Paul Xiaoming Lee, (Li Xiaoming) the richest man in China’s Yunnan province, and a U.S. citizen, and his younger brother Li Xiaohua, reportedly a U.S. green card holder, are currently under residential surveillance by police in China.
The path to wealth of the super-rich brothers is attracting a great deal of attention. Moreover, over the past few years, the Li brothers have cashed out more than 10 billion yuan (about $1.4 billion) from their company, a sign they may have planned to flee the country.
Rise to Super Wealth
Born in 1958, Lee was already well established in the plastics industry when he graduated from the University of Massachusetts with a degree in polymer materials in 1992, having served as vice president of Kunming Plastic Research Institute from 1984–1989.His brother, who is four years younger, graduated from the University of Massachusetts the following year, also with a degree in polymer materials.
Both brothers worked in the plastics industry in America in the mid 1990s: Lee worked at Inteplast Corp. from 1992–1995, and his younger brother worked at World-Pak Corporation from 1993–1996.
In January 1993, the brothers established their own company, Lanser-Tech Corporation, in California. The company has since been terminated.
In 1996, they returned to China to do business, running a string of successful companies in the packaging industry and eventually joining the lucrative lithium battery and electric vehicle sectors.
In August 2018, Yunnan Innovation acquired a 90.08 percent stake in Shanghai Energy New Materials Technology Co., Ltd for 5 billion (approx. $700 million) and ventured into the lucrative lithium battery industry. In October of the same year, the company’s name was changed to Yunnan Energy New Material Co., Ltd.
Missing Assets May Be Key
According to a report from Chinese financial news group Yicai Media, the arrest may have something to do with assets that were left unaccounted for when Yunnan Energy acquired Jiangxi Tongrui New Energy Technology Development in November 2018.Although the smaller company had been awarded more than 1 billion yuan in government funding and guaranteed loans not long before the acquisition, the modest purchase price and the company’s declared assets left over 1 billion yuan, or $140 million, unaccounted for.
Possible Link to Tobacco Industry Cleanup
Other Chinese media speculate that the arrest has something to do with the siblings’ involvement in the tobacco industry. A report by financial services company Eastmoney Securities noted that one of their first business ventures upon returning to China involved the production of cigarette packaging.Yunnan, in southwestern China, is considered a hub for the tobacco industry.
Raising Capital While Cashing Out
Yunnan Energy has been aggressively raising capital in recent years. According to its 2020 annual report (pdf), in February 2020, it raised 1.6 billion yuan (about $200 million) through the issuance of convertible bonds. In September of the same year, it raised another 5 billion yuan (about $700 million) through non-public stock offerings. Correspondingly, its share prices rose sharply during that time frame.Cash-out May Indicate Plans to Flee
According to an investigative report by Chinese news portal Qingliu Studio, the Li family has reduced its equity stake in Yunnan Energy New Material several times in recent years, citing “shareholders’ capital needs.”Between August 2020 and June 2022, the family reduced its holdings by about 54 million shares, the report said. It estimated that the cash out was about 3.87 billion yuan, or about $549 million.
In addition, Qingliu Studio reported, since 2019 the family has secured 28 equity pledges, most of which were for “personal capital needs.”
Current affairs commentator Li Yanming told The Epoch Times that wealthy families in China have been selling off their assets and fleeing China in the past two months. While Yunnan Energy is financing its expansion, the Li brothers have been reducing their shareholdings and cashing out nearly 10 billion yuan (about $1.4 billion). Li Yanming speculates that they are in the process of transferring their assets in order to flee China.