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FORTUNE.COM // DECEMBER 2019
MOST HEADLINES TODAY depict a China under siege, its long economic
boom ominously waning as it duels with the U.S. in a volatile trade
war. But Weijian Shan is talking about the other China, the thriving
market of 1.4 billion customers that, he claims, stands shielded from
tariff disputes—and is one of the world’s best places to invest.
On a wintry evening, we’re seated in a Maison Kayser coffee
shop on Manhattan’s Upper West Side. I’m having a latte and
scone, while Shan, a wiry 66-year-old who exudes Zen calm, orders
hot water. Shan heads PAG, Asia’s largest private equity firm, and
he’s about to phone in for the board meeting of a company PAG
owns that runs an English-language tutoring school in Beijing.
“The trade war is yesterday’s conflict,” he says, in soft, lightly ac-
cented English. “The prize is winning the Chinese consumer.”
Shan has been profiting from that prize for two decades. His
prowess reflects three contrasting traits that have made him an
unusually astute observer of China’s markets: He’s a successful
on-the-ground dealmaker, managing $35 billion in assets; he’s a
U.S.-trained Ph.D. economist and former business-school profes-
sor; and he’s a figure whose personal path mirrors his nation’s
transition from repressive poverty to an economic miracle. Says
Robert Aliber, a retired economics professor from the University
of Chicago’s Booth School of Business who’s known Shan since he
was a doctoral student: “I can’t think of anyone who offers a better
streetscape view of the individual markets in China. That’s why he’s
been so successful.”
“Successful” is an understatement. Shan’s firm operates a real
estate investment fund and a corporate lending franchise, but his
impact shows most in PAG’s $15 billion private equity portfolio,
which he directly manages. He declines to disclose information about
his investors or returns. But public records and other reporting show
that Shan’s clients include major pension funds, insurance com-panies, and endowments. Among his private
equity investors are Calpers, San Francisco’s
public-employee retirement system, and the
sovereign wealth funds of Singapore and
Kuwait. PAG also took on U.S. private equity
giant Blackstone as a minority partner last
year. While returns of private funds are hard
for outsiders to calculate, an analysis of the
companies Shan has bought and sold and the
profitability of his current portfolio indicate he’s
been generating gains averaging about 30% a
year on those companies—for a decade.
Those returns are rooted in China’s roar-
ing domestic economy, and Shan expresses
confidence that trade tensions won’t muffle
that boom. In his view, President Trump’s tariff
offensive “mainly hits an export sector that’s
already in decline,” says Shan. “The consumer
sector has kept thriving.” And that sector offers
enticing possibilities because it is something of
a world unto itself, since so much of what U.S.
and Chinese companies sell to consumers in
China is also made in China.
In conversations with Fortune over several
months, Shan elaborated on that premise. It
was a movable feast in which Shan did most of
the moving, treating me to around 10 hours of
phone interviews from PAG’s headquarters in
central Hong Kong, where he also lives; from
his car while driving to dinner at a hometown
eatery; and while strolling in San Francisco,
where he began his U.S. education. Along the
way, Shan described how he spots megahit po-
tential in the likes of day-care centers, dating
websites, and a huge herd of dairy cows.S
HAN GREW UP in Beijing, where
his father worked as a customs
official and his mother as a sec-
retary. His schooling ended at
age 12 in 1966, when Chairman
Mao launched the Cultural Revolution. AsINVES T OR ’ S GUIDE 2020
“The trade war is yesterday’s conflict.
The prize is winning the Chinese consumer.” Weijian Shan • PAG