China’s top tech banker Bao Fan is missing

3 Min
China’s top tech banker Bao Fan is missing

When the investment bank China Renaissance Holdings said it had lost touch with Mr Bao Fan, its prominent founder, it sent shudders through the investment community, says a report on The Strait Times while noting that it is not uncommon for executives to go “missing” in China, a country with a murky legal system. Sometimes they return to work, sometimes they go to prison.. It adds that many see the Bao Fan episode as another clampdown on the country’s financial industry in the works.

The Strait Times report says

“Bao, 52, is one of China’s most prolific dealmakers. He is known for being able to broker difficult mergers and acquisition cases, such as the ones that led to the formation of Didi Global and Meituan. A former Morgan Stanley and Credit Suisse banker, Mr Bao is well-known in China’s business circles for his sprawling connections across industries.

“Although Beijing-based China Renaissance, which is listed in Hong Kong, said on Feb 16 that its operations remain unaffected by Mr Bao’s absence, the news sent its stock down as much as 50 per cent the following morning. Mr Bao’s family has been told he was assisting with an investigation likely related to former China Renaissance president Cong Lin, a person familiar with the matter told Bloomberg News.

“Increasingly in China, a suddenly absent boss has come to signal a crackdown or investigation by authorities. In many cases, the person is said to be “assisting” graft probes, or becomes the subject of an investigation into corruption or financial crimes in China. Oftentimes, the companies themselves report they have lost contact with the boss and need to make their own inquiries into what happened within China, a country that has opaque disciplinary procedures.

“It is not uncommon for executives in China to become unreachable when they are involved in a government probe. Some were later found to have been detained by the authorities, while others eventually returned to their jobs. In 2015, Fosun chairman Guo Guangchang briefly disappeared, to help with a government investigation. He later re-emerged, vowing to ensure the business was not reliant on any one individual.

“Financier Xiao Jianhua, who ran China’s Tomorrow Holding Co. empire, was taken away from Hong Kong by the Chinese authorities in January 2017, the South China Morning Post reported at the time. In August 2022, Xiao was sentenced to 13 years in prison after the Chinese authorities found him guilty of illegally obtaining public deposits, breach of trust, bribery and the illegal use of funds.

“In August 2018, casino operator Landing International Development reported its then chairman Yang Zhihui had disappeared. But he then returned to the job three months later with the explanation that he was assisting the authorities with an investigation. In November 2022, however, Landing said it had suspended Mr Yang after the Securities and Futures Commission of Hong Kong started legal proceedings against him alleging, he had breached fiduciary duties related to other business dealings.

“Bosses that go missing underscore a big challenge for China investors: key man risk. When Chinese executives synonymous with their companies come under fire, it typically sparks a tumble in the stock market valuation and investors pay the price. While key man risk is an issue around the world, it can be particularly acute in China because the nation’s corporate founders play outsized roles.

“Take the prolonged absence of Alibaba Group Holding’s founder Jack Ma. Although Mr Ma was never reported “missing”, Alibaba shares took a beating after he disappeared from the spotlight in November 2020, after the authorities torpedoed an initial public offering for affiliate Ant Group. It also heralded the coming crackdown on China’s entire tech sector. Ant said this year that Mr Ma, who has kept a relatively low profile ever since, was ceding control of the company.

“It is not clear, but Mr Bao’s disappearance has certainly fuelled investor jitters. In late 2021, Chinese President Xi Jinping launched a broad anti-corruption probe targeting the nation’s US$60 trillion (S$80.18 trillion) financial sector, which has brought down dozens of officials.

“The probe also implicated the investment banking community, ensnaring bankers from brokerages including Everbright Securities and Guotai Junan Securities. This year, China is poised to name regulatory veterans known for their strict campaigns against financial wrongdoing as new chiefs of the country’s banking and securities watchdogs”.