Detention of Anbang boss a milestone in financial industry crackdown, analysts say

by Frank Tang & Nectar Gan in South China Post, June 15, 2017
The reported detention of Anbang Insurance chairman Wu Xiaohui could be a milestone in efforts to take on vested interests – many with connections to the political elite – in China’s financial sector, paving the way for reform, analysts say.
Wu is the latest figure said to have been detained for investigation in a financial industry crackdown which began after a stock market rout in the summer of 2015 that wiped trillions of yuan from the portfolios of small investors – costing Beijing hundreds of billions of yuan in a bailout.
It later developed into an extensive operation seeking to stem collusion among senior regulators, family members of the ruling elite and tycoons.
“Senior executives in China’s financial sector usually have powerful [political] backers. The anti-graft campaign in this sector is not only about corruption – it also aims to reduce interference by these backers,” said Zhuang Deshui, deputy director of Peking University’s Clean Government Centre.
“If these backers are still around, any attempt at financial reform will be futile. The ties with these backers need to be cut to overhaul the financial sector,” he said.
Global insurer Anbang, one of China’s most aggressive overseas investors, said on Wednesday that billionaire chairman Wu – who married a granddaughter of former paramount leader Deng Xiaoping – had stepped aside “for personal reasons”, after media reports that he had been taken away for investigation.
“The probe into Wu indicates that this anti-corruption drive isn’t just targeting those coming up from the grass roots, but also the princelings,” said Hu Xingdou, a professor of economics at the Beijing Institute of Technology. “This is a milestone showing that the campaign, especially in the financial sector, has entered a new stage.”
Hu added that the campaign would continue to target “the most corrupt area” of mainland society.
Big players in the insurance industry have caused controversy with aggressive acquisitions of listed companies and overseas assets using client money and high leverage.
Their investment in the stock market drew criticism from Liu Shiyu, chairman of the China Securities Regulatory Commission, at a forum last November, when Liu referred to such insurers as “barbarians” and “evil”.
One of the most eye-catching examples of this was the battle for control of one of the mainland’s biggest property developers, China Vanke. Anbang, Qianhai Life Insurance and Evergrande Life Insurance all joined the fray at the end of 2015, and Qianhai ultimately emerged with a 25 per cent controlling stake based on high leverage and several securities investment schemes.
But earlier this year, Qianhai chairman Yao Zhenhua was removed from his post and barred from the insurance market for 10 years. Evergrande, meanwhile, sold off its stake in the property developer at a loss to state-owned Shenzhen Metro last week.http://www.scmp.com/news/china/policies-politics/article/2098355/detention-anbang-boss-milestone-financial-industry