| | | Hong Kong in a corner after China’s raid on Xiao Jianhua
The billionaire took sanctuary in Hong Kong but the state under Xi Jinping has caught up with him
In 1989 many students at the elite Peking University were swept up in the democracy movement that culminated in the Tiananmen Square protests and the subsequent bloody government crackdown.
But Xiao Jianhua, a 17-year-old law student and chairman of the Communist party-controlled student union, had other ideas. The child prodigy, who came from an educated family in a poor village in Shandong province, remained loyal to the party.
“He came to Tiananmen Square in 1989 but probably just to collect information and report to the authorities,” says Wang Dan, one of the students who led the protests and was jailed after being named as the most-wanted activist. The party would insist that the head of the student union do its bidding, says Mr Wang, and in return he could expect to develop “close relationships” with the government. “That’s why, after graduation, it is natural that he knows many high-level officials and their family members.”
Mr Xiao’s impeccable political connections were formed with the clique that grew up around Jiang Zemin, who was made general secretary of the Communist party after Tiananmen and was president from 1993-2003. This helped him transform from villager to well-connected bagman, billionaire investor and one of China’s richest men.
These ties, though, could prove to be the undoing of the chubby-faced 45-year-old, whose Tomorrow Group has made investments stretching from chemical plants and coal mines near his wife’s hometown in Inner Mongolia, to Ping An, one of China’s largest insurance companies.
Student leader Wang Dan calls for a city-wide march in Tiananmen Square, Beijing, in May 1989Mr Xiao was abducted from the Four Seasons hotel in central Hong Kong in the early hours of January 27 by a group of Chinese public security agents, according to people briefed on the incident. At a time when he should have been preparing to celebrate Chinese new year with his family, he was instead whisked across the border into mainland China.
His disappearance has compounded fears about Beijing’s meddling in Hong Kong, which is supposed to have an autonomous government and an independent legal system. Coming after the abduction of Hong Kong book publisher Lee Bo and four of his colleagues in 2015, Mr Xiao’s seizure underlines the impotence of the Hong Kong government in the face of Beijing’s arbitrary power, says Kenneth Leung, an opposition member of the territory’s legislative council.
It also sends a strong warning to other wealthy businessmen about the determination of Xi Jinping, China’s president, to show no quarterto those with questionable dealings or connections to his political rivals.
Mr Xiao, who has Canadian citizenship and a diplomatic passport from Antigua and Barbuda, is most probably in one of the many unofficial detention facilities dotted across China, where thousands of businessmen and officials have been taken as part of Mr Xi’s anti-corruption campaign.
The authorities have not confirmed his detention or whether he faces charges. People familiar with the workings of the Communist party, however, believe Mr Xiao’s detention is related to his business connections with Mr Jiang’s allies, who have been targeted in the graft crackdown, as well as his dealings with the Xi family.
A rally to protest against the detention of five Hong Kong bookselllers in January 2015 © Getty“Observers like myself had thought Mr Xiao was safe because he conducted transactions for multiple political elites in China, which is a good hedging strategy,” says Victor Shih, a professor of Chinese political economy at the University of California, San Diego. “If he does not resurface soon then this hedging strategy will be shown to no longer be a foolproof way of protecting oneself.”
Long reachLike other tycoons who feared they could fall foul of Mr Xi, Mr Xiao had been staying in the residential tower at the Four Seasons, where rooms cost up to $26,000 a month, for several years.
They hoped they were beyond the reach of China’s internal security service, which is banned from operating in Hong Kong, while being close enough to the mainland to run their businesses. China’s state-controlled media have written about these tycoons hiding in plain sight, with the Global Times, a tabloid owned by the People’s Daily, the Communist party’s mouthpiece, wryly dubbing the hotel “a home for all seasons”.
Despite the hotel’s heavy security, Mr Xiao employed two companies to provide bodyguards plus an entourage of female minders who followed him everywhere, often wiping his sweat as he walked around humid Hong Kong in sports gear.
