The big questions about missing tycoon: why and why now?
Mainland billionaire Xiao Jianhua has been linked to investigations into top-level bribery and market manipulation
Hong Kong’s bustling Central district was quiet in the small hours of January 27, the last day of the Year of the Monkey, when two seven-seater vans quietly pulled up outside the luxury Four Seasons Place serviced apartments. The eve of the Lunar New Year is always a big occasion for family gatherings and the crowds on the streets were thinner than usual.
Five men left the vans at about 1am and went straight into the lift lobby. Moments later, they reappeared on the 28th floor and knocked on the door of mainland billionaire Xiao Jianhua, who was staying in one of the several apartments he had rented there for two years – each costing more than HK$200,000 (US$25,000) a month.
Two hours later, Xiao emerged with two female bodyguards and the five men. They got into the two vans and left the hotel precincts without making a scene. Almost 12 hours later, Xiao and his entourage reappeared at the Lok Ma Chau border crossing between Hong Kong and Shenzhen. They passed through border controls with valid documents and disappeared into the mainland Chinese city at 3pm.
In the weeks since, Xiao has been linked to mainland investigations into top-level bribery and market manipulation and been caught up in the central government’s anxieties about financial and political risks.
The South China Morning Post pieced together the legendary mainland tycoon’s last 14 hours in Hong Kong based on information obtained from Hong Kong police and mainland sources and people close to Xiao. It has been unable to independently verify the information.
The people of Hong Kong were ignorant of Xiao’s disappearance until the next day, when his wife, Zhou Hongwen, reported a missing person case to the police.
The news spread like wildfire, immediately bringing back memories of the mysterious disappearance of several booksellers linked to a Causeway Bay bookstore a little over a year earlier. The booksellers had angered Beijing by publishing politically sensitive books and reports said two had been abducted by mainland security agents – one in Thailand and one in Hong Kong. The case, which rocked Hong Kong and made headlines around the world, sparked concerns about Beijing’s commitment to honouring the “high degree” of autonomy promised to the city for 50 years from 1997. Xiao’s disappearance exposed that raw nerve again, with some local and foreign media screaming “abduction” in their first headlines. Hong Kong police said later their records and surveillance camera footage showed Xiao left Hong Kong legally through a border control point.
Still, the curious circumstances of his departure, and the fact that his wife, who is also his most trusted business partner, was initially unaware of his whereabouts and alerted Hong Kong police to his disappearance, suggest Xiao left the city against his will. He might not have been bundled up and whisked away, but, to borrow the terminology of The Godfather, somebody may have made him an offer he could not refuse.
That’s effectively what mainland sources familiar with the case told the Post in the following days. In their version of the story, Xiao was fully aware of the January 27 visit, which was the final chapter of an ongoing, yearlong negotiation that ended with him agreeing to return to the mainland to help with an investigation into suspicious trading that disrupted China’s financial markets in 2015.
Two of the five people who knocked on his door that night were close friends of Xiao, the sources said.
“The others were strangers to Xiao but none of them were from the law-enforcement agencies,” the Post was told. “They were negotiators. In the end, he agreed to return to the mainland to assist the investigation.”
Officially though, China has never acknowledged that Xiao is on the mainland or in police custody. Adding to the confusion, Zhou withdrew the missing person report on January 29 – 48 hours after filing it. The official WeChat account of the Tomorrow Group – Xiao’s flagship company – released two statements after media reports about his disappearance, denying he had been abducted and saying he was “receiving medical treatments overseas”. The statements were removed from the social media platform on January 31 but reappeared a day later as an advertisement on the front page of one of Hong Kong’s Chinese-language broadsheet newspapers.
By then it had come to be an accepted fact that Xiao was in custody on the mainland. Some mainland media even started to report it as a matter of fact, despite there being no official announcement from Beijing that it had opened a case against Xiao.
The surprising twists and turns quickly captured the public imagination. Various accounts of how Xiao vanished from Hong Kong started to emerge. In one version reported by The New York Times and Reuters, he was seen leaving the serviced apartments in a wheelchair and with his head covered. Xiao was then taken to a boat that left Hong Kong bound for mainland China, “eluding border control”.
Police sources who spoke to the Post refused to verify if Xiao left the building in a wheelchair or if he was hooded. But they said they could not find any sign of a struggle at the scene. The Four Seasons Place – run by adjacent Four Seasons Hotel – is famous for its tight security. Visitors would not be allowed into the building at night without a tenant’s approval, a property agent told the Post. Hong Kong police have declined to release surveillance camera footage from the scene.
But police dismissed the reports that Xiao had left Hong Kong by boat and eluded border controls. On February 4, Secretary for Security Lai Tung-kwok said Xiao left Hong Kong for the mainland by passing through a border checkpoint. He also said the police investigation had found no evidence that mainland law-enforcement agents were involved in Xiao’s departure. But Lai also admitted there were unanswered questions and said he understood “the public is concerned”. He promised the police would continue their investigation and ask for more information from the mainland side.
Xiao was not a Hong Kong permanent resident and was not covered by the notification mechanism between the city and the mainland authorities, under which one side has the obligation to inform the other if one of its residents is detained – a procedure that was breached in the Causeway Bay bookstore case.
The Post later confirmed that Xiao had held a diplomatic passport from the tiny Caribbean nation of Antigua and Barbuda. Whether it was renewed after it expired last year is not known. The Tomorrow Group notice published in Hong Kong also said Xiao held a Canadian passport. The Canadian consulate in Hong Kong confirmed that Xiao was a Canadian citizen..
