The Hong Kong deal that turned Donald Trump into a China basher

June 02, 2016 17:37
Donald Trump (center) sued Henry Cheng (left) and Vincent Lo over the sale of  the Riverside South development, but he lost in court. Photos: HKEJ, Reuters

Republican presidential candidate Donald Trump is a China basher.

He has pledged that when he becomes the next US president, he will impose economic sanctions on China.

Why does he seem to hate China, and Chinese businessmen in particular, so much?

The answer may be found in his bitter experience with a group of Hong Kong billionaires 22 years ago, as recounted in a New York Times article.

In 1994 Trump was on the verge of bankruptcy in the wake of the collapse of the US real estate market.

A consortium of Hong Kong billionaires led by Henry Cheng Kar-shun and Vincent Lo Hong-shui came to his rescue.

Cheng and Lo agreed to buy his 77-acre property in New York City known as Riverside South, assume his debts and pay him 30 percent of the profits as well as fees for helping to manage the development of the site.

The article quoted Abe Wallach, Trump’s executive vice president of acquisitions and finance at the time, as saying that Trump was hesitant to travel to Hong Kong upon the invitation of Cheng and Lo.

He feared that he would be put at a disadvantage during the negotiations.

Face-to-face meetings are crucial in Chinese business culture, and so Trump was forced to make the trip to Hong Kong.

Lo and Cheng invited Trump to play golf, a common practice in Hong Kong's business culture.

However, Trump was appalled when he was told the bet for each hole is more than US$1,000.

They ended up betting US$100 per hole, and Trump ended up losing more than he won, Lo told the newspaper in an interview.

“He’s a good golfer, but we had the local knowledge -- he probably was jet-lagged,” Lo recalled.

After golf, he was invited for dinner at the home of Cheng’s father.

It was an awkward experience for Trump, who couldn't use chopsticks and did not like Chinese food.

The first course was a whole fish, with the head facing Trump. He asked Wallach to try it first.

Cheng and Lo also challenged Trump to a drinking contest, but Trump, a teetotaler, declined.

The deal was initially scheduled to be closed during the Ghost Month, during which, according to Chinese belief, the spirits of the dead roam the earth.

But the Hong Kong partners insisted to postpone the signing until Sept. 15. Lo explained it was due to paperwork, not superstition.

There was also some disagreements about the design of the project. The Hong Kong partners insisted on following the advice of a feng shui master, overriding the marble and gold motif favored by Trump.

In spite of it all, the Riverside South project turned out to be very lucrative.

Trump was able to avoid any conflict with his Hong Kong partners for more than a decade.

But in 2005, the Hong Kong businessmen sold the development for US$1.76 billion.

The deal was regarded as the largest residential real estate transaction in New York.

However, Trump was furious, saying his partners did not consult him first before selling the project.

He sued them and demanded US$1 billion in damages. But Lo claimed that Trump had been informed of the decision.

Trump lost the case in the court, and had to accept a 30 percent share in the profits from the project.

This experience could partly explain why Trump hates Chinese businessmen.

This article appeared in the Hong Kong Economic Journal on June 2.

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist