Xiao Jianhua

Chinese tycoon ‘in contact’ with family and business after vanishing from Hong Kong

Sources say Xiao Jianhua crossed border legally to help mainland authorities in investigations, and Hong Kong police chief rejects speculation he was kidnapped by mainland agents

PUBLISHED : Saturday, 04 February, 2017, 3:18pm
UPDATED : Monday, 06 February, 2017, 9:22am

The Chinese tycoon who vanished from the Four Seasons Hotel in Hong Kong last week – and is now believed to be on the mainland assisting several investigations – is in contact with his family and business, sources have told the Post.

They said Xiao Jianhua entered the mainland via normal border control procedures. And Hong Kong’s police chief also rejected speculation that the founder of the Tomorrow Group was kidnapped by mainland agents, saying there was no such evidence.

The sources said Xiao had been negotiating with mainland authorities about returning to help with investigations, including ones covering bribery and stock market manipulation.

Xiao was said to be allowed to contact his family and was able to direct his company’s business through close associates, as the authorities wanted to contain the impact of the case on financial markets. Xiao directly or indirectly controls dozens of financial and insurance ­firms.

Four visitors from the mainland met Xiao in Hong Kong on January 27 at a prearranged rendezvous, said the sources, who asked to remain anonymous. He had been friends with two of them for years, and the other two were “negotiators” he did not know, they said.

One source said none of the visitors were mainland law enforcement personnel. After the meeting, Xiao agreed to go the mainland with them, but asked that his two female bodyguards come with him, he said.

The group of seven left the hotel together, people who have seen the hotel security footage said.

People familiar with the case confirmed that Xiao’s border-crossing exit records were in order, making his case different from the Causeway Bay bookstore incident, where there was no record of Hong Kong booksellers travelling to the mainland. They vanished at the end of 2015 and surfaced on the mainland, where they were “asked to assist” investigations into the sale of banned books.

Hong Kong and mainland China need to strike extradition pact

“Up to this moment, we have not seen mainland counterparts exercising their authority in Hong Kong,” Lo said, adding that the force was trying to investigate what happened during the 12 hours between Xiao leaving the Four Seasons Hotel and crossing the border into the mainland, and that it was still waiting for a reply from police there. “We also want to understand his movements after he crossed the border,” Lo said.

Xiao’s return to the mainland comes as Beijing attempts to get its house in order ahead of a major power reshuffle later this year.

Beijing has grown concerned that certain powerful businessmen, who can move vast amounts of money in sometimes murky ways, can cause market swings exacerbating financial risks. These people have also obtained substantial political influence. The leadership has been trying to minimise “risk factors” at a time when the country is facing challenges at home and abroad.

The case also underlines President Xi Jinping’s determination to continue his fight against graft, regardless of the political links of those implicated.

Another reason Xiao was brought back to the mainland was to provide information on alleged bribery involving family members of state leaders, one source said.

“Beijing is trying to send a message that bribing family members or relatives of state leaders will not be tolerated any more,” the source said.

Doing business with the relatives of China’s leaders, or simply acting as a bagman for political elites, used to be a path to wealth. Xiao, born into a poor rural family, was said to have developed extensive ties with some of the most powerful families in the nation and amassed a fortune estimated at about US$6 billion.

Xiao was said to be able to make phone calls to his wife and his key associates to inform them of major business decisions relating to the Tomorrow Group and its affiliated entities. The arrangement is partly to ensure market stability and avoid any panic selling that would trigger new risks.

“Xiao’s business is very big, and nobody wants to see it collapse, which would cause huge risks,”one source said.

The billionaire tycoon’s departure from Hong Kong has fuelled speculation as to whether mainland law enforcers were operating illegally in the city, and renewed fears about further encroachment since the booksellers’ abduction.

Share prices of companies linked to Xiao and his Tomorrow Group plunged in Shanghai on Friday, including Baotou Tomorrow Technology, Baotou Huazi Industry and Xishui Strong Year.

The Tomorrow Group issued a statement on its WeChat account on Thursday saying its business was operating normally.

Stocks linked to missing Chinese tycoon plunge as mystery deepens

Xiao’s business empire could be much larger than public records reveal. A mainland market watcher, who has followed the Tomorrow Group for more than a decade, said Xiao controlled dozens of financial firms and listed companies via various entities and people.

“A unique thing about Tomorrow is that it tries to control businesses via people and private agreements, not equity stakes,” the market watcher said. “It would be a big underestimation to say that Xiao can control [only] 1 trillion yuan [HK$1.13 trillion].”

Mainland authorities are also trying to get a clear understanding of how much money Xiao oversees and the methods he can use to move the funds.

Beijing had realised the dangers of leaving large money flows unattended during the stock market rout of 2015, a source said. About US$5 trillion in wealth was wiped out amid the sell-off, and public confidence in the government’s ability to manage the market was greatly shaken.

Tumultuous times for China’s tycoons

Mainland regulators have become extremely hostile to “hidden crocodiles” in the financial market. Last month, Xu Xiang, known as China’s best private stock fund manager, was sentenced to five and half years in prison for insider trading.

At a conference in December 2016, Liu Shiyu, chairman of the China Securities Regulatory Commission, condemned investors who carried out highly leveraged buyouts as “barbarians”, “bandits” and “evil monsters”.

Liu did not name any individual or institution.

“China has a great number of hidden tycoons and shadow shareholders, and many political families have stakes in listed companies,” said Hu Xingdou, a professor of economics at the Beijing Institute of Technology.

According to a report published in 2013 by China Business News, Xiao preferred secrecy and developed a strict “confidentiality code system” within Tomorrow Group. Xiao, 46, did only one interview in the last decade and has made few public appearances. The interview was conducted by the 21st Century Business Herald in 2013 at a time when the Tomorrow Group was caught up in allegations of insider trading. Xiao denied any wrongdoing in the interview.

He also said “none of the senior executives at Tomorrow Group have ever been involved in any investigation or questioning by the Chinese authorities”.