In the early winter of 2023, a luxury house in the upscale community of Bel Air in Los Angeles changed hands for $25 million. The buyer, Horizon Sunrise, was registered in the British Virgin Islands, and the contact person was Shi Youzhen, the mother of Zong Fuli, the eldest daughter of Zong Qinghou and the boss of Wahaha. This company seemed to be set up specifically for buying houses. Two months later, Zong Qinghou died of illness. As the media dug deeper, a huge asset network spanning China and the United States, involving offshore companies, trust funds, and illegitimate children gradually surfaced. The school district where the Bel Air mansion is located is exactly where Zong Fuli’s three children are enrolled; and the parent company of this company is exactly the core platform for Zong Qinghou to manage overseas assets. While the outside world focused on the ownership of Wahaha’s equity, a war of inheritance over a $1.8 billion overseas legacy had quietly started within the Zong family.
Capital maneuvering from green cards to the Virgin Islands
Zong Qinghou’s overseas layout was earlier than the 1990s. In 1992, when Wahaha raised 236 million yuan from internal employees to establish Hangzhou Wahaha Food City and planned to go public, Zong Qinghou registered Wahaha (USA) Group Corp in California and served as president himself. This company has no actual business and is more like a “shell company” tailored for applying for a green card. In 1996, Zong Qinghou’s wife and daughter obtained US social welfare numbers. In 1999, the whole family was approved for green cards. In 2005, the eldest daughter Zong Fuli replaced her US passport.
The precision design of the offshore structure is amazing. Through the parent company Horizon Sunrise registered in the British Virgin Islands, Zong Qinghou achieved the secret holding of assets. The typical operation path of this structure is: domestic funds flow to offshore companies through trade contracts to inflate costs, and then purchase overseas assets in the name of investment. The Los Angeles mansion purchased in 2023 is just the tip of the iceberg. In 1999, Du Jianying (Zong Qinghou’s former assistant) purchased a property in San Marino in the name of the Jifunctioning Du Trust Fund, adjacent to the $2.68 million manor owned by Zong Qinghou and his wife. When the Zong family sold their U.S. properties in 2008, the property sold by Du Jianying at the same time was appraised at $1.54 million.
The subtle rhythm of green cards and capital reveals the deep logic. In 1996, Danone invested $43.0695 million in the same year that the Zong family obtained the U.S. social welfare number. After the Danone merger dispute broke out in 2007, Zong Qinghou returned the green card. In 2009, Zong Fuli renounced her U.S. citizenship. In 2013, the third brother Zong Zehou registered Zong’s family holdings in the United States to manage family assets. This operation of “taking identity when needed, abandoning identity after the storm, and assets held by relatives” perfectly avoids policy risks.
The Secret of $71 Million in the Danone Joint Venture
In 1996, under the matchmaking of Xu Xin of Peregrine, Zong Qinghou and Danone established five joint ventures. This $43.0695 million investment became a booster for Wahaha’s take-off, and also laid the groundwork for capital maneuvers. As the core figure in the negotiations, Du Jianying was called “the key to international business” by Zong Qinghou, and even obtained the right to act on behalf of decision-makers. It was this “key” who gave birth to her and Zong Qinghou’s eldest son Zong Jichang in Los Angeles in 1998.
The cross-border flow of $71 million in salary exposed the transfer of interests. The 2006 audit showed that Danone paid a total of $71 million in salary to Zong Qinghou in the name of service fees, bonus stock dividends, etc. These funds were deposited into the Hong Kong bank accounts of Zong Qinghou (more than 50 million), Shi Youzhen, Zong Fuli, and Du Jianying. Calculated at the exchange rate at the time, it was equivalent to 580 million yuan, while Wahaha’s consolidated net profit in 2006 was only 1.07 billion yuan, and this “salary” accounted for as much as 54%.
