In mid-January this year, Bao Fan, a Chinese celebrity investment banker who helped create several Chinese technology giants, appeared at Huaxing Capital’s annual meeting in Beijing. His children also came with him. The children played musical instruments on the spot. There was also a performance of Coldplay’s hit “Yellow.” He encouraged the hundreds of employees present to move forward.
The 52-year-old banker has spent the past month in solitary confinement in a detention system run by China’s anti-corruption unit. Bao Fan tried to create China’s JP Morgan and managed to bridge the gap between China and the West.
Bao’s disappearance comes as China’s battered tech sector looks forward to the end of a protracted regulatory overhaul. Former “economic czar” Liu He also recently told elites attending the World Economic Forum in Davos that China had reopened to business. But the arrest of Bao Fan wiped out this goodwill, and the Chinese business and financial circles only felt chills.
Feng Chongyi, an associate professor at the Center for China Studies at the University of Technology Sydney, said Bao Fan, like thousands of others, seized the opportunity of China’s embrace of a market economy and relied on his professional ability to succeed, and now, Everyone who succeeds in this way feels threatened…the threat is real.
Privately, those close to Bao Fan were dismayed by his detention. Such government scrutiny is unusual for China Renaissance Holdings Limited (1911.HK), the small boutique investment bank founded and run by Bao Fan. Bao Fan’s colleagues, business partners, friends and acquaintances fear for his safety and want him to make public appearances as soon as possible. An insider close to Bao Fan said that he was completely disillusioned.
While the confidence of business people has been frustrated, anxiety has also led to more and more middle-class and wealthy Chinese emigrating overseas. They are worried about the direction of China’s development, and they also have views on China’s human rights and epidemic prevention and control. Global investors are rethinking their exposure to the world‘s second-largest economy following a sharp sell-off in Chinese markets over the past two years. Much of the decline has been caused by regulatory overhauls and policies in China. The MSCI China index is down 23% in 2021 and 24% in 2022.
Chen Zhiwu, a professor at the School of Economics and Management of the University of Hong Kong and a chair professor of finance, said that confidence has almost been shattered, and the government’s desire to expect private equity and venture capital to increase investment has also been severely frustrated.
China Renaissance, which provides financing and start-up investment services to companies, is trying to reassure clients and employees that all is well. On February 16, Huaxing Capital disclosed that Bao Fan had lost contact. Since then, its stock price has fallen by more than a quarter in one day. Bao Fan is also the chairman and controlling shareholder of Huaxing Capital.
There have been cases in China before of entrepreneurs disappearing and quickly reappearing. Guo Guangchang, the billionaire chairman of the Shanghai-based Fosun Group, resurfaced after days of mysterious detention by authorities in late 2015. He remains at the helm of Fosun and has never been accused of wrongdoing.
Xiao Jianhua, a Chinese financier, is the behind-the-scenes controller of the “Tomorrow Department”. He was taken from Hong Kong in 2017 and has not been seen for five years. He appeared in a Shanghai court last year to face corruption charges and was eventually sentenced to 13 years in prison.
The Wall Street Journal previously reported that Bao Fan was taken away to assist in a corruption investigation involving Cong Cong, the former president of China Renaissance Capital. Cong Cong joined China Renaissance after resigning from a subsidiary of Industrial & Commercial Bank of China Ltd. (Industrial & Commercial Bank of China Ltd., 1398.HK, referred to as: ICBC) in 2020.
When Cong Cong worked at ICBC, an ICBC subsidiary lent $200 million to China Renaissance. One of the questions in the investigation was whether Bao arranged for Cong a position at China Renaissance as a condition of getting the loan, The Wall Street Journal reported. ICBC’s international business unit was also one of the sponsors for China Renaissance’s 2018 IPO and earned fees from China Renaissance’s stock offering.
Chinese officials have never formally disclosed the circumstances and did not respond to a request for comment for this article.
“There is a real due process risk in China,” said Andrew Polk, co-founder of consultancy Trivium China. “The problem is not that the CEOs or chairmen of these companies are being questioned, it’s that no one knows where they go, and it’s done in secret, without warning, and we only find out after the fact.”
Bao Fan, the son of diplomats, was born in Shanghai and grew up in China’s financial capital. In a 2011 TV interview with American reporter Nancy Merrill, Bao Fan said that when his parents were sent overseas, he often had to be separated from them for long periods of time.