The bigger questions surrounding the Xiao case are why and why now?
Xiao, a self-made billionaire who had amassed a staggering fortune by the age of 42, is no stranger to controversy. But he had managed to stay beyond the authorities’ reach for years. The fact that he chose to live in Hong Kong suggests he was concerned enough about his safety not to live on the mainland but confident enough in his protection not to move to another country altogether.
Mainland sources said Xiao was taken back there to help with investigations that included ones into “bribery and stock market manipulation”. Beijing is concerned that powerful businessmen like Xiao, who can move vast amounts of money secretly, can cause wild market swings that exacerbate financial risks. They have also obtained substantial political influence.
At a meeting of the Communist Party’s National Security Commission on Friday, which President Xi Jinping heads, the president put emphasis on economic security.
As China enters a politically sensitive year ahead of a leadership reshuffle, the leadership was eager to minimise “risk factors”, the sources said.
Another reason was that Xiao held 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.
Over the years, Xiao carefully cultivated an image of success and built a vast network in China’s business, social and political circles. He was said to have been a prodigy, admitted to the prestigious Peking University at just 15. But a source close to Xiao told the Post he was actually born in 1967 – meaning by the time he began his study at Peking University he was 19. His Antigua and Barbuda passport gave his date of birth as January 13, 1972.
A mainland official who has met Xiao described him as a “humble businessman”. He said the tycoon always dressed plainly and shunned public attention.
“His face is white as a sheet. He likes to dress in a black hoodie and plain, flat-bottomed cloth shoes,” the official recalled. “I have this impression that he always wants to hide from the notice of others. Sometimes when he leaves a public place, he will pull on the hood to avoid attention.”
Xiao was president of the official students union at Peking University in 1989 – when the student-led pro-democracy movement put the country at the centre of the world’s attention. He was not interested in politics and quickly sided with the authorities – earning him the scorn of many activist students. Many of the student union leaders at Peking University would be selected and groomed by the authorities as future politicians – as in the case of Premier Li Keqiang. But Xiao showed no appetite for politics. His focus was on money, and lots of it.
His speciality was his ability to network and a natural knack of mixing business with politics. Xiao once famously said that he was only “a second-rate financial talent”.
“The top [financial] talent in China are politicians,” he told the Guangzhou-based 21st Century Business Herald in an interview in 2013.
But the self-proclaimed second-rate financier managed to amass a personal fortune of US$6 billion by 2016, making him the 32nd richest person in China, according to the Hurun Rich List. His Tomorrow Group flagship developed into a conglomerate with business ranging from real estate to insurance, banking and even mining. But the real secret of Xiao’s success was never clear.
According to the publicly available information, he is the major share holder of Baotou Tomorrow Technology, Baotou Huazi Industry, Xishui Strong Year, Shanghai U9 Game, China Ever Grand Financial Leasing Group, Shougang Fushan Resources Group and China Strategic Holdings – all listed on the mainland. He also has substantial shareholdings in at least three Hong Kong-listed companies.
“The Xiao Jianhua that I know is not active in trading Hong Kong stocks,” one veteran broker in Hong Kong said. “He focuses on the [mainland] A shares.”
Xiao also controlled many more companies through a complicated and intricate network, making him the top deal broker in China’s financial markets, market sources told the Post.
He came under the beady eye of mainland graft-busters early as 2014, a source familiar with his case said. Another described Xiao as “somebody who wields tremendous influence in China’s political circle”.
Xiao was extremely careful in covering up the money trial. But over the years, some of his major transactions were revealed by the media, pointing to some fascinating connections he built.
A widely read report by Caijing magazine in February 2007 said that Zeng Wei, the son of the powerful former vice-president Zeng Qinghong, had teamed up with Xiao in the controversial takeover of state-owned conglomerate Shandong Luneng. It was eventually sold for 38 billion yuan (US$5.5 billion), but its market value was estimated at 70 billion yuan. In 2014, a spokeswoman for Xiao said the deal was “legal and valid”.
He was also linked to business deals involving the relatives of powerful political families on the mainland, including the son-in-law of former state leader Jia Qinglin and the sister of President Xi Jinping.
Xiao told The New York Times in 2014 that he had helped Xi’s relatives sell their assets when the president came to power in 2013. Xi was said to have ordered all his family members to sever their business ties as he launched his unprecedented anti-corruption campaign.
Political commentator Johnny Lau Yui-siu said Xiao’s case was a move by Xi to put his potential political rivals on the back foot ahead of the leadership reshuffle at the Communist Party’s national congress this autumn.
“Xi’s position is so solid now that there is no other power centre to compete with him ... but the 19th party congress still means a lot to Xi as he needs to rearrange the set-up and build for the future,” Lau said. “He wants to strengthen his hand.”
Mainland scholar Zhang Lifan said it was not surprising that an influential financier like Xiao would catch the authorities’ attention.
“By going after the so-called financial tigers, the leadership can achieve two goals with one move: they can boost their clean image and reduce the financial resources of potential rivals in the process,” he said.
Hu Xingdou, professor of economics at Beijing Institute of Technology, said reducing financial risks was another motive behind Xiao’s case.
“Financial security is very weak in China and there are many loopholes in the system,” he said. “The big risk factors in China’s economy are concentrated in the financial sector. These financial risks could lead to social turmoil and become political risks.
“Xiao’s case is a landmark. It shows that the leadership is determined to get to the bottom of collusion between money and power. But I think there are limitations to this: our political system means that the tie between power and money will never [completely] break.”