Lai Xiaomin, the former head of a state-owned asset management company was sentenced to death on January 5 for bribery, corruption, and bigamy. Lai led China Huarong Asset Management until his 2018 expulsion from his public duties and the Party, and was subsequently accused of accepting $277 million of bribes over the course of a decade. He stands to become one of the few high-ranking officials, or “tigers,” to be executed for financial crimes in recent years. At The New York Times, Alexandra Stevenson situated Lai’s arrest within Xi’s signature corruption crackdown:
Mr. Lai, 58, was among the highest-profile figures to fall from grace amid a sweeping crackdown on corruption by Xi Jinping, China’s top leader. Mr. Lai was kicked out of the Communist Party in 2018 for violating party law and regulations, including abusing his power for sex. He confessed to taking cash bribes last year in a televised show on state media.
The unusually harsh sentence could send a signal that Mr. Xi is not ready to ease his anticorruption campaign, which he began shortly after he took control of the Communist Party in late 2012. The campaign has taken down some of his most powerful rivals. But it has also helped him contain concerns in China that party officials were becoming increasingly corrupt.
[…] A high-profile death sentence will send a message, though its interpretation depends on the audience, said Joshua Rosenzweig, the deputy regional director for east and Southeast Asia at Amnesty International.
[…] “This could be a message to the public that the Xi regime is still treating corruption as a serious issue, or it could be a message to the business elite in China that they need to keep their noses clean,” Mr. Rosenzweig said. “Or it could be a message to both.” [Source]
Lai Xiaomin, former chairman of Huarong Asset Management, was sentenced to death today.
Death penalty has been rarely used to punish corruption since the Xi new era. As far as I know, Lai is the first centrally-managed-cadre 中管干部 sentenced to death for corruption since 2012. pic.twitter.com/7DdJVWIl1t
— 𝐋𝐢𝐧𝐠 𝐋𝐢 (@lingli_vienna) January 5, 2021
In a statement issued after the ruling, China Huarong said: “The severe treatment of Lai Xiaomin reflects the strong determination of the Central Committee with President Xi Jinping as the core to administer the party and its zero tolerance in punishing corruption.” Lai’s corruption was tabloid, and state-media, fodder. A five-episode CCTV documentary on his alleged crimes, aired in early January of 2020, showed footage of an apartment filled with cash-stuffed cabinets, drawers, and safes. Lai called it “the supermarket.” Caixin reported that Lai had over 100 mistresses, owned over 100 homes, and had three tons of cash tucked away in an apartment.
This will be a fascinating story if it is ever written (and published). For years before his arrest in 2018 I had heard crazy rumors from my friends and former students about Lai Xiaomin and the company he ran, China Huarong Asset Management (one of…https://t.co/g5uQIYUQWT
— Michael Pettis (@michaelxpettis) August 12, 2020
…stashed away in an apartment is not a total surprise. I suppose if you have two wives, two families, and “more than 100” lovers, you do have to cut the occasional corner.
— Michael Pettis (@michaelxpettis) August 12, 2020
#CCP official Lai Xiaomin(https://t.co/UrfjlEZOVB) & his cash wall. He has embezzled 1.79 B yuan ($257.7 M), bought 100+ houses for each of his mistresses and managed them well. He hid 270 M yuan ($38.85M) in one of his houses in Beijing and called this place "Supermarket". pic.twitter.com/vQuE46BxxS
— Jennifer Zeng 曾錚 (@jenniferatntd) August 16, 2020
Lai’s punishment stands out for its severity. Although China executes more prisoners than any other country in the world, according to Amnesty International, death sentences for government officials are extremely rare. In his newsletter Pekingnology, Zichen Wang stressed that Lai’s harsh sentence was due “first and foremost” to his position as “a cadre and official of the Communist Party of China and the Chinese state… the conviction is based on that identity.” At The Wall Street Journal, Chao Deng explained China’s death penalty laws, and examined its recent application in political cases:
By Chinese law, officials can face the death penalty, either by firing squad or lethal injection, for bribery totaling as little as three million yuan. Still, Chinese courts seldom resort to the death penalty for corruption, and accounts of financial bribery in China frequently total in the tens of millions of yuan.
The former head of regional Hengfeng Bank in eastern Shandong province was sentenced to death last year for accumulating illegal gains amounting to more than 10 billion yuan, but the sentence came with a two-year reprieve, meaning it will likely be converted to life imprisonment.
[…] In the few cases involving a death sentence in recent years, Zhang Zhongsheng, the former vice mayor of a coal-mining town in northern Shanxi province, was executed in 2018 after being convicted of accepting more than 1 billion yuan in bribes.
Zhao Liping, a former police chief in Inner Mongolia, was executed in 2017 for murdering a woman and accepting bribes of more than two million yuan. [Source]
Lai’s sentence did not include a two-year reprieve, making it likely that he will be executed. A Bloomberg News interviewee suggested that Lai’s sentence would remind officials about the steep penalties for corruption under Xi Jinping:
Mo Shaoping, a Beijing-based lawyer, said it’s rare that bribery cases result in the death penalty with many ending up being reprieved to life in prison. But in this case “the amount of corruption is particularly huge, likely the biggest in recent years,” Mo said. “The case has also sparked public outrage. Under the current environment, a death sentence is definitely sending a warning — and mostly importantly — shattering the belief that corruption isn’t punishable by death.” [Source]
China Huarong Asset Management, the company Lai led until his downfall in 2018, was one of four asset management companies (AMCs) founded in 1999 to help state-owned corporations offload bad loans. Under Lai’s leadership, China Huarong aggressively expanded into new financial fields. The company lent money to already over-leveraged private corporations, including HNA and Anbang, sparking regulators’ ire. At the time of Lai’s arrest in 2018, Dinny McMahon wrote that the detention was a regulatory signal aimed at the AMCs, warning them to abandon their lending practices and limit themselves to assuming state-owned corporations’ debt. Xi Jinping’s top economic advisor Liu He reportedly scrutinized China Huarong’s lending practices, possibly triggering his arrest. From Tom Mitchell for The Financial Times:
Huarong was one of four asset management companies originally established in 1999 to take bad debts off China’s largest state-owned banks, in order to help them lower their non-performing loan ratios and prepare for stock market listings. The four AMCs absorbed bad loans with a total face value of $800bn, although their market value was a fraction of that amount.
[…] Under Lai’s leadership, Huarong raised vast amounts of capital and expanded aggressively into investment banking services. In the five years through 2018, China’s four largest AMCs raised more than $100bn from debt markets, with Huarong accounting for about half of their total issuance.
[…] Huarong’s rapid expansion, as well as the high-yield loans its investment bank clients sometimes struggled to repay, eventually attracted scrutiny from regulators as President Xi Jinping’s top economic adviser, vice- premier Liu He, ramped up a series of campaigns against risky financial practices. [Source]