Anbang: Out with an Anbang
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Jun 15th 2017 | SHANGHAI
“THE total number of airline miles travelled by this team is equal to a round trip between Earth and the moon.” So bragged Wu Xiaohui at a recruiting event held at Harvard University in January 2015. The boss of Anbang, a big Chinese insurer, was dazzling potential hires with his plans to go global. Anbang had shot to prominence just weeks before with a deal worth $2bn to acquire the Waldorf Astoria hotel in New York from America’s Hilton.
Since then Mr Wu has attempted acquisitions around the world worth a total of some $38bn (see table). Political controversies have caused a number to unravel. One that recently fell apart was Anbang’s negotiation to take a $400m stake in a property in Manhattan, 666 5th Avenue, controlled by a firm owned by the family of Jared Kushner, President Donald Trump’s son-in-law. There were complaints about a potential conflict of interest on the part of Mr Kushner, who advises Mr Trump on relations with China.
Domestic politics in China is now a far more pressing concern. For months rumours have circulated that President Xi Jinping’s anti-corruption campaigners had Mr Wu in their sights. On June 13th Caijing, a prominent business magazine, published a story stating that on June 9th the authorities had detained Mr Wu. Anbang confirmed on June 13th that “for personal reasons” Mr Wu was “temporarily unavailable”, but it refused to comment on his whereabouts. The article disappeared quickly from Caijing’s website, although press accounts suggest he is still missing.
Why might Mr Wu be in trouble? Despite his brash dealmaking, he was once thought untouchable because he married a granddaughter of Deng Xiaoping. His apparent disappearance could be tied to an ongoing corruption purge of Communist Party officials. He may possibly be linked to an investigation into Xiang Junbo, China’s chief insurance regulator, a probe that was announced in April. Mr Xiang had unleashed a burst of deregulation that allowed firms such as Anbang to take on far more risk, though allegations against him may not involve the insurance industry. Another possibility is that Mr Wu flouted regulations for too long. Anbang’s risky practices, including using short-term instruments to fund long-term investments, eventually prompted the regulator to act. Last month it banned Anbang from issuing new products for three months.
Numerous corporate bosses have been detained in the past three years, often for mysterious reasons, but most have been released. At the end of 2015, for instance, Guo Guangchang, the boss of Shanghai’s Fosun conglomerate, disappeared but later re-emerged from detention. But the firm’s dealmaking must surely be on hold, even if Mr Wu is released. Anbang cannot finance pricey foreign forays so long as its ability to issue products at home remains curtailed.
A plunge in confidence that prompts a liquidity crisis is another risk. Yet Anbang seems likely to survive. Because it controls some $250bn-300bn in assets, the government can be expected to shield it from collapse at all costs, reckons Brock Silvers of Kaiyuan Capital, a Shanghai-based investment advisory firm. That Mr Xi is ready to go after such a heavyweight, well-connected tycoon, ahead of important Communist Party meetings this autumn, underlines his confidence that nothing too destabilising will result.
