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April 18, 2014 6:36 pm
Zili Shao’s move from head of China to vice-chairman of Asia Pacific was announced hastily by the bank on Friday after enquiries from the Financial Times.
His is the latest in a flurry of high-level moves after the Department of Justice and Securities and Exchange Commission began examining the bank’s hiring practices in China, investigating whether it hired so-called “princelings” – children of senior Chinese officials – in exchange for lucrative advisory work, including IPO mandates.
JPMorgan has not identified a successor but has appointed headhunters to try to fill the role, according to people familiar with the matter. In the announcement, JPMorgan said Mr Shao had “informed us that he would like to return to a regional role”.
He will report to Nicolas Aguzin, head of Asia-Pacific, who told colleagues in a memo: “In his new role, Zili will advise the Asia leadership team on matters relating to China, remain on the boards of certain legal entities and joint ventures in China, and take on regional projects to support the firm’s growth in Asia Pacific.”
Mr Shao’s move follows the departure in March of Fang Fang, who headed investment banking for JPMorgan in the country.
There is no suggestion that Mr Shao has broken any laws, although his responsibility for a country, which is the subject of US regulatory investigations, did weigh on his position, according to people familiar with the matter. JPMorgan and Mr Shao declined to comment.
One JPMorgan executive said he was moving to a more senior role after helping the bank to a record year in China.
Mr Shao personified a way of doing business that relied heavily on give and take with regulators. For example, JPMorgan engaged in certain activities at the behest of regulators in the expectation that they would reciprocate by awarding licences and access in turn.
Some of Mr Shao’s operations in the country had sceptics inside the bank. For example, Mr Shao drove through an investment of about $200m in a credit guarantee company in 2011 at the request of China’s state planning body, the National Development and Reform Commission. At the time, several executives opposed the idea, fearing that JPMorgan had no experience or competitive advantage over the banks seeking such guarantees for loans to small and medium enterprises.
Thanks to Mr Shao’s energetic pursuit of licences in China, including a securities and trust licence, the bank has had a far higher profile than in the past.
In one of the more successful moves orchestrated by Mr Shao, JPMorgan took a 20 per cent stake in a trust company in China in 2012.
Trust companies are at the heart of concerns around the shadow banking system in China, but the venture has become the most profitable of the bank’s arms in the country, according to people familiar with the matter, in large part because the bank was judicious in selecting its partners, China Power Investment Financial and the city of Zhengzhou.
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