The real cost of the Danone dispute in 2007 far exceeded the public data. Danone proposed a merger price of 40 billion yuan, and finally cashed out with 5 times the profit. Although Zong Qinghou retained control of the company, he paid a painful price: a total of 450 million yuan in taxes in China and the United States, was forced to return his green card, and Zong Fuli also renounced her American citizenship. Only Du Jianying and her two children were not affected – she retained her green card, and her children held American passports, becoming the actual controllers of Zong’s overseas assets.
Rashomon: Asset holding under the triple family relationship network
Zong Qinghou’s family relationship presents a “triple structure”: legal marriage with Shi Youzhen, de facto marriage with Du Jianying, and dewy relationships with other women. This structure is maintained through precise asset arrangements – Du Jianying also gets a corresponding share of what is given to his wife and daughter. When Du Jianying bought a property in San Marino in 1999, Zong Qinghou and his wife also bought a property in the same area; Du Jianying received the same proportion of the US$71 million paid by Danone as Zong Fuli.
The immigration network of brothers builds an overseas safety cushion. The second brother Zong Duanhou obtained a green card in 2003, and the third brother Zong Zehou and his family are American citizens, all living in the luxury residential area of San Marino. In 2013, Zong Zehou established Zong’s family holdings. Three weeks after Zong Qinghou’s death, his son Jason registered a new company in Texas to specialize in the distribution of US assets. This layout of “core assets inherited by children and marginal assets held by brothers” ensures the maximization of family interests.
Zong Fuli’s double game shows the wisdom of the heir. As the only legal heir, she has to deal with the inheritance claim of Du Jianying’s illegitimate son and control the Wahaha Group. After renouncing her American citizenship in 2009, she used her Chinese passport to purchase Unit 2, Park Road, Mid-Levels in Hong Kong (sold for HK$26 million in 2018), and spent another HK$44 million in 2016 to buy a commercial building on Queen’s Road Central, achieving “de-Americanization” through Hong Kong asset allocation. The luxury house at 27 Barker Road, The Peak, where she currently lives (worth HK$200 million), is registered in the company under the name of her mother, Shi Youzhen, forming a legal asset isolation.
The fatal loophole of the $1.8 billion inheritance
Zong Qinghou planned a seemingly perfect inheritance plan before his death: Wahaha shares belonged to Zong Fuli, and overseas assets were left to illegitimate children through a trust, with each child receiving $700 million. But this plan has a fatal flaw – the source of the trust funds is Wahaha Company rather than personal assets. In 2024, the eldest princess successfully tried to withdraw $1.1 million from the trust, which means that this trust, which was originally designed for “asset isolation”, has been easily penetrated.
Du Jianying’s greed accelerated the crisis. She has accumulated tens of billions of assets through investment companies and interest transfers, but she is not satisfied with the quota of 1.4 billion US dollars for her two children. In 2017, she suddenly had another child under her name, and asked for an additional 700 million US dollars in trust shares. Zong Qinghou failed to collect this money during his lifetime, and this “unfulfilled promise” became her legal weapon to fight for the inheritance after his death. What’s more complicated is that the identity of the child’s biological father is in doubt, and there are rumors that it is a “product of careful planning.”
The dilemma of the ownership of offshore assets has surfaced. Are the assets transferred by Zong Qinghou through dozens of offshore companies Wahaha’s company assets or personal property? If it is the former, Zong Fuli, as the chairman, has the right to recover it; if it is the latter, Du Jianying’s children have the right of inheritance. At present, the focus of the dispute between the two parties is on the funds transferred through the cooperation with Danone between 1996 and 2006. These funds flowed through company accounts and entered personal accounts in the name of “salary”, and the legal characterization is extremely complicated.
Battle for control
After Zong Qinghou passed away in February 2024, the battle for control of Wahaha quickly escalated into a struggle among four forces: Zong Fuli’s direct line, Du Jianying’s capital alliance, Zong Zehou’s family elders, and Hangzhou Shangcheng District State-owned Assets, which holds a 46% stake.
