Ten days after China Renaissance Holdings admitted it had lost contact with its founder, Bao Fan, the bank offered a single line of explanation. Bao, it said in a stock market filing on Feb. 26, was cooperating with an investigation by Chinese authorities. No further details came with it. The firm also suggested it had not heard from him and did not know where he was.
Bao is 52 and has spent decades as one of China’s busiest dealmakers. He worked at Morgan Stanley and Credit Suisse before building the Beijing-based bank, which is listed in Hong Kong. He is known for brokering tricky mergers and acquisitions, among them the deals behind the formation of Didi Global Inc. and Meituan, and for contacts that run across many industries.
China Renaissance first raised the alarm on Feb. 16, saying its operations were unaffected by his absence. The share price took a beating anyway.
A possible link to a former colleague
A day later, on Feb. 17, Bloomberg News quoted a person familiar with the matter who said Bao’s family had been told he was assisting an inquiry, one probably tied to Cong Lin, the bank’s former president. Neither the company nor the authorities have confirmed that link.
Not the first time
Executives who drop out of sight are a familiar story in China, where disciplinary procedures are opaque. Companies often announce that they cannot reach a boss and are making their own inquiries. Some of those executives turn out to have been detained. Others come back to work.
Fosun Chairman Guo Guangchang briefly vanished in 2015 to help with a government investigation, then resurfaced. Financier Xiao Jianhua, who ran the Tomorrow Holding empire, was taken from Hong Kong by Chinese authorities in January 2017, according to the South China Morning Post. In August 2022 he received a 13-year prison sentence for illegally obtaining public deposits, breach of trust, bribery and the illegal use of funds.
Yang Zhihui, then chairman of casino operator Landing International Development Ltd., disappeared in August 2018. He returned to his post three months later and said he had been assisting authorities. In November 2022 the company suspended him after Hong Kong’s Securities and Futures Commission began legal proceedings alleging he had breached fiduciary duties in other business dealings.
Key man risk
For investors, such absences carry a particular cost. When an executive who is practically synonymous with a company comes under fire, its valuation tends to tumble. Founders in China often play outsized roles, which sharpens the problem.
Alibaba offers the best-known case. Jack Ma was never reported missing, but he left the spotlight in November 2020 after authorities torpedoed the planned IPO of affiliate Ant Group Co., and Alibaba shares suffered. A crackdown on the whole tech sector followed. Ant said this year that Ma, who has kept a low profile since, was giving up control of the company.
Is another crackdown coming?
It is not clear, though Bao’s case has rattled investors. Chinese President Xi Jinping launched a broad anti-corruption probe in late 2021 aimed at the country’s $60 trillion financial sector, and it has brought down dozens of officials. Bankers from brokerages including Everbright Securities Co. and Guotai Junan Securities Co. were caught up in it.
Bloomberg News reported on Feb. 17 that Beijing is poised to name regulatory veterans, known for strict campaigns against financial wrongdoing, to head its new banking and securities watchdogs this year.
