(FORTUNE Magazine) – THE RICHEST man in Hong Kong and the world's most successful Overseas Chinese entrepreneur is a legend in the East. But Li Ka-shing, 63, is barely known in the West. That will soon change because Li is busily investing in North America. His lucrative Asian businesses, including real estate development, have built a mountain of cash just when many real estate tycoons are buried in debt. His personal net worth is approaching $4 billion, and he controls public companies in Hong Kong that have little debt and $2.3 billion in spare cash. Says a member of the professional management team that backs up Li: ''He always learns from the mistakes of people like Donald Trump.'' A shrewd trader with a keen sense of timing, Li is bottom-fishing in the troubled waters of Olympia & York. He picked up 49% of an office tower in lower Manhattan and paid lenders $58 million to take over a mortgage that originally was for $158 million (the lenders wrote off $100 million). He is now looking for other potential bargains in the Reichmann portfolio. ''Sure, we'd like to invest more in the U.S.,'' he says. ''It still offers the biggest financial opportunity in the world.'' Wherever he shops, Li searches for undervalued assets. In Vancouver he acquired 204 acres of waterfront land in 1988 for the equivalent of $637,000 an acre. Recently he sold a 14-acre slice for $2.38 million an acre. And Li is developing the property mostly with other people's money. A passionate dealmaker, Li picks up partners in the U.S. as avidly as an American kid collects baseball cards. Hutchison Telecom, his mobile phone company that operates in both Asia and Europe, has joint ventures with AT&T and Motorola. Star TV, which broadcasts from Hong Kong and Thailand via satellite to 38 countries in Asia and the Middle East, has made deals in which America's MTV and Prime Sports provide programming in exchange for a share of profits. He's talking with major companies in the U.S. entertainment industry, including Time Warner (parent of FORTUNE's publisher), to link with another new enterprise, a distributor of movies and TV programs to Asia. Partners in additional deals include Lockheed (for aircraft maintenance in Guangzhou, China) and Procter & Gamble (for making shampoo and face lotion in South China). Who is this billionaire who started out selling plastic watchbands? Li, who rarely explains himself, talked at length to FORTUNE, as did many close associates and some critics. The real Li is an entrepreneur who combines the instincts of a gambler with the calculations of an actuary. He enjoys making money more than spending it. He has no art collection or corporate jet and has lived in the same Hong Kong hilltop house for 30 years. In his regular poker games with wealthy pals, the stakes are low (though the business tips they trade are sometimes worth more than any high roller's pot). He plays golf for exercise (his handicap is 56). Says Li: ''The most important enjoyment to me is to work hard and make more profit.'' He works in a modest, wood-paneled penthouse office. Alerted to approaching visitors by a closed- circuit TV system, K.S., as friends call him, acts genuinely grateful that anyone would bother coming to see him. A slight man, he looks more like an amiable schoolmaster than a tough trader. He always wears a dark business suit with a conservative tie and white shirt. His small talk stresses frugality. Says Li, pointing to his Citizen electronic watch: ''Yours is more luxurious. Mine is cheap, less than $50. It's my working watch. Not that I cannot afford a more expensive one.'' LI'S MOST VISIBLE moneymaker is a group of four public corporations in Hong Kong (see chart). He owns nearly 35% of Cheung Kong, the premier local property developer, which controls an electric utility, an investment company, and Hutchison Whampoa, an old British hong or diversified conglomerate that dominates large swatches of the British colony's economy and has stakes overseas in such ventures as gold mining in Zimbabwe and oil fields in Canada. The companies steadily grind out a total of about $1 billion a year in profits on sales of $4.4 billion. Together they have a market value of $22.2 billion, about 15% of Hong Kong's total stock market capitalization. As chairman and chief executive of the four companies, Li makes all the key decisions while relying on a team of Chinese and Western executives for day- to-day management. He pays himself only an annual director's fee of $641, ''less than a messenger's salary,'' he says, adding, ''but even if I charged $10 million, it would be low for the work I do.'' How does he live, even relatively modestly, on such a sum? Don't worry about Li. Dividends from his companies last year came to more than $60 million. Li, whose wife died in 1990, is training his two sons as successors. They are coming along, he says, ''better than I expected.'' (See box on what a billionaire teaches his children.) Victor, 27, earned a master's degree in structural engineering at Stanford. He describes himself as ''the most conservative director'' at Cheung Kong. Among other projects, he heads the big Vancouver development. Richard, 25, majored in computer science at Stanford and worked for a while as an investment banker in Toronto. Now he is back in Hong Kong running Star TV, the satellite broadcaster. In the spirit of his own messenger's salary, Li doesn't pay much to ''the boys,'' as he calls them. Says Richard: ''At least 15 executives at Star TV are paid more than I get.'' Investing abroad is important for Li. About 80% of his corporate assets are in Hong Kong, where his companies have such big shares of their various markets that he can't expand much. Besides, he also faces an incalculable political risk: Britain will hand over the colony to the People's Republic of China in just five years. Li talks of retiring by then. Beijing promises to keep Hong Kong capitalist for at least 50 years, but no one can be certain what will happen. Though Li was deeply disturbed