Bao Fan said that he was a troublemaker when he was in elementary school. He was often ordered by the teacher to write checks because of fighting with classmates, making noise in the classroom or being late.
Bao Fan is fluent in English and accepted Western culture very early. He wore Nike shoes in high school, a rarity in China in the 1980s. He studied English Literature at China’s prestigious Fudan University, then went on to study abroad in Europe, earning a degree in Business and Economics at BI Norwegian School of Management.
Bao started working on Wall Street in the mid-1990s, joining Morgan Stanley Dean Witter and Credit Suisse First Boston before returning to Morgan Stanley to help arrange mergers and financing transactions. As a junior banker, Bao had arranged deals for clients including Chinese state-owned telecom operators and Huawei Technologies Co., according to people familiar with the matter.
In 2005, Bao Fan founded Huaxing Capital, which is dedicated to helping Chinese technology companies raise funds to develop their businesses. Privately, Bao Fan told those around him that he hoped to build Huaxing Capital into China’s JPMorgan Chase, that is, the financial empire that John Pierpont Morgan (John Pierpont Morgan) originally created. Thanks to cooperation and cooperation, industries such as U.S. steel and railroads were integrated, making giants of the American Golden Age.
“He was very hardworking, very knowledgeable. He was well respected even as a junior banker,” said Duncan Clark, who worked with Bao for several months at Morgan Stanley and now runs an investment advisory firm. BDA China. Clark said that Bao Fan was a passionate person who didn’t take himself too seriously and often worked long overtime.
A Chinese TV show in 2008 called Bao Fan “the least investment banker-like investment banker” because of his previous tapings in floral shirts and ripped jeans, smoking a cigar.
Bao Fan believed that China was about to embark on a new economic revolution, and he connected early on with some young entrepreneurs who were trying to get their Internet technology start-ups off the ground. Bao Fan said in a 2015 video celebrating China Renaissance’s 10th anniversary that the firm’s goal was to become China’s most powerful investment bank in the next decade.
That year, China Renaissance was the sole financial adviser to mergers that created ride-hailing company Didi Global Inc. and food delivery company Meituan . Didi eventually forced Uber Technologies Inc. ( UBER ) out of the Chinese market. These Internet platforms have all been caught in a money-burning battle for market share. Bao Fan used his deep connections among the founders and shareholders of the company to bring some old enemies in the business world to the negotiating table.
In 2018, China Renaissance raised about $350 million in a Hong Kong IPO, with big-name institutions including fintech firm Ant Group Co. investing. China Renaissance is often the only nonstate-owned Chinese bank in the multibillion-dollar IPOs of Chinese companies such as Pinduoduo (PDD Holdings Inc., PDD ), Meituan and short-video app operator Kuaishou Technology. Technology, 1024.HK) IPO.
The increasingly successful Bao Fan dons stylish glasses, a tailored business suit, and often speaks at international conferences. According to people who have been in touch with him, Bao Fan drove a Ferrari and sometimes let his business partners take him for a ride around Beijing. Friends remember Bao Fan joking about a time when he wore a leather jacket to a formal party and was mistaken for a driver by a waiter.
Meanwhile, many of the companies he has worked with have been targeted by the government for crackdowns. The Chinese government blocked Ant Group’s 2020 IPO at the last minute and forced a complete restructuring of the company. The Chinese government also forced Didi to delist from the U.S., and China Renaissance helped underwrite the Didi IPO. Meituan was fined more than 3.4 billion yuan for violating anti-monopoly laws.
Bao has managed to adapt to the new environment, turning his attention to deals in sectors such as semiconductors, which are still favored by the Chinese government.
In May, Bao left China to visit investors in the Middle East, Southeast Asia and the United States, and returned to China in July for several weeks in quarantine, people familiar with the matter said.
The last update of Bao Fan’s WeChat Moments was on January 9th, a few days before Huaxing Capital’s annual meeting. In this message, he congratulated Fenbi Ltd. (Fenbi Ltd., 2469.HK, referred to as: Chalk) on its listing in Hong Kong. Chalk is a vocational training institution and a company invested by funds under Huaxing Capital. In the signature column of his circle of friends, Bao Fan wrote in English: “Dream as if u’ll live forever, live as if u’die today.” Life is infinite; cherish the present as if tomorrow never existed.)