The cross-border e-commerce industry faces renewed scrutiny as former Globalegrow chairman Xu Jiadong faces allegations of occupational embezzlement, exposing the complex relationship between capital and entrepreneurs in China's booming online retail sector.
When the massive ship of cross-border e-commerce sails into deep waters, the undercurrents often involve not just market competition but capital struggles. A recent announcement sent shockwaves through the industry: Globalegrow disclosed that its former chairman and actual controller Xu Jiadong has been formally investigated for alleged occupational embezzlement.
Xu swiftly denied the allegations, claiming they stem from personal disputes with Yang Jianxin, former controller of parent company Cross-Border E-Commerce (previously called Baiyuan Garments). Xu maintains that Yang has pursued him relentlessly since his 2021 departure from Globalegrow, leveraging resources to initiate investigations.
From Startup to Market Leader
The saga began in 2007 when Xu, a returned overseas student, founded Globalegrow to capitalize on China's cross-border e-commerce boom. The company's rapid growth attracted Baiyuan Garments, a traditional apparel firm seeking digital transformation under Yang's leadership. The 2014 acquisition marked a turning point - Globalegrow became Cross-Border E-Commerce's primary revenue driver, prompting a 2015 rebranding.
From 2014 to 2018, Cross-Border E-Commerce enjoyed spectacular success. Revenue skyrocketed from 842 million yuan to 21.53 billion yuan, with net profits jumping from 33 million to 623 million yuan. Globalegrow, along with later acquisitions Patuoxun and Youyi E-Commerce, formed the company's revenue backbone. By 2018, Globalegrow alone generated 12.4 billion yuan in sales.
The company's market value soared during this golden period, propelling Yang to become Shanxi's richest person with three consecutive appearances (2015-2017) on the Hurun Rich List.
Troubled Waters
The tide turned in 2019-2020 as Cross-Border E-Commerce faced financing difficulties, cash flow crises, mounting debts, and marketing budget shortages. Revenue declined to 17.87 billion and 17.02 billion yuan respectively, while net losses ballooned from 2.7 billion to 3.37 billion yuan.
The situation worsened in April 2021 when auditors issued a disclaimer of opinion on the company's financial statements. The Shenzhen Stock Exchange subsequently imposed delisting risk warnings in May, prompting Xu's resignation. However, financial disputes between Xu and Cross-Border E-Commerce's controllers persisted.
This case mirrors earlier conflicts in the industry, such as the dispute between Zaful's parent company and investors over performance commitments that ultimately led to founder departures.
Broader Implications
While Xu's case awaits official resolution, it highlights critical challenges facing cross-border e-commerce firms: balancing capital support with operational independence, maintaining financial health during rapid expansion, and navigating complex investor relationships.
For investors, the incident underscores the need to understand the sector's unique dynamics and build sustainable partnerships with entrepreneurs. As China's cross-border e-commerce boom continues, only companies that skillfully manage capital relationships while maintaining operational discipline will successfully navigate these turbulent waters.