Business
Why do Chinese billionaires keep vanishing?
The disappearance last month of technology industry dealmaker Bao Fan has rekindled interest in a recent Chinese phenomenon – vanishing billionaires.
The founder of China Renaissance Holdings – with a client list that has included internet giants Tencent, Alibaba and Baidu – is seen as a titan in the country’s tech sector.
Mr Bao’s case has followed a well-trodden path: he went missing for days before his company announced that he was “co-operating in an investigation being carried out by certain authorities in the People’s Republic of China“.
As has also become customary, there has been no word yet on which government body is carrying out the probe, what it is about or Mr Bao’s whereabouts.
The mystery shrouding his disappearance comes after a number of Chinese business leaders have gone missing in recent years, including Alibaba boss Jack Ma.
While vanishing billionaires tend to get much more attention, there have also been a number of less publicised cases of Chinese citizens going missing after taking part in, for example, anti-government protests or human rights campaigns.
Mr Bao’s disappearance has once again shone a spotlight on the view that this is one of the ways that President Xi Jinping is tightening his control of China’s economy.
It came in the run-up to the annual National People’s Congress (NPC), a rubber-stamp parliament, at which plans for the biggest overhaul in years of China’s financial regulatory system were announced this week.
A new financial regulatory watchdog will be set up to oversee most financial sectors. Authorities said this would close current loopholes caused by multiple agencies monitoring different aspects of China’s financial services industry, worth trillions of dollars.
In 2015 alone, at least five executives became unreachable, including Guo Guangchang, chairman of conglomerate Fosun International, which is best known in the West for owning English Premier League football club Wolverhampton Wanderers.
Mr Guo went missing in December of that year, with his company announcing after his reappearance that he had been assisting with investigations.
Two years later Chinese-Canadian businessman Xiao Jianhua was taken from a luxury hotel in Hong Kong. He had been one of China’s richest people and last year was jailed for corruption.
In March 2020 billionaire real estate tycoon Ren Zhiqiang vanished after calling Mr Xi a “clown” over his handling of the pandemic. Later that year, after a one-day trial, Mr Ren was sentenced to18 years in prison on corruption charges.
The most high-profile disappearing billionaire was Alibaba founder Jack Ma. The then-richest person in China vanished in late 2020 after criticising the country’s financial regulators.
The planned mega-listing of shares in financial technology giant Ant Group was shelved. And despite donating almost $10bn (£8.4bn) to the ‘Common Prosperity’ fund, he has not been seen in China for more than two years. He has also not been charged with any crimes.
Mr Ma’s whereabouts remain unclear, although there have been reports of him being seen in Japan, Thailand and Australia in recent months.
The Chinese government insists the actions taken against some of the country’s richest people are purely on legal grounds and has pledged to root out corruption. But Beijing’s actions also come against the backdrop of decades of liberalisation of what is now the world’s second largest economy.
This opening up helped to create a swathe of multi-billionaires who, with their immense wealth, had the potential to wield considerable power.
Now, some observers say, under Mr Xi, the Chinese Communist Party wants that power back and it is going about the task in ways that are often clouded in mystery.
The theory goes like this: Big business, especially the technology industry, saw its power grow under the policies of Mr Xi’s predecessors Jiang Zemin and Hu Jintao.
Prior to that, Beijing’s focus had been on traditional centres of power, including the military, heavy industry and local governments.
While maintaining a tight grip on these areas, Mr Xi has widened his focus to bring even more of the economy under his control. His Common Prosperity policy has seen major crackdowns in much of the economy, with the technology industry coming in for particular scrutiny.
“Sometimes, these incidents are orchestrated in a way to send a wider message, particularly to a specific industry or interest group,” Nick Marro from The Economist Intelligence Unit told the BBC.
“At the end of the day, it does reflect an attempt at centralising control and authority over a certain part of the economy, which has been a key feature of Xi’s governance style over the past decade,” he added.
“Beijing remains focused on ensuring that big technology platforms and players do not develop their own brands and influence that makes them difficult to rein in and more likely to go against Beijing’s preferences,” Paul Triolo, head of China and technology policy at global advisory firm Albright Stonebridge Group said.
