Zhigao Air Conditioners Bow Out: A 30-Year Grassroots Giant That Didn't Make It Into This Spring

Southern Finance reporter Wu Rong, Foshan coverage

Li Xinghao from 30 years ago probably couldn’t have imagined that his “air conditioner kingdom” would end this way.

On February 12, on the eve of the Year of the Horse Spring Festival, a notice issued by the People’s Court of Nanhai District, Foshan City ruled to accept the bankruptcy liquidation case of Guangdong Zhigao Air-Conditioning Co., Ltd.

That once-brand powerhouse who used to dominate CCTV’s prime-time slots and boldly vowed to “surpass Gree, Midea, and Haier” couldn’t make it through to this spring.

The outside world tends to attribute both success and failure to the founder, saying Zhigao fell due to Li Xinghao’s rough-and-ready, unsophisticated approach and loss of focus. But the truth may be more complicated—what killed it was never just one person, but the entire structure it had relied on to succeed: growing by fighting on low prices, then losing its technological moat because of the low-price strategy; growing by riding the cycle dividend, then taking pressure when the cycle turned; speeding up through one-person decision-making, then running into danger due to lagging governance.

Those survival tactics that once helped it break through during the era of brutal, unchecked growth became, at the stage when the industry shifted toward refined operations and high-quality development, the very core weaknesses that slowed it down.

Zhigao air conditioner’s rise and fall over more than 30 years may, to a certain extent, reflect lessons for China’s private economy at turning points in the times. What can get through the cycles is not scale and speed, but steadfast focus on the core business, an innovation foundation, and modern governance.

Tear open the market with extreme value for money

In 1993, in Lishui Town of Nanhai, Guangdong, farmer Li Xinghao decided to build air conditioners.

Before that, he sold popsicles, collected scrap cloth, ran a restaurant, and repaired air conditioners—whatever opportunities came along, he went for them.

While repairing air conditioners, he found that the quality of domestic air conditioners was generally poor, which became an opportunity. He then worked with a Taiwan businessman he had previously gotten to know to settle on a plan: jointly invest in building a factory in Lishui Town, Nanhai District, and name it “Zhigao,” meaning “aspiring to higher ground.”

That was an era when China’s manufacturing industry took off rapidly. Countless ordinary people rode bicycles, carried grit in their pockets, and grew violently in the market.

But the air conditioner industry was firmly controlled by several major companies such as Kelon and Chunlan. With no technical background and as an outsider from a farmer’s background, why would an air conditioner upstart be able to enter?

Li Xinghao’s answer was to drive prices to the lowest.

He targeted third- and fourth-tier markets and rural areas, squeezing air conditioner prices to 20% lower than competitors, and rolled out “lifetime free repairs,” tearing open a crack in the market with extreme value.

However, in the second year, due to poor sales, the Taiwan partner withdrew capital and took away the core team. The Zhigao account was frozen, and the capital chain broke. In a desperate situation, Li Xinghao traveled to Qingyuan to rally suppliers, using personal IOUs totaling 8 million to secure supply-chain support.

This is typical survival wisdom of grassroots entrepreneurs: with no technological barriers, open the road with value for money; with no backing from capital, use streetwise loyalty to hold up the foundation.

In 1995, Zhigao made it through the toughest days. After that, it sprinted forward all the way: in 2001 it obtained import and export operating rights; in 2003 it won the bid for a 20,000-unit air-conditioner order for the Athens Olympics. Its sales network expanded to more than 200 countries and regions worldwide, propelling it into the industry’s top five.

This playbook was even more unstoppable amid the wave of urbanization. In 2007, its market share surged to fourth nationwide; in July 2009, it listed on the Hong Kong Stock Exchange. At its most dazzling moment, Zhigao snatched Chenglong’s endorsement from Gree and proclaimed “ten years to reach one trillion, surpass Gree, Midea, and Haier.” In 2010, Zhigao surpassed Haier for the first time, taking the third spot in the industry.

Zhigao’s Si Hui base.

Standing in that position and looking back, who would have thought that was actually the moment Zhigao came closest to “every household”?

Missing the transformation bus

After building the “tower” with price wars and channel dividends, Zhigao didn’t consolidate the foundation in time.

In 2011, Zhigao posted its first loss since listing, becoming the only loss-making company among the top air-conditioner players that year. The superficial reasons were rising raw material prices and intensified industry competition, but the deeper reason was that the “low-price + channel” model Zhigao had relied on for the past decade-plus had begun to show diminishing marginal returns, while new capabilities (technology, management) had not been built yet.

Since the 21st century, with improvements in people’s living standards and deeper opening up to the outside world, leading companies in China’s air-conditioner market have driven a technological revolution. Variable-frequency technology became widespread, energy-efficiency standards rose, and smart homes took off. The logic of competition in the industry shifted from “who is cheaper” to “who is more advanced.”

Unfortunately, at this crucial junction, Zhigao chose the wrong direction and missed the “critical decade.”

In 2012, Li Xinghao handed over management rights. He then turned around and plunged into the capital market boom. From building decoration and home appliances, to science and education, and then to finance, pharmaceuticals, logistics, and other fields, the “Zhigao group” seemed to be everywhere—but most of them amounted to scattered failures.

With the founder’s attention diverted, the company’s underlying foundation also began to loosen.

