Why China’s Billionaires Are Disappearing

In March 2023, China’s National People’s Congress announced the establishment of a Central Finance Commission, a “super-regulator” tasked with the supervision and overhaul of the entire financial sector. The new body is to be chaired by none other than Chinese President Xi Jinping. The Commission’s first “unofficial” financial restructuring may well have been the mid-February disappearance of billionaire investment banker Bao Fan.

Bao is the founder and chairman of China Renaissance, the country’s top investment bank. The disappearance of Bao Fan remains a mystery, although a rumor later circulated that he was “cooperating” with an investigation by “certain authorities.”

Bao Fan is not the first Chinese billionaire to vanish. He follows in the footsteps of Jack Ma, founder of the e-commerce giant Alibaba and former controlling shareholder of Ant Group. Ant Group was a financial services powerhouse scheduled to go public in Hong Kong in November 2020 in the biggest initial public offering (IPO) ever. Jack Ma disappeared shortly after he delivered a speech in Shanghai that was highly critical of the Chinese banking sector and its regulators.

The IPO was put on hold and Ant Group has been subjected to extensive restructuring. Jack Ma unexpectedly reappeared in mainland China in late March 2023, presumably as a part of the government’s initiative to improve sentiment among the private sector. It is not clear how long the government will allow him to stay on the mainland, but any executive role in Ant Group is over for him.

Bao Fan’s business philosophy sheds some light on the possible circumstances of his disappearance. Bao was an unabashedly global citizen but doing business in an environment of intensifying nationalism and authoritarianism under Xi Jinping. The son of Chinese diplomats, he lived a privileged youth, with the ability to travel internationally and attend high school in the United States. Armed with a Master of Business Administration, he spent several years working for investment banks Credit Suisse and Morgan Stanley. Bao was a titan of China’s technology and finance industries and his fame lay in his unceasing focus on networking and deal-making.

While Bao’s company China Renaissance operates a wealth management division, the company’s core business was investment banking, accounting for 44 percent of its total revenue in 2021. Given his focus on deal-making, it is hard to imagine Bao Fan spending much time on the study of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, which may have been a fatal error.

Bao operated on the model of a flamboyant “master banker” and “rainmaker,” reminiscent of the late US investment banker Bruce Wasserstein, who also bolted out of First Boston (today Credit Suisse) to set up his boutique investment bank and later led the buyout and IPO of Lazard Freres. China Renaissance’s business model eerily resembles that of Lazard Freres, which is generally thought to be home to “swashbuckling” star bankers.

Bao Fan’s flamboyance and aggressive deal-making as “king” of the platform tech industry were incompatible with Xi Jinping’s Marxist vision for the financial sector. Under Xi’s vision, the financial sector should be limited to supporting China’s manufacturing sectors, particularly those prioritized in Made in China 2025. While Xi Jinping is not against the private sector and Premier Li Qiang has repeatedly affirmed China’s commitment to the private sector, their imperative is for the private sector to be under Chinese Communist Party (CCP) control and promote party objectives.

There is no room for someone like Bao Fan within such a private sector model. For Xi, an ideal entrepreneur is someone like Ren Zhengfei, founder and Chief Executive Officer of Huawei. Ren blends unquestionable entrepreneurial talents with a dedication to communism and Mao Zedong, after whom he “fashions himself” and the company. He reads the Selected Works of Mao Zedong in his spare time.

It is difficult to be optimistic about the future of either Bao Fan or China Renaissance. The “reappearance” of Bao Fan as if nothing had happened is highly unlikely. He is much more likely to follow in the footsteps of Jack Ma, either remaining incommunicado under house arrest or being forced into exile.

China Renaissance is likely to follow in the path of Ant Group by “inviting” a major state-owned shareholder and demoting Bao Fan to minority status. Such restructuring would redirect China Renaissance away from the platform tech companies and toward Xi Jinping’s industrial policies. A new chairman appointed by the CCP will be anything but flamboyant, as there is simply no room for flamboyant investment bankers in Xi Jinping’s capitalism with Chinese characteristics.

This article was originally published on the East Asia Forum.