China’s “M&A King” Bao Fan has been missing for over 50 days, sending shockwaves throughout the country’s financial and political circles.
On April 3, China Renaissance Group, the company Bao founded, announced a trading halt, suspending trading from 9:00 am that day. The release of its annual performance report for 2022 has also been deferred as the auditors cannot issue an audit report in Bao’s absence.
Bao is the company’s chairman, executive director, chief executive officer, and controlling shareholder.
On Feb. 16, the company’s board of directors announced that they had been unable to contact Bao, and on Feb. 26, they revealed that he was “cooperating” with authorities’ investigations.
Impressive Resume
Bao, born in 1970, founded China Renaissance Group in 2005 at the age of 35.Prior to that, he served as the chief strategy officer of China-based IT services and software company Asiainfo Group. He also worked at international financial companies such as Morgan Stanley and Credit Suisse, accumulating seven years of investment banking experience on Wall Street.
Bao’s influence in the Chinese financial industry is enormous.
In 2015, China Renaissance Group facilitated four major mergers and acquisitions in China’s Internet industry: the merger of ride-hailing giants Didi and Kuaidi, the merger of classifieds site 58.com and Ganji.com, the merger of lifestyle e-commerce platform Meituan and online review site Dianping, and the merger of online travel agencies Ctrip and Qunar.
Since then, Bao has been involved in almost all major financing, mergers and acquisitions, and IPO deals in China’s internet industry.
Bank of China Chairman Implicated
The day after Bao went missing, Liu Liange, chairman, executive director, and Chinese Communist Party (CPP) boss at the Bank of China, was removed from his positions.One month later, the Bank of China claimed that Liu had “voluntarily” resigned. On March 31, the Central Commission for Discipline Inspection announced that Liu was under investigation for serious law violations.
Liu had worked in China’s banking system since the 1990s, holding key positions, including 11 years at the China Exim Bank and later serving as the Party boss and chairman of the Bank of China.
As reported by Beijing Caixin, sources close to the Bank of China said that Liu’s case is likely connected to the recent investigation into Bao’s case.
Early Repayment Clause
Although China Renaissance Group has stated that its business and operations are currently running as usual, it has been noted that the company has signed loan agreements with specific clauses.In May 2021, China Renaissance Group announced that it had obtained its first syndicated loan since going public. The loan, totaling $300 million over a three-year period, was led by the Bank of Communications (Hong Kong) and involved other banks such as Citibank (Hong Kong), China Citic Bank International, and Bank of China (Macau).
The financing agreement stipulates that if Bao is no longer the largest shareholder of China Renaissance Group or no longer serves as board chairman, the main lenders can cancel their commitments and demand immediate mandatory repayment of all outstanding loans under the financing.
The market is concerned that if Bao cannot perform his duties for an extended period, creditors may lose confidence in China Renaissance Group, and the aforementioned $300 million loan may be subject to early repayment.
Xi Targets Financial Sector
Chinese leader Xi Jinping has been disciplining the financial sector in China, with dozens of personnel changes seen in bank executive positions this year. According to the CCP’s Central Commission for Discipline Inspection, in the first three months of 2023, at least ten high-level executives in China’s financial sector have been investigated.
One week after Bao went missing, the Central Commission for Discipline Inspection published an article on Feb. 23 mentioning “finance” 16 times.
The article claimed that the commission aimed to eliminate “political risks,” break the “financial elite” and “Westernization” mindsets, rectify the industry’s “unspoken rules,” eliminate the mentality of “law does not punish the masses” and investigate issues such as “shadow shareholders” and the “revolving door.”
Political commentator Ji Lin, who resides in Japan, told The Epoch Times on April 10 that as China’s economy continues to decline and the fiscal deficit becomes severe, debt crises may erupt at any time. Therefore, Xi is taking action in the financial system, attempting to ease the situation.
Ji said that China’s financial sector is controlled by influential families, and through factional purges, Xi can replace key positions with his trusted individuals.
Ji also said that China’s capital circle is full of unspoken rules involving collusion between officials and businessmen, where capital magnates receive illegal benefits and protection from officials and, in turn, act as officials’ hidden henchmen who help with reaping profit and money laundering.
“With Bao Fan’s qualifications, he is likely such a henchman figure. Thus, if Bao is being investigated, many individuals associated with him may also fall,” Ji said.
