Newspaper Probed Amid Mystery of Missing Tycoon

Following reports (quickly censored in China) of the apparent abduction of billionaire Xiao Jianhua—a former dealmaker for CCP elites who is believed to have connections to Xi Jinping himself—from his Hong Kong residence by Chinese agents two weeks ago, a steady flow of media reports on the deepening mystery of his whereabouts continues. Immediately after Xiao’s disappearance, state media denied that Beijing had played any part in it. Shortly thereafter, WeChat statements ascribed to Xiao claimed that he had faith in China’s observance of the rule of law, and that he was simply receiving medical treatment abroad. The statements were later deleted, and an anonymous associate of Xiao’s told the New York Times they were untrue and meant to distract. Last Friday, The New York Times reported on the emergence of security camera video footage believed to show Xiao’s alleged abduction on January 27. From Michael Forsythe and Paul Mozur:

In the early hours of Jan. 27, he was taken out of the Four Seasons Hotel in Hong Kong in a wheelchair, his head covered by a sheet or a blanket, according to people who have seen or been briefed on video footage captured by security cameras in the hotel.

Mr. Xiao, 45, who was not known to use a wheelchair, was accompanied by about half a dozen unidentified men who were also pushing a large suitcase on rollers. He is believed to have been transported by boat from Hong Kong, eluding border controls, and is now in police custody in mainland China, according to two people familiar with the investigation into his whereabouts.

While the reasons for his apparent abduction remain a mystery, it comes ahead of an important Communist Party leadership meeting this year that will fill top posts, leading to speculation that someone powerful may have wanted Mr. Xiao out of the way, or perhaps wanted to use him to silence rivals with whom he has business ties.

Few people are in a position to know more about the financial holdings of China’s leading political families than Mr. Xiao, who made billions investing in banks, insurers and real estate around the world. In the past decade, he has served as a de facto banker to the Communist Party elite.

His disappearance has again raised fears about Chinese encroachment into Hong Kong in violation of the “one country, two systems” rule that allows this former British colony to run its own affairs and bars mainland security forces from operating here. A year ago, the city was outraged when five Hong Kong booksellers disappeared — only to turn up in Chinese custody. […] [Source]

A more recent report from The New York Times’ Forsythe and Mozur claims that at least 30 employees of Xiao’s Tomorrow Group and its subsidiaries have been barred from leaving China, while another employee was detained at the Hong Kong airport:

It has become increasingly apparent that Beijing’s dragnet extends far beyond the billionaire, , and is now closing in on dozens, if not hundreds, of his employees in one of the most far-reaching crackdowns on a private Chinese conglomerate in the nearly four decades since the country began to embrace free markets.

[…] In another development, an employee who worked on the computer systems at Mr. Xiao’s companies was detained at the Hong Kong airport on Sunday evening, suspected of committing passport violations while trying to fly to Japan, the people familiar with the matter said.

[…] The moves signal that Mr. Xiao, 45, is in serious trouble and that his companies are unlikely to be spared amid a widening crackdown.

Companies under Mr. Xiao’s Tomorrow Group, which was founded in 1999, control tens of billions of dollars in assets, and its holdings have included stakes in more than 30 financial institutions, including Ping An, one of China’s biggest insurers, as well as Harbin Bank and Industrial Bank. [Source]

At Caixin Global, Yue Yue and Han Wei report that Securities Daily, a state-backed securities industry newspaper, is also now under investigation, while its president Xie Zhenjiang has been removed from his post. The sacking of Xie and investigation into the paper is believed to be linked to Xiao’s case, as Xiao’s Tomorow Group has been in control of the paper’s business side for years:

Xie Zhenjiang, 63, has been removed from his post as the president of Beijing-based Securities Daily and chairman of Securities Daily Media Co., the newspaper’s business arm listed on the New Third Board for small- and medium-sized enterprises, sources said. Xie has been expelled from the Communist Party for serious disciplinary violations, they added.

The newspaper has been ordered to undergo a two-month “rectification” for various business issues, sources said. It is unclear what the rectification is about and whether the company’s normal operations would be disrupted.

