The tycoon who styles himself as China’s Warren Buffett has been caught up in an intensifying anti-corruption drive, raising concerns throughout the country’s already nervous private sector.
Fosun International, China’s largest private conglomerate, said its chairman, Guo Guangchang, one of the country’s best-known businesspeople, was “assisting in certain investigations carried out by the mainland judicial authorities”. It did not say whether he was the target of the inquiry or was helping police gather evidence on someone else.
His disappearance will fuel anxieties in the private sector that the anti-corruption crackdown launched by President Xi Jinping three years ago is being extended to high-profile entrepreneurs and the prime beneficiaries of China’s decades of rapid growth. It initially focused on ensnaring senior members of the government and military and financiers and is now broadening to prominent businesspeople in Shanghai.
Trading in Fosun’s shares was suspended on Friday following reports in the Chinese media that Mr Guo had been detained, prompting a wave of speculation. Fosun said it had applied to the Hong Kong Stock Exchange to resume trading on Monday.
His case threatens to accelerate the pace of capital flight out of China as the country’s wealthy elite scramble to shift their assets offshore and out of reach of the Chinese authorities. In the past many entrepreneurs believed that as long as they had extensive assets abroad, they had political insurance.
“This is Richter scale 9 for the private sector in China,” said Rupert Hoogewerf, who compiles the annual Hurun China rich list. “Guo Guangchang is one of China’s most respected entrepreneurs and the most active Chinese entrepreneur on the international circuit.”
Mr Guo, 48, has spent billions buying high-profile global brands ranging from French tourism group Club Med and Canada’s Cirque du Soleil, to insurers and property.
He co-founded Fosun with three university friends in 1992 and likes to model himself after the legendary investor, Warren Buffett. This year’s Hurun Rich list ranked him the 17th richest person in China with wealth of Rmb50bn ($7.7bn).
Fosun’s statement said he “may continue to take part in decision-making on major company matters via appropriate means”. It added that the investigation did not pose a “material adverse impact on the financial operation of the group”. “The operations of the company remain normal,” it said.
Fosun’s strategy is to invest in companies that primarily serve China’s growing middle class, including the booming markets in domestic and outbound Chinese tourism.
The case comes days after the European Central Bank approved Fosun as a “fit and proper” owner of a eurozone bank. Central bank officials have been trying to verify reports about Mr Guo since making that decision.
A person close to the ECB said it was “bad timing”, but added that even if it were confirmed that Mr Guo had been arrested, it would not automatically reverse its authorisation.
The reports about Mr Guo were only the latest involving senior businesspeople going missing, apparently in connection with enquiries into corruption or market manipulation. Citic Securities, China’s largest investment bank, said on Sunday it was unable to contact two of its top executives and last month Guotai Junan, one of China’s leading brokerages, said it could not reach its chairman and chief executive.
Fosun was one of the bidders in the aborted auction for Portugal’s Novo Banco and is also bidding for German private bank Hauck & Aufhäuser and BHF Kleinwort Benson.
A European executive whose company works closely with the Chinese conglomerate said Fosun officials told them they were able to establish contact with Mr Guo but it was minimal, possibly suggesting he had been detained. A friend of the Guo family said family members had lost touch with him.
Trading in shares of seven of Fosun’s listed companies on the Chinese mainland, including Shanghai Fosun Pharmaceutical, Nanjing Iron and Steel and Hainan Mining were also suspended.
Mr Guo is one of China’s more respected business leaders as well as an advocate of free market reform.
In March 2012, he met Mr Xi as he was poised to take over as the country’s top leader, and urged him to enact a series of economic reforms, including greater court protection for insurance companies, increased lending by non-bank financial institutions and greater scope for private equity businesses to operate, according to a presentation posted on the company website at that time.
Thomas Cook, which is in a joint venture with Fosun, saw its shares fall as much as 5.3 per cent to 110p on Friday morning, before closing down 2.33 per cent. “Fosun is a supportive shareholder in Thomas Cook and we are monitoring the situation closely,” the travel group said.
Rumours of Mr Guo’s disappearance began to circulate in China on Thursday when influential financial publication Caixin cited unconfirmed reports that police had detained him when he arrived in Shanghai on a flight from Hong Kong. Later, calls to the mobile phones of Fosun executives went unanswered.
Fosun: rise of an empire
1992 Guo Guangchang founds Guangxin Technology Development Company, a market research group, with classmates from Fudan University, using Rmb38,000. Guangxin later takes founding stake in Fosun Group
1994 Expands investments to property and pharmaceuticals
2004 Fosun International founded in Hong Kong; lists on main board of HK exchange in 2007
2010 Buys 7.1 per cent of Club Med, the first time a quoted Chinese group has taken a direct stake in a listed French company
2012 Sets up joint venture Pramerica Fosun Life Insurance with Prudential Financial. Also invests in Minsheng Bank, China’s largest private lender
October 2013 Pays $725m for New York building One Chase Manhattan Plaza
Sept 2014 Buys Portuguese insurer Caixa Seguros with bid of €1bn
February 2015 Wins takeover battle for Club Med, the French holiday group
April 2015 Fosun and TPG Capital pay $1.5bn to buy Canada’s Cirque du Soleil
May 2015 Pays $1.8bn for Bermuda-based insurer Ironshore
June 2015 Announces joint venture with UK travel company Thomas Cook
July 2015 Bids for Kleinwort Benson, one of London’s oldest banking names
July 2015 Announces €210m offer for German private bank Hauck & Aufhäuser
July 2015 Completes $433m acquisition of US insurer Meadowbrook
Sept 2015 Bid for Portugal’s Novo Banco is rejected and auction is cancelled
Sept 2015 Announces $1.5bn Hong Kong rights issue after raising $1.2bn in May through share placement
With additional reporting by Jackie Cai, Gabriel Wildau and Tom Mitchell in Shanghai and James Kynge in London