Zong Fuli’s iron-fisted integration shocked the industry. After taking over as chairman in July 2024, she closed 18 branches in the name of “strategic adjustment”, many of which involved Du Jianying’s shareholding; at the same time, a major personnel change was carried out, with veterans such as Wu Jianlin and Pan Jiajie withdrawing from the board of directors, and Hongsheng Beverage Group (founded by Zong Fuli) backbones Ye Yaqiong and Hong Chanchan entering the core management. What is more noteworthy is the transfer of assets-as of June 2025, the total assets of Wahaha Group headquarters were only 5.807 billion yuan, while the total assets of Hongsheng’s external companies reached 37.047 billion yuan, and the net profit soared from 18.71 million yuan to 4.767 billion yuan, and the headquarters became a “shell”.
Du Jianying’s Jedi counterattack is quite methodical. While applying for a temporary injunction from the US court to prevent the transfer of the factory, she accused Zong Fuli of embezzlement and actively contacted the state-owned assets of Shangcheng District, Hangzhou. In July 2023, Shangcheng District State-owned Assets had planned to transfer its 46% stake, but failed due to valuation differences. People familiar with the matter revealed that Du Jianying is preparing to take over with several institutions. If successful, she will become the largest shareholder of Wahaha. His capital strength should not be underestimated: by holding shares in Wahaha production lines, founding 7 companies, and investing in 21 companies, his net worth is conservatively estimated to exceed 10 billion.
Zong Zehou’s defection has exacerbated the split. As Zong Qinghou’s younger brother, Zong Zehou publicly criticized Zong Fuli for “not being broad-minded enough”, “selfish”, and “not recognizing relatives”, and used the controlled Zongsheng Intelligent Company to influence Wahaha’s business. In the 2022 “Wahaha Maojiu” incident, Zongsheng Intelligent was accused of imitating the Wahaha brand, exposing its ambition to infiltrate the group’s business. He united the old employees in the trade union shareholding association (24.6%) to form a key force to fight against Zong Fuli.
The swing of state-owned assets in Shangcheng District became the deciding factor. Faced with the transfer of assets to the Hongsheng Group, state-owned assets have a strong desire to withdraw. The audit report disclosed in June 2025 showed that the revenue of the Wahaha Group headquarters only accounted for 12% of the total revenue of the “Wahaha Group”, and the core assets were emptied out. If the state-owned assets choose Du Jianying to take over, it will completely change the equity structure; if external investors (such as China Resources and Yili) are introduced, the Zong family may completely lose control.
The legal dilemma of the three-place lawsuit
The inheritance dispute has evolved into a legal battle across China, Hong Kong and the United States. The strategies and judicial differences of all parties make the case full of variables.
The equity inheritance dispute in the Hangzhou Court focuses on 29.4% of the family shares. The three plaintiffs Zong Jichang, Zong Jieli and Zong Jisheng (claiming to be the illegitimate children of Zong Qinghou) have applied for DNA comparison and claimed inheritance rights in accordance with Article 1071 of the Civil Code. Zong Fuli submitted a 2020 will defense, emphasizing that “all overseas assets are inherited by her” and questioning the authenticity of the plaintiff’s birth certificate. The key point of dispute is: Did Zong Qinghou and Du Jianying get married in the United States in 2005? If they were married, was the status of an illegitimate child established?
The Hong Kong court’s debate on the validity of the trust involved $2.1 billion in funds. The plaintiff accused Zong Fuli of illegally transferring family trust funds (withdrawing $1.1 million in 2024), and Zong Fuli’s side refuted: ① The trust is not established-the funds come from Wahaha Company rather than individuals, and the 2023 overseas business budget report is submitted to prove that it is a reserve fund for the Southeast Asian market; ② The $1.1 million is the final payment for the equipment of the Vietnamese factory, and a complete contract and invoice are provided. The Hong Kong court needs to review the three certainties of the establishment of the trust (intention, subject matter, and object) according to the common law, but it needs to wait for the mainland court to determine the nature of the equity.
