In China, a Financial Tycoon’s Rise and Fall

Wu Xiaohui, the founder and chairman of Anbang, the Chinese insurance conglomerate, has been detained in China. Prior to Wu’s downfall, Anbang was most famous for its overseas deals: it acquired the luxury Waldorf Astoria hotel in New York and tried to co-develop a Manhattan office tower with Kushner Companies, the family business of U.S. President Donald Trump’s son-in-law Jared Kushner.

A Chinese magazine, Caijing, first published news that Wu had been detained on June 9. The next day, the China Insurance Regulatory Commission (CIRC) announced the detention of a small number of Anbang employees, but didn’t provide specific reasons.

The news immediately exploded across Chinese websites, but was quickly deleted by Chinese censors. Chinese officials neither confirmed, nor denied Wu’s detention. Anbang simply announced on its website on June 14 that Wu was temporarily unable to fulfill his duties as chairman for “personal reasons.”

Financial Times (FT) later confirmed that Wu had been detained by corruption investigators in Beijing. But since Wu has not been publicly accused of any wrongdoing, it is still possible that he might be released after the “relevant department” completes its questioning.

Regardless, Anbang has become the hot potato no one wants to hold. Stocks linked to Anbang suffered; some Chinese banks stopped selling Anbang’s financial products; and one bank, rumored to have given 100 billion yuan ($15 billion) in loans to Anbang, pushed back and said the number was closer to 100 million yuan.

As further bad news related to Anbang emerged, not only were stories mentioning Wu’s arrest deleted but comments on reports about Anbang were disabled. By blocking such discussions, the censors triggered even more gossip about Wu and the Anbang crisis. Wu is not only a financial tycoon, but also has (or had) direct connection with China’s princelings, the children and grandchildren of the leaders of the Communist Party of China (CPC).

The Rise

Wu was born in 1966 in a suburb of Wenzhou, a city famous for entrepreneurship. At a recruitment event in early 2015 at Harvard, Wu delivered a speech and then answered questions from students. One asked what “specific qualifications” he had been looking for among those at the campus recruitment event. Wu’s response reads like a self-portrait, with an emphasis on presentability, passion, and attention to detail.

If you fail to sell yourself to you, how do you expect to sell yourself to your professors and to others? Your self-discipline determines your future. Simply speaking, you can see our executives sitting here are all with kind faces, shining eyes, and decent behavior. They represent an image of Chinese enterprises.

In response to a question about the internationalization of Chinese businesses, Wu emphasized the benefits of going global by using a marriage metaphor:

For instance, if you choose to stay in rural villages, you can only meet common village girls; yet if you come to Paris, you will have the chance to lay your eyes on the Mona Lisa. A city provides opportunities unique to cities; China provides opportunities unique to China. Yet if you step onto the global stage, you have global opportunities.

By setting up business in Beijing, Wu successfully made connections with China’s most powerful families. One of his most critical moves was marrying into one of the country’s top families. According to FT, some time after 2004 — when he founded Anbang — Wu married a granddaughter of Deng Xiaoping. It was Wu’s third marriage; his second wife had been the daughter of a Zhejiang vice governor, according to Caixin.

In the decade following Anbang’s 2004 founding, Wu transformed the insurer into a major player. In 2014, Anbang's registered capital reached 62 billion yuan ($9 billion) and its reputation hit a peak after purchasing the Waldorf in New York City.

After the Rise

As the old Chinese saying goes, “Things will develop in the opposite direction when they become extreme.” Wu’s aggressive business expansion and high profile on the global scene led to the split with the relatively more low-profile princelings. 

In 2015, Caixin published a report claiming that the marriage between Wu and Deng’s granddaughter was “suspended” and Deng’s family confirmed that Anbang had “nothing to do with the Deng family anymore.” Meanwhile, several princelings, whose names always appeared together with Wu in news related to Anbang, publicly denied any relations with the company and complained that Wu had used their names without permission.

Yet these ominous signals didn’t slow Wu’s march onto the global stage. He mingled with, and bragged about mingling with, not just China’s most powerful families but also big names on Wall Street. For example, during those 2015 Harvard remarks he publicly acknowledged that he had good connections with the Blackstone Group, which sold him the Waldorf for nearly $2 billion in 2014:

Jonathan Gray, head of Blackstone’s real-estate division and chairman of Hilton, is a good friend of mine. Our relationship developed gradually from negotiation counterparties to close friends. I trust him deeply because he keeps his word. He is like a checkbook: as soon as a check is written, you can count on cashing it, and he doesn’t waste any time.

In November 2016, Wu met with Jared Kushner in a private dining room to cast a bid to buy a stake in a Manhattan office building partly owned by Kushner’s family company. The New York Times reported on the meeting in January 2017, just two weeks before Kushner’s father-in-law, Donald Trump, was to be sworn in as president.

Ezra F. Vogel, a Chinese expert and professor emeritus at Harvard had told the Times in September 2016 that he met Wu on several occasions:

[Wu] had this staff of sharp people who were working for him… It seems that they were doing the detail work, and he was the friendly man supplying the connections.

While Wu was actively attending various events in New York city, the anti-corruption campaign back in China had turned to one of the country’s richest circles — the financial sector.

On March 21, 2017 China’s premier Li Keqiang made a harsh speech on anti-corruption in the financial sector:

[We will] crack down on illegal bank credit,  insider trading, and interest transmission, insurance companies’ illegal acts. Regarding those regulators who collide with financial predators to conduct illegal acts, [they] must be severely punished as a warning to others.

Interestingly, Li’s speech wasn’t published until April 9, when China announced that the top insurance regulator, Xiang Junbo, chairman of CIRC, was “suspected of severe disciplinary violations” and under investigation.

Now, two months later, Anbang’s Wu has ended up being “taken away” as well. Not surprisingly, Wu reportedly had had good relations with Xiang. "Anbang has the ability to push the regulator forward, including the revision of regulations," Caixin wrote.

Although the situation is still developing, and as of this writing what exactly Wu is being accused of is unclear, what can be certain is that Wu’s story — replete with money, ambition, power, and politics — is a prime example of China’s big business boom.