“His health is not so good, he’s not very energetic and he sleeps badly,” says one person close to Mr Xiao. “That’s probably why he sweats a lot.”
The Four Seasons Hotel in central Hong Kong, where Xiao Jianhua was staying © ReutersMr Xiao has had good reason to feel anxious in the past few years.
Since taking power in 2012, Mr Xi’s anti-graft campaign has ensnared some of those allied to the Shanghai faction around Mr Jiang. Mr Xiao had used his connections with this group to go from computer salesman to billionaire investor, leveraging financial and political capital to cut deals, trade shares and build a vast and complex fortune.
Several of the princelings, as the children of Communist party leaders are known, connected to Mr Jiang have been targeted, most notably the charismatic Bo Xilai, who was jailed for life in 2013 for abuses of power.
Mr Xiao has also earned some powerful enemies. In 2013, the People’s Daily denounced him in a piquant commentary that rejected suggestions by other local media that he was the “JPMorgan of China”. Instead, it painted him as a “messy” dealer who exploited loopholes to make gains from public wealth.
“Shrouded by the aura of Peking University and ‘high technology’, Xiao tells investors enticing stories about wealth that cannot be fulfilled,” the newspaper said. “Xiao Jianhua is not a wealth creator but a wealth mover and destroyer.”
Xiao Jianhua outside the International Finance Centre in Hong Kong in December 2013 © APMr Xiao appears to have tried to reduce risk by going into business with Mr Xi’s family. A company he co-founded helped it dispose of one of its investments, according to the New York Times, after an investigation by Bloomberg in 2012 revealed the extent of the family fortunes. The person close to Mr Xiao acknowledged that he had bought the company in question from Mr Xi’s sister but described it as a “normal business transaction”.
When Mr Xiao sought to justify the deal in a statement released to the New York Times in June 2014, he might have undermined his position by revealing to Mr Xi, the most powerful Chinese ruler since Mao Zedong, just how much information he had on the first family.
Willy Lam, a professor of politics at the Chinese University of Hong Kong, says Mr Xiao’s intimate knowledge of such matters and his proximity to Mr Xi’s political foes will have rung alarm bells in Zhongnanhai, the leaders’ compound in Beijing.
“There is speculation that Mr Xiao knew too much and Xi Jinping doesn’t want embarrassing details to come out in the run-up to the party congress this autumn,” he says, referring to China’s forthcoming five-yearly Communist gathering, when Mr Xi is expected to further consolidate his grip on power.
High stakesPrevious cases involving tycoons who disappeared at the behest of the security forces will give little comfort to Mr Xiao. Guo Guangchang of the Fosun Group was freed after a few days “assisting the judicial authorities with an investigation”, following his disappearance in late 2015. That is the best Mr Xiao can hope for.
Other tycoons have been convicted of financial and other crimes, including Xu Xiang, a billionaire investor who led a group of hedge funds called the “ Limit-up Kamikaze Squad” and was jailed for five-and-a-half years last month.
Mr Xiao has a lot to lose. “He’s probably the richest man in China but nobody knows how much he is actually worth,” says the person close to Mr Xiao. “Even he doesn’t know.”
He is listed as the 32nd richest person in the country by the Hurun Report, which researches the wealthy, with a net worth of $6bn. Rupert Hoogewerf, chairman of Hurun, says that it was difficult to calculate Mr Xiao’s wealth because he uses a “myriad of highly complex structures” to make investments.
There is more at stake than Mr Xiao’s billions, however. His abrupt disappearance further undermines confidence in the ability of the Hong Kong government to uphold the rule of law. And for Beijing, the detention of such a well-connected tycoon raises the stakes in Mr Xi’s purge.
“It’s not about ideology, it’s about power,” says Mr Wang, the former Tiananmen leader who lectures in Taiwan on Chinese politics. “If Xi attacks the corrupt and rich, it boosts his popularity. But it’s very dangerous for him, because the basis of the Chinese Communist party’s power is partly based on its alliance with the rich class.”
Additional reporting by Jamil Anderlini and Gloria Cheung
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