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Anbang Chairman Wu’s Detention Shows That Xi Jinping Means Business

With the news that the insurance giant’s chairman, Wu Xiaohui, has “stepped aside” following his alleged detention by Chinese authorities, Xi Jinping’s government is once again throwing its weight around ahead of Communist Party elections in the fall.

  • Allen T. Cheng

Wu Xiaohui, chairman of Chinese financial giant Anbang Insurance Group Co., has gone on a $30 billion spending spree over the past three years, most famously snapping up the landmark Waldorf Astoria hotel in Manhattan for nearly $2 billion back in 2014.

But earlier this week, Anbang posted a statement on its web site saying its chairman had “stepped aside” and that business at the privately held group, which controls 1.97 trillion yuan ($290 billion) in assets, was being managed by others. The announcement follows revelations that Wu was taken by Chinese investigators from his offices in Beijing on June 8, as reported by the BBC, citing an official source.

Wu may be one of China’s wealthiest businessmen, but his spending power and political connections have not protected him from the wrath of Chinese President Xi Jinping. Indeed, some of those connections — namely, his attempted business dealings with U.S. President Donald Trump’s son-in-law Jared Kushner — may have compounded his problems, sources tell Institutional Investor. Chinese finance experts say the recent investigation and detention of the Chinese insurance tycoon also is an indication that Xi has fully consolidated his power and gained an upper hand over political rivals ahead of the nation’s 19th Party Congress of the Communist Party of China, a summit set for this fall that will elect leaders for the coming five years.

A wealth of connections

Neither Anbang nor the government has revealed the reasons for Wu’s detention. But sources with knowledge of the current investigations tell Institutional Investor that Wu, 52, is being questioned by investigators looking into alleged insider trading during China’s stock market crash of 2015.

Those same investigators already have detained at least one other tycoon. In January, Xiao Jianhua, a Chinese billionaire who controls four listed companies, allegedly was nabbed by Beijing security agents from his suite at the Four Seasons Hotel in Hong Kong. Xiao was a business partner of the sons of several retired Chinese leaders — among them, former vice president Zeng Qinghong — and seemingly had access to inside information in government and business circles.

Wu was once married to Zhuo Ran, a granddaughter of former Chinese leader Deng Xiaoping, and is known in Chinese political circles as a princeling: a child or relative of a powerful senior leader. Wu arguably had much higher-level contacts, sources say, and in particular, was still managing funds linked to one of China’s preeminent political families, despite his reported separation from Zhuo more than a decade ago.

Where he got in trouble, says Andy Collier, an independent research analyst in Hong Kong, was getting too close to Kushner, which prompted scrutiny in both the U.S. and in China.

Earlier this year, Anbang attempted to invest in a Manhattan office tower at 666 Fifth Avenue owned by the Kushner family’s Kushner Companies, a potential deal that attracted scrutiny from regulators and the U.S. Congress and eventually fell through.

“Anbang’s overseas ambitions caught the attentions of American regulators, who then requested more information, which Anbang did not want to disclose,” says Collier, who from 2009 to 2011 was the New York-based president of Bank of China International, the offshore equity arm of China’s third-largest bank. “This, coupled with their ill-fated connections to Jared Kushner, brought them far more attention than Beijing wanted.”

U.S. regulators also were investigating Anbang’s aggressive spate of attempted acquisitions, including a failed attempted last year to buy Starwood Hotels & Resorts Worldwide for $14 billion. Back home, an Anbang subsidiary was censured by China’s insurance regulator in May for designing insurance and investment products that skirted regulations aimed at curtailing risk. The censure came amid an industry-wide crackdown on excessive use of universal life products by some insurers and as China’s leaders moved to curb financial-sector risk.

A government crackdown

Willy Lam, a political scientist at the Chinese University of Hong Kong, says he believes the government detained Wu as part of a crackdown on massive capital flight by wealthy Chinese.

“The major problem has to do with the leadership’s efforts to prevent or curtail capital flight — corporations that make big investments overseas for the purpose of parking their money in safer places, either the U.S., Hong Kong or tax havens such as British Virgin Islands,” Lam notes. “Although Anbang is putatively a private company with connections to big clans in China, it has to follow general rules established by the party-state authorities.”

Founded in 2004 as a small property and casualty insurer, Anbang has become a behemoth in only a little more than ten years under Wu’s leadership. Wu’s personal ties to the Dengs helped him raise a lot of funds from the nation’s wealthy families, many of them linked to the sons and daughters of senior Communist Party officials.

Since President Xi took office in 2013, he has been leading a crackdown on official corruption, including attacking a few of the powerful families that once led China, among them the scion of the family of Bo Yibo, a vice premier and former ally of Deng’s. Xi sacked Bo’s son, Bo Xilai, from his post as Chongqing party chief in 2012. Bo was subsequently imprisoned for life after being prosecuted by a Chinese court for corruption.

“Xi even went after a few other officials and former officials, but this is the first time he dared to go after someone who handled the wealth of the Deng family,” says a retired senior Chinese official, who asked not to be identified by name for fear of incrimination. “The fact that Xi dared to go after Wu means even the Deng family is no longer sacred or safe from Xi’s campaign. It takes a lot of guts to go after the Dengs, and Wu’s arrest means Xi has guts.”

If anything, the retired official says, President Xi is not only ensured a second term through 2022, but he also “may have a hand in putting one of his cronies in as his successor, and that means he may rule China through 2032.”