All nine are linked to Tomorrow Party, the conglomerate of investments owned by Xiao Jianhua. The firms are among more than 40 financial institutions listed as being part of Xiao ‘s network by New Fortune Magazine in a 2017 report. Chinese regulators will take charge of nine financial companies related to a financier who was seized by Chinese authorities from a Hong Kong hotel in 2017 and hasn’t been seen in public since.
Among the firms that are being taken over are Huaxia Life Insurance Co., Tianan Life Insurance Co., Tianan Property Insurance Co., New Times Trust Co., Yi’An Property Insurance Co., and New China Trust Co., said the China Banking and Insurance Regulatory Commission in a statement on its website Friday.
The takeover does not change the debt obligations or creditor rights of the companies, and company activities do proceed as usual. Guosheng Securities Co., New Times Securities Co. and Guosheng Futures Co. will also go into state custody, the securities regulator said in a separate statement.
All nine are linked to Tomorrow Party, the conglomerate of investments owned by Xiao Jianhua. The firms are among more than 40 financial institutions listed as being part of Xiao ‘s network by New Fortune Magazine in a 2017 report. You can check any Chinese company details here.
The Chinese authorities are stepping up their effort to retain financial stability as Covid-19 shows that economic growth is ruinous and soured loans are piling up. In May last year, Beijing seized control of Baoshang Bank Co. — another firm linked to Xiao — citing its “significant” credit risks.
Regulators reportedly mulling Huaxia Life’s expanded supervision last month, including sending a group of state-owned China Life Insurance Group Co. executives to assist. Insurers’ earnings were under pressure, and that’s only worsened by the coronavirus pandemic.
Poor Apples
“This is certainly a move in the right direction,” said Steven Lam, an analyst with Bloomberg Intelligence, in terms of containing financial risk and warning peers of wrongdoing. “The authorities are also being more transparent by saying to the market, ‘We know bad apples are there, and we’re taking care of them.'”
In a statement Saturday on its official social media account, the Tomorrow Group questioned the decision of regulators. The company said its subsidiaries have not seen any defaults and the risk of liquidity has not been great. It added that requests from units to use around 2 billion yuan ($286 million) on tomorrow’s balance sheet were denied for repayment of wealth management products. Following several hundred thousand views online announcement of tomorrow was later deleted.
In its statement on Friday, the CBIRC stated that authorities will seek market-oriented restructuring for the six insurance and trust firms, and the bottom line is to avoid any systemic financial risks. The three broking and futures companies were confiscated to conceal their ultimate owner’s identity, or their actual assets, as well as weak corporate governance, the securities regulator said.
The moves are repeating Anbang Insurance Company Co ‘s care. Authorities are in the process of finding strategic investors for Dajia Insurance Group Co., the firm that took over the once-acquisitive Anbang operations after a two-year state custody period. Anbang’s former president, Wu Xiaohui, was convicted of fraud and the CBIRC was charged with selling much of the properties that Anbang had acquired during a buying spree in overseas.
Seasons Four
Xiao has been missing since he was taken out of his room at the Hong Kong Four Seasons in early 2017. After leaving China, where he is still awaiting prosecution, Xiao had lived there for several years. What charges can be levied against him is as yet unknown. Tomorrow Group invested mainly in financial services and used much of its assets to manage shell companies. Before his disappearance, the Hurun Survey of China’s richest people said Xiao, a student leader at the time of 1989 pro-democracy protests, is part of a fortune valued at almost $6 billion.
In 2018, China’s central bank named Tomorrow as one of several “ financial holding companies ”that need to be scrutinized in their ownership structure, related transactions and source of funding.”Some financial holding companies, primarily those created by non-financial investments, blindly expanded into the financial industry,” the People’s Bank of China said at the time. “There has been a regulatory vacuum, and risks continue to accumulate and be exposed.”
