China’s billionaires are learning yet again that wealth and power are no longer enough to keep them out of trouble.
Anbang Insurance Group Co. said Tuesday that Wu Xiaohui — its chairman, and one of China’s most aggressive overseas dealmakers — was unable to perform his duties for personal reasons. Caijing Magazine, a reputable finance and business publication, said he was taken away for questioning.
Wu is the latest example of the new reality in Xi Jinping’s China: Almost anyone could be hauled away at any time, regardless of cash or connections. Since Xi became party chief in 2012, billionaires and senior Communist Party members alike have been among those rounded up for questioning over corruption, financial crimes or other misdeeds.
While it’s unclear if Wu did anything wrong, his mysterious absence reinforces the strength of Xi, who’s already one of China’s most powerful leaders since Mao Zedong. At the same time, it risks leading to pushback against Xi ahead of a twice-a-decade leadership reshuffle just a few months away — the most significant political event in China’s opaque, one-party system.
“These billionaires are similar to the oligarchs: It gives Xi the opportunity to seize evidence against his political rivals by controlling them before the party reshuffle,” said Zhang Lifan, a Beijing-based historian whose father was a minister under Communist rule before being purged in the Cultural Revolution. “This could possibly stir up resentment among Xi’s rivals and risks causing a backlash against the legitimacy of the Communist Party.”
Part of the reason for the crackdown is economic. A decade ago, authorities were more willing to overlook bribes, risky loans and dodgy transactions as they sought to stoke growth in the world’s second-biggest economy. Now, the focus is on reducing debt and financial risks that threaten to worsen an economic slowdown.
Another aspect is political. Xi made the fight against corruption a cornerstone of his rule, asserting his authority and protecting the Communist Party’s legitimacy even as growth slowed. In the meantime, he’s consolidated his power, securing political accolades that eluded his two immediate predecessors.
“For a strongman leader like Xi, any alternative power base — be it political or financial — is suspect,” said Arthur Kroeber, founding partner and managing director at Gavekal Dragonomics and author of the 2016 book “China’s Economy: What Everyone Needs to Know.” “The ‘insurance’-driven manipulation of domestic markets had clearly gotten out of control by last year.”
China built up a record debt pile in the wake of the global financial crisis, with liabilities now equal to about 264 percent of gross domestic product, according to Bloomberg Intelligence estimates. In April, authorities began to tighten up: the head of the insurance regulator was placed under investigation, and the securities regulator called on the country’s equity exchanges to “show swords.”
Later that month, after the worst losses this year in Shanghai-traded shares, Xi chaired a meeting of the party’s elite Politburo that included the central bank governor and chiefs of the nation’s market watchdogs. His message: Financial security was the basis of a stable, healthy economy.
Anbang, which has since its 2004 founding grown into China’s third-largest insurance company by premiums, came under increased scrutiny following an overseas acquisition spree. It also drew attention with its aborted investment discussions in the proposed redevelopment of 666 Fifth Ave. in New York, the marquee holding of Kushner Cos., the family company of President Donald Trump’s son-in-law Jared Kushner.
Other high-profile figures — including several billionaires — have found themselves in the cross hairs of the government. Prominent financier Xiao Jianhua was taken by agents from a Hong Kong hotel earlier this year and presumed to have been brought back to China, according to local media reports.
Guo Guangchang, the chairman of Fosun International Ltd., another major Chinese firm that has been part of the overseas buying spree in recent years, also disappeared in 2015 for a while to assist authorities in an investigation. While he resurfaced after a few days, it wasn’t before concerns about his fate impacted the company’s shares.
Tycoon Miles Kwok, also known as Guo Wengui, shows the potential risks for Xi. Executives of a company he controls stood trial this month on charges of loan and foreign exchange fraud, the state-owned Xinhua News Agency reported, after Chinese authorities issued a request to Interpol for Kwok’s arrest in April.
Kwok fled the country after the fallout from a corporate feud in 2014 with Peking University Founder Group, a state-owned company. Now in the U.S., Kwok has attracted nearly a quarter-million followers on Twitter with threats to expose corruption among senior members of the Communist Party.
Many wealthy Chinese are looking to follow Kwok overseas. Mainland Chinese citizens make up about 80 percent of applicants for EB-5 visas, a program that grants wealthy foreigners green cards in exchange for investing in U.S. projects, according to a 2015 report from property brokerage Savills Studley Inc.
“The billionaires need the security of a new passport,” said Hu Xingdou, an economics professor at Beijing Institute of Technology. “Anyone could become a criminal overnight.”