Summary of Key Points
Fengyuan Pharmaceutical (000153.SZ) recently announced that its controlling shareholder, Fengyuan Group, will sell its equity to Bengbu Investment Group, which is under the jurisdiction of the Bengbu Municipal State-owned Assets Supervision and Administration Commission. This means that Li Rongjie, the actual controller of the “Fengyuan Group,” will completely lose control of his last A-share listed company. Starting in 1994 by taking over a citric acid factory on the brink of bankruptcy, Li Rongjie built the “Fengyuan Group,” which comprised three A-share companies, making him a well-known local capital magnate in Anhui Province. However, due to aggressive expansion and tight financial constraints, he has successively lost control of Fengyuan Biochemical (now COFCO Technology) and ST Taifu (now Yunding Technology), and now he has even had to part with his last company, Fengyuan Pharmaceutical. After thirty years of ups and downs, he has completed a cycle from being the director of a state-owned enterprise to becoming a capital magnate, only to later withdraw from the A-share market, currently facing enormous debt pressures.
Detailed Analysis
1. From “Firefighter Director” to Capital Magnate: Li Rongjie’s Rise
Li Rongjie’s story began in 1994 at the Bengbu Citric Acid Factory, a state-owned enterprise that had been losing money for six consecutive years and was on the verge of closure with debts exceeding its assets. At the age of 32, he was appointed as the director and took drastic measures upon taking office: he dismantled and reinstalled the only old production line (scaring the local chemical industry bureau), reduced the number of management staff from 132 to 57, and replaced traditional raw materials with corn flour to produce citric acid, turning the factory into a profit-making enterprise that same year.
He then went on to win numerous awards, including provincial and national labor model honors. Taking advantage of the state-owned enterprise restructuring, he transformed the citric acid factory into Fengyuan Group in 1998 (fully owned by the Bengbu State-owned Assets Supervision and Administration Commission) and established Fengyuan Biochemical in the same year, pushing it to go public. By 2003, through acquisitions and other means, he controlled Fengyuan Pharmaceutical and ST Taifu, making the “Fengyuan Group” one of the largest capital forces in Anhui, second only to the “Hailuo Group.” The scent of citric acid could be detected throughout half of Bengbu city, and the Fengyuan Industrial Park became a self-contained economic hub.
2. The Traps of Expansion: The “Citric Acid Model” as a Double-edged Sword
The success of the Fengyuan Group relied on the “citric acid model,” which involved aggressively expanding production capacity to reduce costs. For example, after Fengyuan Biochemical went public, its citric acid production capacity became the largest in the world. However, this model also led to several problems:
- Aggressive Investment Mistakes: Li Rongjie ventured into other industries such as oils, food, and vitamin C, even acquiring foreign companies like Shanghai Jialikeke, but many of these projects were unprofitable.
- Financial Trust Crises: Starting in 2003, media began to question the authenticity of Fengyuan Biochemical’s export data, and in 2006, an accounting scandal exposed financial fraud, resulting in a loss of 1 billion yuan from a targeted capital increase.
- High Debt: By 2006, Fengyuan Biochemical’s debt ratio reached 70% (banks were particularly cautious about lending to such companies), and despite a net profit of only 84.11 million yuan that year, it relied on 283 million yuan in government subsidies to stay afloat, putting significant strain on its financial situation.
3. Losing Two Listed Companies: The Cost of Broken Financial Chains
Under pressure from debt, Li Rongjie had to make difficult decisions:
- Fengyuan Biochemical’s Sale to COFCO: In 2006, the Bengbu government required Fengyuan Group to attract strategic investors, and ultimately, COFCO purchased 20.74% of the shares, becoming the largest shareholder.
- ST Taifu’s Transfer to Shandong State-owned Assets: After taking over ST Taifu in 2005, the company’s main business performance was poor (with zero revenue in 2007), and it faced regulatory issues due to the undisclosed change in control. During a reorganization in 2012, Shandong Ludi Mining took over, and the company was renamed Yunding Technology, shifting its focus to mining information technology. As a result, only Fengyuan Pharmaceutical remained under the Fengyuan Group’s control.
4. Selling the Last Company: A Reluctant Decision Due to Debt
In 2011, Li Rongjie obtained control of Fengyuan Group through equity incentives (allowing management to purchase shares at low prices). He hoped to use this to create new listed companies like Fengyuan Biology and Tiger Biology, but these plans faced setbacks. To date, there has been no progress with Fengyuan Biology’s application for a listing on the STAR Market, and the acquisition plan for Tiger Biology has also failed.
The most critical issue was debt: As of June 2026, Fengyuan Group had a total debt of 11.5 billion yuan, with annual repayments of 1.5 billion yuan, yet its first-quarter net profit was only 134 million yuan—barely enough to cover interest payments. To manage the situation, Fengyuan Group had pledged almost all of its shares in Fengyuan Pharmaceutical (with a pledge rate of 99.99% among the three related parties) and even borrowed nearly 150 million yuan from Fengyuan Pharmaceutical. Selling its equity to Bengbu Investment Group was essentially a last-ditch attempt to stabilize its finances.
5. A Thirty-Year Cycle: Li Rongjie’s Exit from the A-share Market and an Uncertain Future
From taking over a failing enterprise in 1994 to controlling three listed companies in 2011, and then losing his last one in 2026, Li Rongjie’s thirty-year journey can be seen as a cycle. Now 64 years old, he faces the same problem as before: a lack of funds. However, the market environment has changed significantly; what worked in the past—restructuring state-owned enterprises and expanding scale—no longer guarantees success. Today, companies with state-owned backing have a competitive advantage.
With Fengyuan Pharmaceutical under new state-owned ownership, it may become more stable (thanks to government support), but Fengyuan Group still carries a debt of 11.5 billion yuan. Whether it can turn things around remains uncertain. Li Rongjie was once a legend of private capital in Anhui, but this exit from the A-share market may mark an important milestone in his career.
Conclusion
Li Rongjie’s story illustrates the rise and fall of private capital during the restructuring of state-owned enterprises and industrial expansion in China. He rose through courage and opportunity but fell due to aggressive expansion and poor financial management. The sale of Fengyuan Pharmaceutical is not only a personal farewell but also reflects the inevitable choices private capital faces under debt pressure. For all businesses, even the most successful ones can collapse if their financial chains break. This serves as a reminder that no matter how successful a company is, a broken financial chain can lead to its downfall.