Smartisan founder lands on a credit blacklist in China

This article is co-written by Li Tao.

Luo Yonghao, founder of Smartisan Technology, was once hailed for his savvy marketing skills, which helped build a niche Chinese smartphone brand with a cult following.

Examples of his knack for promotion included publicly bashing Apple for “losing its soul,” turning his company’s annual product launches into variety shows and getting consumers to pay to hear his sales pitch.

But the 49-year-old entrepreneur’s financial troubles have landed him a place among the current 15 million “deadbeats” – officially designated as “discredited individuals” or laolai in Chinese – on a national database maintained by China’s Supreme Court.

Photo credit: Smartisan

Daily life for Luo, a former English teacher, is now a series of inflicted indignities. He is barred from taking flights or high-speed train trips as well as any sort of lavish spending, such as staying in luxurious hotels or golf clubs, according to a Chinese court’s recent ruling.

Luo, who has also been legally barred from buying property or sending his children to private schools, said in a post on microblog site Weibo on Sunday that he will work hard to pay his debt. He also apologized to Smartisan’s creditors, investors, and users. He declined to make any further comments on his situation, according to a company spokeswoman.

His Weibo post followed a ruling issued last week by a court in Danyang, a city in eastern China’s Jiangsu province, in favor of plaintiff and creditor Jiangsu Chenyang Electronics Co.

In his post, titled “Confession from a deadbeat CEO,” Luo said he personally vouched for a loan of more than 100 million yuan (US$14.2 million) and raised tens of millions of yuan more to help save Smartisan at its “most difficult” period.

Smartisan, which was founded in 2012, has managed to repay 300 million yuan (US$42.8 million), estimated to be around half of the company’s total indebtedness, over the past 10 months, according to Luo. One of Smartisan’s creditors, Yulong Communications Technology, sued the Beijing-based company last year for unpaid components valued at US$650,000.

The scramble to pay off Smartisan’s debts has come amid an economic slowdown in China, the world’s largest smartphone market, which has felt the effects of a protracted trade war with the US.

Smartphone shipments in China fell for the fourth consecutive quarter in the three months to September, which saw market leader Huawei Technologies capture a record 40% share, according to a report last week by Counterpoint Research. It said the top five brands accounted for 92% of the market.

“The Chinese smartphone market is becoming increasingly concentrated and difficult for smaller brands,” said James Yan, research director at Counterpoint.

That deal with Bytedance showed how Luo, who helped raise Smartisan’s profile by talking big and bashing technology giant Apple whenever he had an opportunity, failed to sustain the hype he built up over the past few years.