by the violent suppression of Chinese pro- democracy demonstrators around Tiananmen Square in 1989, he continues to help China in substantial ways. He has donated to Shantou, his native district in South China, an entire university with a teaching hospital -- so far costing $85 million. Says he: ''Education is what China most needs.'' Li's father, a schoolmaster in China, sent him to study in Hong Kong in 1940, when the boy was 12. Two years later the elder Li died, leaving his eldest son to support his widow and two younger children. Li worked 16 hours a day, including Sundays, selling plastic belts and watchbands to retailers. At 20, already a star salesman, he became general manager of the little company. Two years later, in 1950, he went out on his own. With $7,000 in savings, Li began making plastic combs and soapboxes in a rented factory. To remind himself of the need for business allies, he called his company Cheung Kong, Cantonese for ''long river'' -- one with many tributaries. His landlord kept raising the rent, so in 1958 Li bought his own factory, along with an apartment building. Soon he was not only turning out plastic flowers but also getting a stream of profits from property trading -- which gradually became his main activity. Since his earliest days he has used a technique that limits his exposure to the kind of debt that has wiped out many Hong Kong rivals. When he starts a major development, he usually forms a joint venture with a landowner, promising a share of the profits that will ultimately yield more than the owner would have received in an outright sale. That relieves Li of paying in advance for the land, which in Hong Kong amounts to about 60% of real estate developments. He raises much of the remaining capital by selling apartments before building them -- and collecting down payments. An old friend and golfing partner describes how it works: ''Whenever he has a big project, K.S. calls up friends and offers them a batch of apartments at a good price. Their purchases help launch the project, the price goes up, and they later sell for a nice profit. It's a winning situation for everybody.'' Li has seasoned his organization with an adventurous band of Western managers. In 1984 he booted out a handful of expatriates running Hutchison and installed Simon Murray, a lively Briton, as group managing director. A veteran of the French Foreign Legion (who wrote a best-selling book about his experiences in Algeria), Murray, 52, quit the British trading firm Jardine Matheson after 14 years because it refused to put him on the executive board. Says Murray, now Li's ambassador to Western business: ''He's accessible to ideas and moves quickly.'' Li, for instance, decided within half an hour to buy for $372 million 5% of Cable & Wireless, a British telecommunications company, in 1987 -- and almost as quickly to sell it three years later for a profit of nearly $100 million. IN HIS PUBLIC COMPANIES, Li concentrates on five core activities that are also his principal targets abroad: property, container terminals, retailing, telecommunications, and energy. Hutchison Whampoa is leading the charge into ( Western countries. Says Murray: ''Li's reputation for having a lot of cash draws people like flies to a honey pot.'' Rather than shopping for trophies with the abandon of an oil sheikh, Li hunts for bargains. Says he: ''I don't like to waste people's time. If I don't find an offer attractive, I tell them directly why I turned it down.'' Initially, Li's strategy was to buy into large British corporations in order to form global alliances. Though Hong Kong has been a British colony for 150 years, Li found no welcome mat in the mother country. In 1986 he acquired nearly 5% of Pearson, a British holding company with such assets as the Financial Times and an interest in the Lazard investment banking firms in London, Paris, and New York. Li got such an icy reception from Pearson, which feared a takeover bid, that he later sold the stock. Likewise, his substantial stake in Cable & Wireless failed to win Li an invitation to join the board or to form a joint venture. In his most daring thrust into the U.S., Li two years ago tried to buy half of a $3 billion portfolio from Columbia Savings & Loan, a troubled California S&L. Gordon Investment, a Toronto merchant bank where Li's son Richard had worked, designed a deal with little risk. Li and the merchant bank would jointly put up $300 million -- 10% of the portfolio. Columbia would finance the rest under attractive terms: Li and his partner could return the portfolio without further obligation if their losses exceeded the down payment. A wonderful arrangement for Li, but regulators in Washington turned it down because it didn't provide enough new capital. Husky Oil of Canada, Li's biggest investment outside Hong Kong, has become his biggest headache. Betting on a rise in energy prices, he bought control of the Canadian independent oil and gas producer in 1987. Li shared the risk with his public companies: To acquire 52%, he personally put up $75 million, and his companies invested $360 million. The following year Li and his companies together invested an additional $169 million to help Husky acquire Canterra Energy, a natural gas producer. He expected profits within five years, but oil and gas prices have remained low. Murray now says, ''It's going to take longer than we had hoped.'' Analysts think Li would love to bail out if he could get a decent price. If he does decide to sell, he won't have to ask anyone's permission. At the end of last year he pumped in another $210 million to raise his stake in Husky to 95%. His main Canadian partner, Nova Corp., was unable to put more money into Husky, which needs additional capital for its oil and gas exploration and development projects. Li bought out Nova's stake. Says he: ''Since we're already deeply involved in this investment, we had no choice.'' He used mostly his own money to avoid putting Husky's $1 billion debt on the balance sheet of his public