Also key to Common Prosperity is the rule of law and that the rules must apply to rich or poor alike.
Beijing maintains that the policy is aimed at narrowing the widening wealth gap, which many agree is a major issue that could undermine the Communist Party’s position if left unaddressed. The country has seen growing inequality – and Mr Xi is said to face pressure from ultra-leftists who want to move closer to the party’s socialist roots.
The mystery surrounding the billionaires’ disappearances as well as wider concerns over Beijing’s approach to business may have significant unintended consequences.
Some China watchers suggest the government risks deterring new business talent.
“The danger for Beijing in making targets out of tech billionaires is putting more pressure on technology entrepreneurs hoping to become the next Jack Ma,” Mr Triolo said.
Mr Xi appears aware of the risk of spooking business sentiment, and in a speech to NPC delegates this week he stressed the importance of the private sector to China.
But he also called on private enterprises and entrepreneurs to “be rich and responsible, rich and righteous, and rich and loving”.
Besides the announcement of a new financial watchdog, bankers were also warned last month to not follow the example of their “hedonistic” Western counterparts.
Commentators see this as further evidence that Mr Xi has the financial system in his sights.
“In recent months, we’ve been seeing hints of the Common Prosperity agenda bleed into financial services, particularly in regards to remuneration and bonus schemes for senior executives, as well as the pay gaps between management and junior staff,” Mr Marro said.
It remains to be seen whether or not Mr Xi’s crackdown on billionaires will help him significantly tighten his grip on power.
What is certainly at risk though is confidence in China’s financial markets, businesses and ultimately the economy as a whole.
Reports /TrainViral/
The prospective new owner of Royal Mail has said he will not walk away from the requirement to deliver letters throughout the UK six days a week, as long as he is running the service.
“As long as I’m alive, I completely exclude this,” Czech billionaire Daniel Kretinsky told the BBC.
Mr Kretinsky has had a £3.6bn offer for Royal Mail accepted by its board.
Shareholders are expected to approve the deal in the coming months, but the government also has a say over whether it goes ahead.
Currently the Universal Service Obligation (USO) requires Royal Mail to deliver letters six days a week throughout the country for the same price. But questions have been raised over whether the service could be reduced in the future.
In an exclusive interview with the BBC, Mr Kretinsky also said he would be willing to share profits with employees, if given the go-ahead to buy the group.
However, he appeared to reject the idea of employees having a stake in Royal Mail, which unions have called for in exchange for their support.
The Royal Mail board agreed a £3.6bn takeover offer from Mr Kretinsky in May for the 500-year-old organisation, which employs more than 150,000 people. Including assumed debts, the offer is worth £5bn.
But because Royal Mail is a nationally important company, the government has the power to scrutinise and potentially block the deal.
As well as keeping the new government on side, Mr Kretinsky also faces the task of convincing postal unions that the proposed deal will benefit employees.
The USO is a potential sticking point for both the government and unions.
Royal Mail is required by law to deliver letters six days a week and parcels five days a week to every address in the UK for a fixed price.
How well this has actually been working in practice is a different matter. Ten years ago, 92% of first class post arrived on time. By the end of last year it was down to 74%, according to the regulator Ofcom.
Last year the regulator fined Royal Mail £5.6m for failing to meet its delivery targets.
Royal Mail has been pushing for this obligation to be watered down. It wants to cut second class letter deliveries to every other weekday, saying this will save £300m, and lead to “fewer than 1,000” voluntary redundancies.
‘Unconditional commitment’
Mr Kretinsky has committed in writing to honouring the USO, but only for five years.
And after that, in theory, the new owners could just walk away from it.
However, Mr Kretinsky told the BBC: “As long as I’m alive, I completely exclude this, and I’m sure that anybody that would be my successor would absolutely understand this.
“I say this as an absolutely clear, unconditional commitment: Royal Mail is going to be the provider of Universal Service Obligation in the UK, I would say forever, as long as the service is going to be needed, and as long as we are going to be around.”
