China’s Warren Buffett disappears into the anticorruption maw.
wsj.com
December 13, 2015
Guo Guangchang, the founder and chairman of $15 billion conglomerate Fosun International, suddenly disappeared in Shanghai Thursday. In recent months Chinese tycoons have dropped out of sight with alarming regularity. Their companies later claim, as Fosun did, that the missing executive is “assisting in certain investigations.” But the arrest is a reminder that President Xi Jinping’s anticorruption campaign is becoming part of an effort to reimpose Communist Party control over the commanding heights of the economy.
Fosun’s president said Sunday that Mr. Guo’s detention is due to “personal matters.” The fact that he is allowed to telephone his colleagues suggests investigators may want him to give evidence against others. But since the Party’s discipline inspection units don’t release details of their investigations and operate beyond the reach of the law, there is no way to know.
Sudden and mysterious disappearances like Mr. Guo’s have extended the terror felt by Party cadres to private entrepreneurs. Known as China’s Warren Buffett because of his insurance acquisitions, he appeared to be an upright and professional manager as well as a Party loyalist. When asked about the arrest of other tycoons, Mr. Guo claimed to have nothing to fear. A Chinese refrain in the past few days goes that if it happened to him, it could happen to anybody.
This captures an essential truth about China’s economy: Nobody is untarred by the need for political assistance. The Party’s arbitrary control over decision-making means that even the most independent entrepreneur has to cultivate relationships with officials to get access to land, capital and other resources.
When officials fall from favor, those who benefited from their protection are also vulnerable. The presence of some skeletons in every businessman’s closet is also a useful way for authorities to prevent tycoons from forming a political bloc that could demand checks and balances on the Party’s power.
The risks of arrest explains why so many rich Chinese are moving money and family members out of the country. Tycoons try to insulate their businesses from political extortion with the purchase of overseas assets. Mr. Guo’s Fosun went on an acquisition spree in the past few years, buying an office tower in Manhattan and the resort operator Club Med, among other assets. It financed these with loans, bond sales and new equity.
Mr. Guo had a close association with former Shanghai Vice Mayor Ai Baojun, now under investigation for “severe disciplinary violations.” According to the state-run Xinhua news agency, a Shanghai court named Fosun in the corruption conviction of Wang Zongnan, the chairman of a state-owned supermarket chain, earlier this year. Mr. Wang was sentenced to 18 years in prison for channeling benefits to Fosun in return for the sale of two villas at less than market value. Fosun denied the accusation.
Both Vice Mayor Ai and Mr. Wang have ties to former Chinese leader Jiang Zemin. Some analysts speculate that Mr. Xi’s anticorruption campaign is now targeting Mr. Jiang’s “Shanghai faction.” That would be a dangerous move, since Mr. Jiang lent his support to Mr. Xi’s rise to the top of Chinese politics. Though he is 89 years old and has been out of power for more than a decade, Mr. Jiang retains considerable clout. But it seems Mr. Xi wants to consolidate his hold over Shanghai politics along with every other corner of the Chinese polity.
Mr. Guo and other entrepreneurs have tried to render services to the Party and aid the projects of the current leadership. At the same time they have served their shareholders through savvy management. But Mr. Xi demands that the economy be run according to Party discipline. As the Party puts stability and control ahead of wealth creation, don’t be surprised if more tycoons disappear.
