Banking & Finance

Tomorrow: yesterday’s firm?

Troubled financial group fires back at ‘nationalisation’ push

Xiao-Jianhua-w

Xiao Jianhua, the fallen financier

Anbang Insurance and Tomorrow Group were two of China’s fastest growing financial powerhouses – that is, until they fell foul of the regulators in the aftermath of the infamous stockmarket meltdown of 2015. The pair have since dwindled in scale and clout. Tellingly, two state-backed firms are being primed instead as “aircraft carrier” investment banks as China’s financial markets start to open up to more international competition (see last week’s Talking Point).

The formerly buccaneering Anbang has been renamed Dajia, which means ‘everyone’ in Chinese, following its nationalisation two years ago. Its founder Wu Xiaohui was sentenced to 18 years in prison and ordered to forfeit Rmb10.5 billion ($1.65 billion) in assets after being found guilty of fundraising fraud and embezzlement.

Wu was arrested in June 2017, just a few months after Tomorrow’s controller Xiao Jianhua had been spirited out of Hong Kong’s Four Seasons hotel (where he had been residing for some time) and ferried across the border back into mainland China (see WiC354).

While Wu’s case seems done and dusted, there hasn’t been much news of Xiao’s whereabouts for more than three years. But if the proceedings against Wu and Anbang are anything to go by, the final verdict on Xiao might soon be made public. Wu’s first trial was held in early 2018 shortly after the government said it would take temporary control of Anbang (see WiC399). And financial regulators finally announced last week they would also seize control of several insurers, trust firms and brokerages controlled by Tomorrow.

Two years ago newspapers in Hong Kong and Taiwan reported that a “very cooperative” Xiao was under “vacation-style investigation” in a Shanghai hotel while regulators worked to untangle his sprawling financial empire (said to constitute interests in hundreds of listed companies and financial firms). Tomorrow’s key banking asset, Baoshang Bank, came under state control earlier this year (see WiC454).

While a fuller nationalisation of the disgraced firm is widely anticipated, the company’s public reaction to the events that played out last week was rather more unexpected.

A four-point statement on Tomorrow’s official WeChat account on Saturday expressed its deep discontent with how the process has been handled. It had been fully collaborating with the government’s investigations since Xiao “was returned” to the mainland in 2017, the company said. Despite being “stripped of any autonomous management” and with “normal movements of staff curtailed”, the group had raised more than Rmb300 billion over the last three years, it added.

“So far we have not spent one penny from the state. We don’t have a single unit running into liquidity risk. And there has been not a single credit event involving the public. We have not stoked a single incident of public protest,” the statement claimed (perhaps a reference to a wealth management product issued by Bank of China that saddled investors with heavy losses when the oil price plunged earlier this year; see WiC493).

Xiao’s trial could offer insights on whether he endorsed the unsigned statement or if it was more the work of his discontented executives. But he might want to absorb a lesson from Anbang’s Wu (the grandson-in-law of Deng Xiaoping) who appealed against his 18-year jail term. The appeal failed and the Shanghai court ordered the punitive confiscation of a further Rmb75.2 billion worth of Wu’s personal assets, according to a legal document published by a weibo celebrity last September. The same amount was mentioned in an open letter apparently penned by Wu’s mother, who has been trying to get the original verdict on her son overturned.

If a senior hongerdai (or ‘second- generation red’) failed to get the court to find in his favour on appeal, a financier with a far lesser political pedigree might be better advised to dial down the protests and accept the first verdict…


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