Mr Kretinsky added that the written five-year commitment was “the longest commitment that has ever been offered in a situation like this”.
Another potential stumbling block for the deal, however, is how the company will be structured.
Unions would like to see the company renationalised, but Dave Ward, general secretary of the Communication Workers Union (CWU), told the BBC that would be “difficult in the current political and economic environment”.
Instead, what the CWU is pushing for is “a different model of ownership” – that is, where the employees part-own the business.
To get its support for the takeover, the union wants employees to share ownership of the company, along with other concessions including board representation for workers.
It says profit sharing is “not going to be enough to deliver our support and the support of the workforce”.
If the union doesn’t get what it wants, it won’t rule out industrial action, Mr Ward said. Its members went on strike in 2022 and 2023.
Although Mr Kretinsky said he is “very open” to profit sharing, he is not in favour of shared ownership.
“I don’t think the ownership stake is the right model,” he said. “The logic is: share of profit, yes, [but an] ownership structure creates a lot of complexity.
“For instance, what happens if the employee leaves? He has shares, he is leaving, he is not working for the company, he [still] needs remunerating.”
Mr Kretinsky said he didn’t want to create “some anonymous structure” but instead “remunerate the people who are working for the company, and creating value for the company”.
The union is also concerned about job losses and changes to the terms and conditions of postal workers’ contracts.
Mr Kretinsky has guaranteed no compulsory redundancies or changes in terms and conditions but only until 2025.
“If we are more successful, and we have more parcels to be delivered, we need not less people, but we need more people,” he said. “So really, job cuts are not part of our plan at all.”
He said if the management, union and employees work together, “we will be successful”.
Another concern is the potential break-up of the business.
The profit for Royal Mail’s parent company last year was entirely generated by its German and Canadian logistics and parcels business, GLS. Royal Mail itself made a loss.
Mr Kretinsky has promised not to split off GLS or load the parent company with excessive debt, although borrowings will rise if the deal goes through.
But he has a way to go to convince the CWU.
“I can’t think of any other country in the world that would just just hand over its entire postal service to an overseas equity investor,” Mr Ward of the CWU said.
However, Mr Kretinsky said that the postal unions “do understand that we are on the same ship, and that we need this ship to be successful, and that if we are there, we don’t have any real problems to deal with, because the sky is blue, and it’s blue for everybody.”
The union cannot stop this deal but the government can block it under the National Security and Investment Act.
Business Secretary Jonathan Reynolds has said he will scrutinise the assurances and guarantees given and called on Mr Kretinsky to work constructively with the unions.
Mr Kretinsky may say that he and the unions are ultimately on the same ship but, as things stand, they are not on the same page.
Who is Daniel Kretinsky?
Daniel Kretinsky started his career as a lawyer in his hometown of Brno, before moving to Prague.
He then made serious money in Central and Eastern European energy interests.
This includes Eustream, which transports Russian gas via pipelines that run through Ukraine, the Czech Republic and Slovakia.
He then diversified into other investments, including an almost 10% stake in UK supermarket chain Sainsbury’s and a 27% share in Premier League club West Ham United.
The Czech businessman is worth about £6bn, according to reports.
Father of five blasted for leashing kids, gives them odd nickname
This heartwarming prom story goes viral again and we all understand why
Simon Cowell Won’t Leave Son His $600 M Fortune; Says If He or Future Children Wants to “Start a Business … I’ll Invest. They Aren’t Getting Trusts”
Five wedding outfits for just £29!
Mikhail Gorbachev changed history
Tracking the war with Russia
-
Fashion2 years agoFive wedding outfits for just £29!
-
Politics2 years agoMikhail Gorbachev changed history
-
Politics2 years agoTracking the war with Russia
-
Everything About Youtube2 years agoThe Twitter Artist who makes a Fortune off YouTube Thumbnails while Studying.
-
Fashion2 years agoOn presents first ever shoe made from carbon
-
Politics2 years agoCharles is announced to be the new King
-
Everything About Youtube2 years agoEveryone knows YouTube, but not how it works.
-
Tech2 years agoThe rise of the AI artists stirs debate