Fleeing the scene

Peng: whereabouts unclear

It’s the vacation season for beleaguered bosses around the globe but in China a few of them have headed off on holidays from which they did not intend to return.

Yang Zhizhui, the chairman of casino operator Landing International, was one of the runaways making headlines last week, when his company told the Hong Kong stock exchange that it couldn’t get in touch with him.

A news outlet in the city thought it had a good lead on Yang’s location, publishing photos that purported to show the former billionaire being detained by police in Cambodia.

The whereabouts of Li Xiaozhen, who in July was appointed chairman of Steyr Motors, a diesel engine maker, have been unknown since he was reported as missing a week ago, however.

Peng Xiaofeng, a former tycoon who built LDK Solar into one of China’s largest photovoltaic firms a decade ago, is another business figure who has been failing to return phone calls.

Overproduction and anti-dumping duties brought down LDK in 2011 and he later resigned as chairman. He reinvented himself at another solar manufacturer called SPI Energy, which he took public on Nasdaq two years ago, but state media has since named Peng on the most-wanted list after suggestions he has fled overseas.

Reportedly, he has fallen foul of the authorities for illegal fundraising through Solarbao, a peer-to-peer (P2P) lending platform. Solarbao claimed it could find funding for solar manufacturers while delivering higher returns for its investors than bank deposits.

Crises like these seem to come round in cycles. Back in 2011 we reported on another round of runaways after a shakedown in the shadow banking sector. Wenzhou, where the most reckless lending was happening, was home to most of the disappearing acts (see WiC124).

A worsening of the economic climate pumped up the pressure again at the start of 2016, although this time it was P2P lending that was more of a culprit (see WiC313). The by-product was the same when company heads started to vanish. Indeed, instances of runaway bosses were so common in parts of Jiangsu that Jinling Evening News recently said they were no longer newsworthy.

The kingpins at smaller firms caught up in the cash crunches get itchy feet the fastest when conditions turn nasty. Many of these minnows have been trying to muddle through in cashflow terms. When the financing options start to fizzle out, their owners start to panic.

However, it’s not just the small fry who suffer from speculation that their leaders have left their posts.

Last year we reported how shares in Huishan Dairy were decimated in Hong Kong when it was confirmed it was having trouble reaching its treasurer, Ge Kun (see WiC360).

Some of the renegade bosses that have escaped from China live out their lives in exile. More commonly they are shamed into early retirement at home after admitting to their mistakes or misbehaviour. In the most serious cases they disappear from public view for lengthy periods before resurfacing in news reports of jail time.

Others see no way out other than suicide. Our first mention of this most desperate means of departures involved a former billionaire from Inner Mongolia in WiC109. This summer rumours swirled after the untimely death of Wang Jian, the chairman of HNA Group, who fell off a wall during a holiday in France (see WiC417).

The other factor that has forced hundreds of bosses to pack their passports is the threat of Xi Jinping’s anti-corruption teams. Bloomberg reckons that Xi’s anti-corruption campaign has snared more than 1.5 million Party members since 2013.

But investigators are now turning their attention to the corporate world in a bid to slow the debt-driven expansion of the country’s biggest businesses. A band of successful businesspeople had already become so fearful of being brought in for questioning four years ago that they high-tailed it to Hong Kong, where they all holed up at the same luxury hotel (see WiC263).

Xiao Jianhua, one of the exiles, then vanished abruptly from the city amid reports that he was bundled back across the border by mainland security agents (see WiC354).

That was still a better outcome than the cases of the 312 civil servants from China said to have suffered “unnatural deaths” in the eleven years to mid-2014, according to a study published by three academics earlier this year.

Depressingly, suicide was the major contributor to the fatalities, with ‘fear of punishment’ cited as one of the most important factors.

The latest ‘fugitive news’ emerged on Wednesday with state broadcaster CCTV reporting on the arrest pf Zhu Yidong, the chairman of FX Group, and his pending extradition (from an unspecified country). He had fled the country in June after his Shanghai-based financial group defaulted on bank loans and payments to retail investors. The latter had demonstrated outside the Bank of Shanghai demanding compensation for their losses having bought FX Group wealth management products from the bank’s staff (Bank of Shanghai says staff were not authorised to sell them). Zhu was declared guilty of stock market manipulation earlier in the summer and looks likely to face jail time.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.