The US court’s application for asset freezing targets Los Angeles luxury homes. Du Jianying applied to freeze the assets of Horizon Sunrise as an “asset custodian” and claimed the right to manage as a guardian of her children. The US court has ruled on a temporary freeze, but there is no judicial assistance treaty between China and the United States, and enforcement faces obstacles. In addition, the US citizenship of the three plaintiffs may give them an advantage in claiming child support.
Asset transfer and hollowing out of the group
Although Zong Fuli’s radical integration has consolidated control, it has led to a “hollowing out” crisis for the Wahaha Group, and the backlash from the market and channels has begun to appear.
The Hongsheng Group’s related-party transactions are sophisticated. By purchasing Hongsheng raw materials at high prices (such as the purchase price of packaging bottles is 20% higher than the market price) and selling products to Hongsheng at low prices (wholesale prices are 15% lower than costs), the total profit transfer from 2024 to 2025 will exceed 3.5 billion yuan. The audit shows that the gross profit margin of the Wahaha Group headquarters has dropped from 32% to 18%, and the net profit margin is only 0.3%, becoming a production workshop for the Hongsheng Group.
The collective backlash of channel dealers has hit the sales network hard. The 10 largest distributors in the country jointly issued an open letter accusing Zong Fuli of “ignoring channel interests” and transferring the quota of best-selling products to Hongsheng’s direct channels. In the first quarter of 2025, the sales volume of Wahaha’s core product Nutri-Express fell by 37% year-on-year, and its market share fell from 18% at its peak to 7%, surpassed by competitors such as Nongfu Spring and Yili.
The dual aging of R&D and branding exposes strategic shortsightedness. Zong Fuli cut 30% of the R&D budget and focused on “Internet celebrity marketing”, but the success rate of new products was less than 5%. The “AD Calcium Milk Beauty Gift Box” launched on Children’s Day in 2025 suffered a Waterloo due to its inflated pricing (399 yuan/set), with online sales of only 3,000 sets, and its brand image was seriously damaged.
Warning
The battle for control of Wahaha has entered the deep water zone, and the possible outcome will profoundly affect the inheritance model of China’s private economy.
Ending 1: Zong Fuli narrowly wins but the empire declines. If the court finds the will valid, Zong Fuli will retain 29.4% of the shares, but the withdrawal of state-owned assets and continued litigation may lead to the company’s merger and acquisition. Referring to the Jianlibao case, family businesses without state-owned capital support find it difficult to maintain channel advantages and may eventually become regional brands.
Ending 2: Du Jianying’s counterattack and family split. After taking over state-owned equity, Du Jianying needs to face internal cleansing and business restructuring. Zong Zehou may take the opportunity to seize power and repeat the “Gome infighting”. The recognition of the inheritance rights of illegitimate children will set a precedent and trigger more inheritance disputes among wealthy families.
Ending 3: Third-party takeover and state-owned enterprise transformation. State-owned assets introduced strategic investors such as China Resources, and the Zong family completely withdrew. Referring to the Qingdao Beer model, although state-owned enterprise holdings can stabilize operations, they may lose the flexibility and innovation of private enterprises.
Three warnings to the private economy: ① Equity structure design needs to be prepared in advance to avoid “one dominant share” and “inheritance vacuum”; ② Family governance should establish modern mechanisms such as trusts and boards of directors, rather than relying on personal authority; ③ Offshore asset allocation must take into account compliance, and there are no absolute secrets in the era of CRS information exchange.
When capital meets humanity
The $25 million Los Angeles mansion eventually became the secret Pandora’s box of the Zong family. From the registration of a company in California in 1992 to the purchase of a house by an offshore company in 2023, the capital empire built by Zong Qinghou in 30 years exposed fatal flaws in the face of death. The revelation of this inheritance war is that true wealth inheritance is not only the transfer of assets, but also the balance between institutional construction and human nature. As China’s private entrepreneurs gradually enter the intergenerational inheritance period, the Zong case is like a mirror, reflecting the ultimate paradox of the capital game – no matter how sophisticated the offshore structure is, it cannot stop the greed of human nature; no matter how huge the business empire is, if there is no sound family governance, it will eventually drift in the storm of inheritance.
