NEW YORK: The disappearance of Chinese banker Bao Fan has come as a surprise to even some of his state-owned lenders, several of which are asking his firm for more information as they assess their exposure, according to people familiar with the matter.
The development underscores how opaque the country’s business and regulatory landscape can be, even for players like state-owned banks with strong links to Chinese officialdom.
Shanghai Pudong Development Bank Co, Bank of Communications Co, China Citic Bank Corp, and China Merchants Bank Co. are among lenders that have requested more details on Bao’s situation as they assess the risks of loans and other business ties to his investment bank China Renaissance Holdings Ltd, the people said, requesting not to be named because the matter is private.
Some banks have also contacted their own government contacts over the past few days to check the whereabouts of Bao, the people said. Bao’s abrupt disappearance last week - likely linked to a government investigation - has unnerved the country’s business elite.
As chairman of China’s pre-eminent tech-focused investment bank, the veteran dealmaker has broad connections across various business sectors and has been a go-to financier for some of the biggest companies. China Renaissance has been in touch with the banks but has not received requests to make any immediate loan repayments, the people said. It had 2.3 billion yuan ($336 million) of outstanding bank loans and 4.97 billion yuan of credit facilities as of the end of June, according to its latest earnings report.
The firm obtained an agreement for a $300 million syndicated loan in May 2021, with lenders including China Citic Bank International Ltd., China Merchants Bank, Bank of China Ltd, Huaxia Bank Co, Nanyang Commercial Bank Ltd and Shanghai Pudong. It stipulates that if Bao is no longer the single largest shareholder of China Renaissance Capital, or is no longer the chairman of the board, the principal lender may cancel its commitment and require mandatory repayment. Representatives from China Renaissance, Shanghai Pudong, Bank of Communications, Citic Bank and China Merchants Bank didn’t immediately respond to requests seeking comment.
Authorities have yet to provide any comments on his whereabouts. The investment bank revealed late Thursday that it had lost contact with Bao, sending its shares down by 28% the next day. The banker’s family was told he’s assisting an investigation, a person familiar with the matter has said. Cong Lin, the firm’s former president, has been involved in a probe by authorities since September, the person said.
Increasingly in China, a suddenly absent boss has come to signal a crackdown or investigation by authorities. In many cases, the person is said to be “assisting” graft probes. Publicly listed companies typically report they have lost contact with the executive and need to make their own inquiries into what happened within the country’s opaque legal system. It is unclear whether Bao’s disappearance marks the escalation of scrutiny on China’s finance industry.
Authorities also on Friday abruptly removed the Communist Party chief of the nation’s largest property insurer, days after online criticism that Luo Xi, who remains chairman of the firm, was building a personality cult when the company demanded employees recite his “golden quotes".
President Xi Jinping has launched a broad anti-corruption probe in late 2021 targeting the nation’s $60 trillion financial sector, which has brought down dozens of officials. The probe has also implicated the investment banking community, ensnaring bankers from brokerages including Everbright Securities Co. and Guotai Junan Securities Co.