[…] “We have been controlled by Tomorrow Group for many years. It is an open secret at the newspaper,” said the source, adding the newspaper’s business head has always been appointed by Tomorrow Group.

Another source from the Securities Daily said by controlling the business side, Tomorrow Group has constantly intervened the newspaper’s editorial decisions. It has forced the newspaper to made public apologies to some companies for negative reports and sent a list of firms to the editorial team asking them not to criticize them. Most companies on the list are subsidiaries and affiliates of Tomorrow Group, said the source. [Source]

At the Los Angeles Times, Jonathan Kaiman reports further on the streams of speculation surrounding the deepening mystery of Xiao’s whereabouts—noting that the investigation into Securities Daily seems to lend credibility to theories that Xiao’s case may be related to a financial sector crackdown. Kaiman also examines how his apparent abduction by mainland security forces has many in semi-autonomous Hong Kong on edge:

The news has fueled speculation that Xiao’s disappearance may be related to a financial industry crackdown. The head of China’s securities regulator, Liu Shiyu, told an official meeting on Feb. 10 that China will “capture” a group of tycoons living abroad and “bring them back to the mainland” to face justice in relation to a stock market rout in summer 2015, which knocked an estimated $3.2 trillion in value from global markets.

[…] Yet experts say the timing of Xiao’s disappearance may be related to a major Chinese political meeting scheduled for October, when Xi — widely considered China’s most powerful leader since Mao Tse-tung — is expected to further consolidate his authority.

[…] In 2012, a company owned by Xiao bought at least $2.4 million worth of shares from Xi’s sister and brother-in-law, Qi Qiaoqiao and Deng Jiagui, according to a 2014 investigation by the New York Times. “If [Xiao] were in Hong Kong, it’s possible that he might spill the beans regarding family financial transactions of the Xi Jinping clan,” Lam said. “So they might want to keep him quiet.”

Hong Kong, a semi-autonomous Chinese territory of 7.3 million people, is geographically joined to southern China. Yet the city is governed under a “one country, two systems” framework, granting its residents civil liberties that are unthinkable on the mainland, including an independent judiciary, an uncensored Internet and a relatively freewheeling press.

Many Hong Kong residents feel that the “two systems” part of the agreement is under siege. […] [Source]

At The Guardian, Benjamin Haas reports further on how Xiao’s disappearance and the suspicion that Beijing is behind it has piqued concern in Hong Kongespecially for businessmen with ties to the mainland. Xiao’s disappearance comes on the heels of the disappearances of five Hong Kong booksellers last year, one of whom was reportedly brought to China by state security personnel.

“There’s an increasing tendency of Hong Kong becoming more and more like just another Chinese city,” said Anson Chan, the former lawmaker and number two official in Hong Kong. “How else can we compete as a global city other than holding on to the rule of law, the independence of the judiciary and rights and freedoms, particularly freedom of expressions and free flow of information?

[…] Beijing will not allow tycoons to “suck the blood of retail investors”, Liu Shiyu, chairman of China Securities Regulatory Commission, said at a meeting on Friday, without directly naming Xiao. China’s stock markets experienced a politically embarrassing rout in 2015, erasing £4 trillion in stock value and severely denting the reputation of the country’s nascent markets.

[…] “There used to be a feeling that if you invested with politically powerful people you were safe, but Xiao’s disappearance shows that doesn’t work,” said a businessman in Hong Kong with extensive dealings in China who asked not to be named. “A lot of people are wondering: if I can get snatched from my home in the middle of the night, is this worth it?”

[…] “For anyone that has illusions Hong Kong is some kind of safe haven, they are lying to themselves. If China wants to arrest you, they will,” the businessman said. “Most people just hope they can get themselves, their family and their money out of Hong Kong before the Chinese can catch up with them.” […] [Source]

As we wait for more details on Xiao Jianhua’s case and whereabouts to emerge, a post from the Chinese Politics from the Provinces blog warns against jumping to conclusions about the reasons for Xiao’s disappearance or its political impact.