First, it lay flat on R&D. According to statistics, in 2012 and 2013, Zhigao’s R&D costs stayed below 100 million yuan, accounting for less than 1% of sales. In the same period, Gree and Midea each invested more than 4 billion yuan annually in R&D, and their R&D expense ratios stayed around 3.6%.

Without R&D investment, there is no product competitiveness. When Gree kept making breakthroughs in compressors and variable-frequency technology, and Midea deployed substantial resources in smart homes and the IoT field—so much so that even an outsider like Xiaomi entered the battlefield with an intelligent ecosystem—Zhigao was still fighting with products from a decade earlier.

Second, Zhigao was slow and dull on channels. When the wave of e-commerce hit, Midea and Gree quickly moved online and integrated online and offline channels. Zhigao, however, continued to cling to the traditional dealer model. By the time it reacted, the online market had long been carved up by leading brands and new players like Xiaomi.

In 2023, Zhigao air conditioner’s online share had dropped to just 0.2%, while offline was under 0.03%, marking its complete exit from the mainstream market. This is a brutal number—it means that in mainstream consumers’ view, Zhigao has disappeared.

Most fatal of all was internal management disorder. Zhigao air conditioner’s executive president Zhang Ping had frankly pointed out the company’s core chronic ailments: the organizational culture was filthy beyond description; the management team misused authority and wouldn’t stop despite being prohibited; the talent pipeline became disconnected with poor succession and weak connections between generations; and project investments were careless and blind.

This is the most typical “dilemma after growing up” faced by grassroots companies. In the early days of entrepreneurship, the founder’s personal charisma and streetwise loyalty could rally a team and rely on “fighting desperately” to carve out a lifeline through sheer grit. But once the company’s scale exceeded 10 billion yuan and the workforce reached tens of thousands, the marginal returns of this playbook began to diminish.

In 2015, Li Xinghao returned to put out the fire, saying it would “return to the top three of the industry.” But that fire burned only for three years. By 2018, it was again posting a huge loss of 480 million yuan. In 2019, losses expanded to 1.4 billion yuan. That same year, Zhigao Holdings triggered the delisting procedure from the Hong Kong Stock Exchange. On April 4, 2022, Zhigao Holdings was formally removed from the Hong Kong Stock Exchange. The latest development is this bankruptcy liquidation.

A new branch grows from an old tree

With extreme value for money and grassroots streetwise loyalty, Li Xinghao carved out a bloody path through a market crowded with giants. His resilience is the shared underlying trait of that generation of private entrepreneurs.

But when the industry shifted from price wars to technology wars, Zhigao was still using products from a decade earlier to fight the market. Enterprises without technological moats will always be the ones swimming naked in the face of cycle fluctuations, so they are ultimately discarded.

That is the story of Zhigao air conditioners’ rise and fall over more than 30 years—it seems to be over.

But the complexity of the business world is that death and rebirth often happen at the same time.

As early as 2021, driven by local governments, Zhigao had completed a restructuring and asset carve-out of its core business. The core assets of its brand, R&D, production, sales, and after-sales service were all inherited by a new entity, “Guangdong Zhigao Guowu Technology Co., Ltd.” The entity entering this bankruptcy liquidation process is “Guangdong Zhigao Air-Conditioning Co., Ltd.,” the old entity. In other words, the “Zhigao” brand still exists.

At the Canton Fair, the “Zhigao” brand remains bright.

Like an old tree whose main trunk has withered, yet one branch has taken root on the ground and opened new flowers. After its “rebirth,” Zhigao Guowu has demonstrated astonishing resilience in overseas markets. In 2025, against the backdrop that the overall growth rate of the global air-conditioner market was only 3.2%, Zhigao Guowu’s overall sales scale grew by more than 30% year over year. In Europe, Zhigao’s variable-frequency air-conditioner business performed outstandingly. In the EU market centered on Italy and Spain, cumulative sales ranked third, up 23.28%, with market share rising steadily. The Americas market is also strong, with overall sales revenue growing by more than 50% year over year. In Africa, Zhigao has entered the top three brands in key markets such as Nigeria and Algeria.

Whether this branch can grow back into a big tree like Zhigao of the past remains to be seen. But Zhigao’s story serves as a warning bell for those small and medium-sized manufacturing enterprises that also started from the grassroots and fought their way out through value for money. In the view of Long Jian’gang, an experienced urban observer, it offers at least three lessons:

First, the original intention of focusing on real business must not be deviated from. Zhigao’s lesson shows that leaving real business to chase “fast money” in finance and real estate not only can’t make a company bigger, but also undermines its foundation. Entrepreneurs can diversify their layout, but they must ensure the core business is not eroded, and must not turn real business cash flow into a “cash withdrawal machine” for cross-sector moves.

Second, the bottom line of reverence for the rule of law cannot be crossed. Modern corporate governance is not a mere formality that can be optional—it is a firewall that prevents risks. Especially in regions where the private economy is highly developed, shifting from family governance to modern governance is required coursework for companies that want to last long and grow bigger.

Third, the life line of quality and integrity cannot be discarded. Zhigao fell from a king of value for money into a byword for low price and low quality. The root cause was lying flat on R&D and making compromises on quality. When consumer complaints surge and [Download the Black Cat Complaint app] fire incidents become frequent, no marketing myth can salvage the collapse of credibility.

This is also the underlying logic for China’s private economy to get through the cycles and go far: modern institutions and systems are the core backing that supports a company’s continuous growth. Ultimately, what truly enables a company to withstand storms is hard-core core technology, a solid talent system, and the determination to deeply focus on the core business.

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