary of the company’s founding, Lu Weiding announced a major event: the Wanxiang’s Board of Directors has decided, in accordance with the “Trust Law” and the “Charity Law”, that all the assets of the Wanxiang Group Company up to 2018 should be donated to establish the Lu Guanqiu Wanxiang Charity Fund. All the proceeds of the charity fund will be used to develop new technologies, high-end talent education, scientific research, and support for the establishment of institutions of applied research in science and technology. This may be the first case in China of such a large-scale asset family trust being established.

According to the listed company’s first quarterly report in 2019, the Wanxiang Group directly and indirectly holds shares of A-share listed companies such as Wanxiang Qianchao, China National Color, Shunfa Hengye and Tianci Materials. The current market value of these companies exceeds 40 billion yuan. The shares held by the Wanxiang Group correspond to a market value of more than 10 billion yuan.

This is not the first time that Lu Weiding sets up a charity trust in the name of Lu Guanqiu after taking over the Wanxiang Group. In June 2018, he established the Lu Guanqiu Sannong Fuzhi Fund for charitable purposes, and awarded the entire equity of the 600 million yuan investment amount of the Wanxiang Sannong Group. The fund led to the Lu Guanqiu Sannong Fuzhi Fund indirectly controlling 48.76% of the company’s shares through Wanxiang Sannong.

The purpose of the fund is to encourage rural development, modernize agriculture, make farmers rich and influence investment. Its property and income will be used for charitable activities such as poverty alleviation, helping the elderly, helping the disabled, special care and disaster relief, promoting the development of education, science and technology, culture, health, sports ad environmental protection. The corresponding market capitalization of the Luguanqiu Sannong Fuzhi Fund is more than 4 billion yuan.

According to the “Charity Law”, this kind of trust belongs to the category of 公益信托 (charitable trust). This means that once the assets are entrusted to a trust institution, they are separate from the family’s private property. They no longer belong to the family, but to the society. The rights of the family, whose role is to take care of these assets, follow from the management regulations established in accordance with the relevant laws.

In the speech with which he announced the new fund, Lu Weiding said that he will remember his father’s lesson and keep in mind that wealth and property alone are useless, since a company should also look for spirit and value in its purpose.