WHEN TOP EXECUTIVES and financiers of any stripe go awol, it rarely ends well. When it is Fosun’s Guo Guangchang, one of China’s richest and highest-profile chief executives, that drops from sight, the conclusions quickly jumped to are inevitably nefarious ones.
Trading in the shares of Guo’s fast-expanding media-to-asset-management-to-Club Med conglomerate was suspended in Hong Kong ahead of a company announcement confirming that Guo was assisting authorities with their enquiries. Beyond that, the company did not say why police in Shanghai, where the group is based, had detained its chief executive. Guo was reportedly picked up at an airport. Local media reports suggest he has been held in connection with an investigation into Ai Baojun, director of the Shanghai free trade zone and a former deputy mayor of the city.
Earlier this year, Guo was found by a Shanghai court to have had ‘inappropriate connections’ with Wang Zongnan, a businessman who had once headed a number of state-owned enterprises, most notably the Shanghai Friendship department store chain. In August, the court sentenced Wang to 18 years in jail for misusing 195 million yuan ($30.2 million) in corporate funds. (Fosun has denied any impropriety in its relationship with the Friendship group.)
Guo is not the first senior company officer in recent months to disappear for a few days before being revealed to have been either under investigation or asked to assist authorities with their investigations.
Two investment bankers at Citic Securities, China’s largest securities brokerage and which overstated its over-the-counter derivatives business by 1 trillion yuan earlier this year causing its chairman to resign, went missing earlier this month. Something similar happened to Guotai Securities’ Yim Fung last month and in September, Li Yife, head of the China unit of Man Group, dropped out of sight for a few days, too.
It is clear that the anti-corruption operation — it has continued for too long to be labelled a campaign anymore — is now reaching deep into financial services.
This has been true since at least the beginning of the year, when Mao Xiaofeng, president of China Minsheng Bank, was detained to assist with the investigation into former President Hu Jintao’s aid, Ling Jihua.
That, at least, smacked of old-fashioned factional politics. But the anti-corruption operations have intensified in the wake of the summer’s stock-market crash, which reawakened concerns in some high levels of the Party about the lack of discipline that could be exerted on markets and their participants.
However, what makes the Guo case so unsettling for business and investment is not that there are unwritten political rules to doing business in China; those exist in many countries. It is that the rules have suddenly become more unpredictable.
Update: Guo has reemerged, chairing Fosun’s annual meeting in Shanghai on Monday, and without giving any explanation for his reported absence over the past few days. Trading in the company’s shares has resumed.