By James T. Areddy in The Wall St Journal, April 18, 2017 1:23 p.m. ET
NANXIAHUI, China—A missing Chinese billionaire who did business with the highest echelons of the Communist Party has previously undisclosed ties to China’s military.
Firms linked to Beijing’s formidable arms-trading conglomerate, China Poly Group Corp., executed at least three recent transactions involving the billionaire, Xiao Jianhua, including a $10 million donation to Harvard University, according to corporate filings and interviews with people familiar with the transactions.
The military connection casts new light on the business dealings of Mr. Xiao, who disappeared in late January from his residence in a luxury Hong Kong hotel, raising questions in China’s business community about the financier’s potential enemies and his fate.
Mr. Xiao, a 45-year-old naturalized Canadian citizen with vast holdings in banks, brokerages and a newspaper, crossed the border into mainland China almost three months ago, according to statements by Hong Kong police and his businesses.
He hasn’t been heard from since and couldn’t be reached to comment; his whereabouts isn’t known. It is unclear if he has a lawyer, and his businesses say they have no information about him. Chinese authorities have said nothing.
During Chinese President Xi Jinping’s four-year-old anticorruption drive, many power brokers in business and the military have disappeared, often for unexplained reasons. Some have resurfaced and some have faced prosecution, while the fate of others is unknown.
The Wall Street Journal examined hundreds of company records and other publicly available documents to better understand how Mr. Xiao made his money and why he might have been vulnerable. Mr. Xiao is worth over $5 billion, according to Shanghai wealth-tracking advisory Hurun Report.
Mr. Xiao has been involved in quiet deal making with China’s elite. He was the middleman in 2012 when relatives of then-Prime Minister Wen Jiabao unloaded shares in a major insurer, according to an executive who works for the buyer.
Later, an entity co-founded by Mr. Xiao acted on behalf of President Xi’s sister and brother-in-law, buying out their stake in an investment firm, according to a statement Mr. Xiao’s company, Tomorrow Group, made to the New York Times .
People with Tomorrow Group say he runs the Beijing-based business, though its websites and corporate records don’t mention Mr. Xiao. The leading shareholder in the group’s key legal entity, Tomorrow Holding Ltd., is its executive director Xiao Weihua, with 29%, according to business filings. He couldn’t be reached to comment.
A spokeswoman for Tomorrow Group declined to answer questions about Xiao Jianhua or his business relationships. The fathers of Xiao Jianhua and Xiao Weihua were brothers, according to people who know both men in Nanxiahui, where Xiao Jianhua grew up, including the village’s Communist Party chief.
In China, few organizations can match the influence of China Poly Group, which was created in 1992 by China’s leadership and the People’s Liberation Army. Today, Poly claims annual profits in the billions of dollars from arms trading, real estate and art auctions.
According to regulatory filings, Poly controls an entity called Pohua JT Capital Partners Ltd. through a 32% stake held by its asset management division and corporate executives.
Firms linked with Pohua JT Capital were critical to the transactions involving Xiao Jianhua. Those companies share directors or addresses, and in some cases use variations of the corporate name, including JT Capital. The Journal received no response to questions submitted to secretaries at Pohua JT Capital and firms linked to it at three offices in Hong Kong. The Journal also submitted questions to Poly about its relationship with Mr. Xiao; a spokesman said they are under review.
Around three years ago, Mr. Xiao offered a major donation to Harvard’s Ash Center for Democratic Governance and Innovation.
Mr. Xiao proposed $20 million, according to a former Harvard executive, but caused anxiety among administrators about the origin of the money when he indicated a third party would pay.
“There was some question about what entity was going to write the check,” the former executive said.
Harvard’s Ash Center never publicized a pledge from Mr. Xiao but in its Spring 2014 newsletter briefly mentioned receipt—from JT Capital Management—of a “major gift of $10 million.”
Harvard spokesman Patrick McKiernan said JT Capital Management supports a China governance program proposed by Mr. Xiao. Fellows named to the program have included Chinese government officials and an executive from a bank partially controlled by his Tomorrow Group.
In another matter two years ago, the Caribbean nation of Antigua and Barbuda credited Mr. Xiao for mobilizing Chinese investment into its leading industrial business, West Indies Oil Co., a distribution hub for Venezuelan and Russian producers.
Prime Minister Gaston Browne described Mr. Xiao in a recent interview as a man of “significant financial resources and influence,” and said he issued Mr. Xiao a diplomatic passport and appointed him ambassador-at-large for his work.
The $14.4 million invested in the oil company for a 24% stake came from a Hong Kong entity called Fancy Bridge Ltd., which also lent $15 million to Antigua in exchange for rights to offer 120 passports, according to Mr. Browne and official statements.
Fancy Bridge operates from the 46th floor of a Hong Kong office tower, according to the Antigua government’s list of authorized investment agents. The Journal went to that location, where the only name on the wall was Pohua JT Capital, and left questions with a secretary about Mr. Xiao, Poly and the business in Antigua.
The Journal returned hours later and the name Pohua JT Capital had been removed. New people staffing the office said they had never heard of the company.
Solar panels in the village of Nanxiahui, which a sign says were installed in 2016 as a poverty relief project by the village’s “famous entrepreneur Xiao Jianhua” with $200,000 in equipment from a company controlled by a unit of arms conglomerate China Poly Group Corp.
A third matter involves Nanxiahui, a flat corn-growing village of 420 households. In the village, a blue sign credits Mr. Xiao for a $200,000 solar-power installation in October and cites the name of the company that made the panels: a division of Kong Sun Holdings Ltd. , which stock-exchange records show is controlled by Pohua JT Capital.
Though villagers say Mr. Xiao rarely visited after he became the first resident accepted to prestigious Peking University in the 1980s, they praise his contributions. Last year, he put $75,000 into an ancestral hall that celebrates the Xiao lineage, from a Ming Dynasty military strategist to a People’s Liberation Army commander who battled Japanese forces.
The tycoon is also honored as a hero with a sample of his calligraphy and a citation: “He never forgot his hometown.”https://www.wsj.com/articles/missing-billionaire-has-ties-to-chinas-military-1492536233
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