Unanswered Questions Over Missing Tycoon

Following last week’s disappearance of billionaire from his hotel room in Hong Kong, his current whereabouts and other details about his circumstances remain unclear. While initial reports said he was abducted by mainland security agents, subsequent statements attributed to Xiao and his business associates claimed that he was outside China receiving medical treatment. A new report from South China Morning Post, citing unnamed sources, now says that Xiao is in China, assisting police with various investigations, but that he entered the country through “normal border control procedures.”

The sources said Xiao had been negotiating with mainland authorities about returning to help with investigations, including ones covering bribery and stock market manipulation.

Xiao was said to be allowed to contact his family and was able to direct his company’s business through close associates, as the authorities wanted to contain the impact of the case on financial markets. Xiao directly or indirectly controls dozens of financial and insurance ­firms.

Four visitors from the mainland met Xiao in Hong Kong on January 27 at a prearranged rendezvous, said the sources, who asked to remain anonymous. He had been friends with two of them for years, and the other two were “negotiators” he did not know, they said.

One source said none of the visitors were mainland law enforcement personnel. After the meeting, Xiao agreed to go the mainland with them, but asked that his two female bodyguards come with him, he said. [Source]

Xiao, the founder of Tomorrow Group and a China-born Canadian citizen, is one of China’s richest men, and has close financial ties to some of the country’s most politically elite families. His disappearance immediately generated discussion on the internet, most of which has since been censored. From Julie Zhu and Venus Wu at Reuters:

Xiao’s disappearance has sparked widespread media speculation that he has been drawn into Chinese President Xi Jinping’s crackdown on corruption, which has ensnared a string of Chinese executives.

[…] When news of Xiao’s disappearance in Hong Kong began breaking early last week, searches on Chinese search engines and social media for him generated many results, mostly links to reports related to statements he had issued via his company, Tomorrow Holdings, a financial group headquartered in Beijing.

But those posts and most reports related to Xiao have disappeared, with search results only bringing up reports about him from several weeks earlier.

According to Freewechat.com, which tracks censored or deleted posts on China’s biggest social network, WeChat, more than 40 articles with the keyword Xiao Jianhua had been censored since Jan. 30. [Source]

Soon after his detention, propaganda authorities in China issued a directive asking Weibo, WeChat, and other online forums to delete references to his case.

The details and circumstances of Xiao’s disappearance remain a mystery, but several observers believe that it is linked to preparations for the upcoming change in leadership at the this fall. His disappearance came one day after another business mogul, Guo Wengui, gave an interview in which he made a series of allegations against politicians and business leaders. From Nectar Gan at the South China Morning Post:

The curious circumstances surrounding how Xiao Jianhua, a well-connected mainland tycoon, vanished from a Hong Kong luxury hotel on the eve of the Lunar New Year has sparked speculation.

Analysts and people familiar with the matter said the timing of the investigation showed that Beijing was trying to avoid any surprises ahead of a key party congress later this year, and was stepping up control of tycoons like Xiao who could reveal inside deals or cause market swings. At the same time, the questioning of Xiao, who reportedly did business with family members of China’s state leaders, would send a signal that Beijing would not tolerate businessmen who pursued fishy deals by involving well-connected partners, analysts said.

[…] “Bringing Xiao back to the mainland was a precautionary measure to prevent incidents like Guo’s from occurring again, because this kind of disclosure was too deadly [for the leadership],” said Zhang Lifan, a political commentator in Beijing.

“Xiao may have served more [leaders’] families and know more than Guo does … with Xiao in their hands, they can order him to reveal things according to their needs,” he said. [Source]

While it is not yet fully clear how Xiao was transported to China and by whom, Minxin Pei posits that it was orchestrated at the highest levels in Beijing  in order to protect possible secrets that leaders fear could be released ahead of the Party Congress:

Legally, Chinese security agents are not allowed to operate in Hong Kong, let alone kidnap a foreign citizen in the former British colony (Xiao holds a Canadian passport and, under Chinese law, is no longer a Chinese citizen.) Bundling up a well-protected foreign national and springing him across the border into China is a lawless act. In addition, Xiao’s previous business dealings with some politically influential mainland Chinese only reinforce the suspicion that he is a pawn in the vicious power struggle raging at the top of the Chinese leadership.

It is unlikely that the abduction was a rogue operation authorized by low-level Chinese officials; the most plausible explanation is that Xiao has intimate knowledge of business transactions involving top Chinese leaders and their families. Such information, if obtained by rival factions in Beijing, could become political dynamite on the eve of the Communist Party’s 19th congress, scheduled for later this year. [Source]

Xiao is one of several business tycoons who have been taken in for questioning, detained, threatened, or mysteriously disappeared in recent months. As Ben Chapman of The Independent writes in summing up some recent cases: “Chinese billionaires and company bosses keep vanishing. Most reappear days later; others end up in prison or fall from buildings.” AFP reports on the complex web of relations between the political elite and the business tycoons who rely on them:

In China, company chiefs need the backing of the Communist Party to get rich, but they also need it to survive.

It is a relationship that — when the political winds change — can leave them out to dry, experts say.

“Chinese businessmen know their country, and they all know that they must have the support of the authorities,” said Jean-Pierre Cabestan, a professor at the Baptist University of Hong Kong.

“Every day, local Communist Party officials receive gifts from company bosses… who need protection.” [Source]

Xiao’s disappearance has also raised concerns in Hong Kong over mainland law enforcement’s overreach in the territory. It comes on the heels of last year’s detention of five Hong Kong publishers and book sellers, one of whom, Lee Bo, was reportedly brought to China from Hong Kong by mainland security agents.