corporations. ''I don't have to show my personal balance sheet to the bank,'' says Li, ''or to shareholders.'' His executives are tightening operations at Husky, which has shed 235 of its 1,500 employees and sold its corporate jet. One analyst calls this restructuring merely ''tidying up a past error of judgment.'' Not even Li is perfect. LEARNING from his mistakes, Li is now buying into or expanding international businesses that his companies know well. Hutchison, which runs the biggest container shipping port in Hong Kong, bought control of the container port at Felixstowe in England for $43.5 million last year and is already making an operating profit. In essence, Li gets more revenue from the same customers by owning both ports. He is now negotiating with local Chinese officials to develop a container port in Shanghai. Hutchison Telecom is an aggressive global operator of cellular phone services. Mostly by reinvesting profits from its dominant position in Hong Kong, the company has moved into nine countries, including Britain. Li got into the business in the mid-1980s in a roundabout way. Ric Siemens, 47, a Canadian entrepreneur who had a tiny telephone paging service in Hong Kong, applied for a cellular license. In an audacious bluff, he told both Li and Motorola that the other was his partner. It worked -- both signed up. Li's stature with Hong Kong authorities helped Siemens get the license, while Motorola provided technical expertise and 30% of the capital. Li promoted cellular phones by making a great show of using one at a land auction in 1985. His friends and competitors quickly followed suit. Hutchison expanded to other countries without Motorola's equity participation. Remarks Siemens, who is now the company's managing director: ''In Asia, our big advantage is K.S. Li.'' Always a hedger, Li is looking for a big international partner to give him more clout in getting cellular franchises. Li's managers are negotiating with AT&T, among others, to buy up to 40% of Hutchison Telecom. (AT&T already has a joint venture with Li to provide data and fax services in Hong Kong.) Baring Securities figures that selling 40% of Hutchison Telecom would bring in more than $500 million in cash. Li's most spectacular venture is Star TV, which broadcasts five channels 24 hours a day via satellite to viewers from Israel to Indonesia. ''This is a risky business,'' says Li, who is personally putting up half of Star TV's initial capital of $300 million (Hutchison is providing the other half). A closer look shows that Li is using a lot of other people's money too. Most of the programming is being provided by such partners as BBC News and MTV, which will share advertising revenues. Li offered initial sponsors $2 million for 2,000 30-second commercial spots, plus warrants for future stock in a company called Hutchvision, the parent of Star TV. He has $120 million in advertising commitments through next year. Not bad, since Star TV's annual operating costs are about $80 million. Star TV began broadcasting last December, well ahead of potential Asian rivals, because of another prescient transaction by Li. Two years ago he teamed with Cable & Wireless and China International Trust & Investment Corp., a Chinese government enterprise, to launch a satellite called Asiasat atop a Chinese Long March III rocket. Total cost came to a comparatively cheap $120 million. Asian governments rent more than half the satellite's transponders for local TV and phone service, while Li uses the rest for Star TV. No one else has tried beaming TV programs across Asia, but the audience is hungry for variety. Says Richard Li: ''Americans and Europeans have access to, on average, 25 channels. In Asia, including Japan, the average is 2.4 channels -- most of them government-controlled and filled with boring propaganda.'' By giving Madonna, American movies, and news from the BBC to Asians, he expects to make money in a few years. Having discovered show business, Li and Hutchison are investing $300 million in Media Assets Ltd., a separate company that will produce and distribute both movies and TV programs.

In his Vancouver real estate operation, Li is using all the moves he developed in Hong Kong. Construction is moving ahead steadily, despite a recession, on what will be the largest project in Canada -- an entire downtown waterfront community called Pacific Place. He bought the site of Expo 86, one- sixth of downtown Vancouver, for $110 million in 1988 when the property market was on its knees. Li has recovered nearly one-third of that by selling a small parcel. $ As he did so often back home, he is helping pay construction costs by selling a lot of unfinished real estate. Some 400 condos in the first two high-rise apartment towers, still being built, were sold out in three days early last year. Li figures that similar project financing will cover most of the cost of developing Pacific Place, around $2 billion over the next decade. Says he: ''We could move faster, but we don't want to damage the local property market.'' Indeed not, since Li's privately owned Concord Pacific Developments and his family control a lot of the rest of downtown Vancouver. In part, Li is selling unbuilt condos to his old friends just as he always did in Hong Kong. Vancouver is a favorite destination for well-off Chinese who want to leave Hong Kong. A common Canadian wisecrack is that the city should be renamed ''Hongcouver.'' Ethnic Chinese constitute 27% of the city's 560,000 population, providing Li with both property buyers and valuable contacts. Li has positioned himself for new deals in the U.S. but is waiting for the right ones and the right moment. Says one of his associates: ''K.S. seems to believe that the bottom of the real estate market has not yet been seen.'' He brings to the table two treasures: ample cash in an era of debt and a wealth of relationships. As Li puts it, ''I don't worry about opportunities. What I'm looking for are the best ones.''

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