Chinese Billionaire Xiao Jianhua Being Investigated in Beijing, Source Says

Chinese Billionaire Xiao Jianhua Being Investigated in Beijing, Source Says
Xiao Jianhua, a Chinese-born Canadian billionaire, reads a book outside the International Finance Centre in Hong Kong in December 2013. (AP Photo/Next Magazine)

HONG KONG—Xiao Jianhua, the Chinese billionaire who recently went missing from his luxury apartment in Hong Kong, is currently assisting the top Chinese leadership with corruption investigations in Beijing, according a source familiar with the matter.

A source in Zhongnanhai, the Beijing headquarters of the Chinese leadership, with authoritative information on high-level discussions, told Epoch Times recently that Xiao’s investigation is a “top priority” in Zhongnanhai at the moment. The source also confirmed that Xiao shared ties with Zeng Qinghong, the former Chinese regime vice chairman and chief political enabler of former Chinese leader Jiang Zemin.

Another source, in Hong Kong’s securities industry, said that Xiao was responsible for several recent financial maneuvers that were aimed at moving capital out of China through Hong Kong.

The information comes as Xiao Jianhua’s abrupt disappearance gains international attention. Because mainland Chinese police had reportedly led Xiao away from his residence at Hong Kong’s Four Seasons Hotel on Jan. 27, many are concerned over what appears to be a breach of the “one country, two systems” arrangement between semi-autonomous Hong Kong and the Chinese regime.

The information also emerges in light of Chinese leader Xi Jinping’s recent attempts to clean out Jiang Zemin’s remaining influence in the Chinese regime and in Hong Kong. Over the past four years, Xi has been purging members of Jiang’s powerful political faction to consolidate power. Previously, Jiang was the Chinese regime’s de facto ruler owing to his stacking of top governing bodies with factional allies.

‘Money Launderer’

The source in Zhongnanhai said that Xiao Jianhua is the most important “money launderer” of the Jiang faction, and one of the “biggest tigers” in the Chinese financial sector. In Communist Party parlance, “tigers” refer to corrupt high-ranking officials.

Xiao is best known for his aiding the business affairs of Zeng Wei, the son of Zeng Qinghong. In 2006, Xiao helped Zeng acquire state-owned energy company Shandong Luneng, which was then being privatized. Luneng found its way into Zeng Wei’s hands, at pennies on the dollar, through shell companies that Xiao is linked with, to the detriment of Chinese taxpayers.

After Xiao’s recent disappearance from Hong Kong, news of Luneng’s privatization started circulating on Chinese social media and was left uncensored. This is a stark contrast to when the news first broke in December 2006 on the cover page of Chinese financial magazine Caijing; Caijing was made to retract that particular issue, the only such case in its history, according to the Financial Times.

Given the Chinese regime’s tight control of information, the decision to keep available the 2006 news concerning Xiao Jianwei and Zeng Wei suggests that both are in political trouble.

Indeed, the source in Zhongnanhai said that the ongoing investigation of Xiao in Beijing is aimed at implicating more members of Jiang Zemin’s faction, including top Hong Kong overseer and elite Politburo Standing Committee member Zhang Dejiang, Zeng Qinghong, and Jiang Zemin himself.

Xiao, 45, has investments across several sectors in China, including banking, property, information technology, and rare-earth metals. He has long and deep ties with the Chinese Communist Party: As the former student union leader of Peking University, Xiao opposed the student protests on Tiananmen Square in 1989. Later, Xiao helped the families of Party elites with their business dealings.

Xiao is a prime example of how business and politics go hand-and-hand in China. According to the Hurun Report, which ranks China’s richest, Xiao is 32nd wealthiest person in the country in 2016, with a fortune of about $5.8 billion (40 billion yuan).

The source says that Beijing estimates Xiao’s wealth to be nearly $300 billion (2 trillion yuan), or sixty times Hurun’s figures. Hurun Report chairman Richard Hoogewerf had told Financial Times earlier in the week that it is “extremely difficult” to gauge Xiao’s wealth because “he’s a got a myriad of highly complex structures.”

“Working through Xiao Jianhua and other traders, the Jiang faction emptied out China’s state coffers,” the source said. “Xiao himself is involved in many cases of banking fraud and other crimes. The number of bad accounts in Chinese banks is staggering, and some of those accounts are closely tied with Xiao and others.”

The source cited as an example a fraud case in Inner Mongolia “by a person” that involved about $247 million (1.7 billion yuan). The “person” used a company under his name to take a loan and filed for bankruptcy, pocketing the loan. But investigations have thus far not been able to connect the fraud case to “that person,” the source said.

“That’s why the Xi Jinping administration has decided to arrest Xiao Jianhua, investigate him, and use his case to make a breakthrough in cleaning out the many godfathers in China’s financial sector,” the source added.

Hong Kong Ties

The source in Zhongnanhai said that the Hong Kong-based Xiao Jianhua has a very close relationship with top politicians in Hong Kong, including Leung Chun-ying, the chief executive, and Zhang Xiaoming, director of the Liaison Office, the Communist Party’s presence in the city. Both Leung and Zhang have recently been outed as allies of Jiang Zemin by a pro-Beijing Hong Kong newspaper that appears to be carrying the messaging of the Xi Jinping leadership.

Christopher Cheung, a member of Hong Kong’s Legislative Council representing the Financial Services constituency, an industry interest group that holds seats in the legislature, told Epoch Times that he once met Xiao through the arrangement of a friend. Xiao’s “influence is so great, he can sway 10 to 20 of those with voting rights” in the financial constituency, Cheung said.

The source said that Xiao was once so influential in Hong Kong, he could “come and go from government buildings as he pleased.”

The same source in Hong Kong’s securities industry, speaking on condition of anonymity, noted that Xiao Jianhua is behind the severe capital outflow from China in recent years.

“Industry insiders all know that Xiao Jianhua and others big crocodiles in the financial sector are using Hong Kong as a platform to move capital,” the individual said. “Their movements are extremely low key, however.”

The source added that the recent purchase of internet business company Zhejiang Wanjia Co Ltd and Chinese property giant China Vanke bear Xiao’s fingerprints.  

Xiao and others acquire firms in mainland China, merge them with shell companies on the Hong Kong market, pump up the prices, then dump the shares for a lucrative windfall, the source said, adding that the process is an effective means of money laundering for Jiang Zemin’s extended retinue, and many influential Hong Kong lawyers, businessmen, and government officials are involved.