Game of Loans: China's 'Broker Butcher' to run securities watchdog as bankers vanish and heads roll

As this absolutely arse kicking publication has been diligently informing you, dear reader, the jig is up for any Chinese market participants that haven’t been making their beds with a King Size doona cover of President Xi Jinping and lying amid his benevolent teddy bear shaped noggin.

That’s to say China’s securities watchdog (China Securities Regulatory Commission – CSRC) has come out of hibernation and randomly whacked a few wayward corners of the bourse, Chinese tech is still on dangerous ground and Xi himself has been eyeing foreign direct investment (FDI) like a bearish economy eyes honey.

Now there’s talk of a top down reshuffle at the watchdog with the unmistakable ‘Broker Butcher’ said to be taking over the reins.

The icing on the cake? This week China’s most high-profile giant tech-dealmaking banker has turned up missing… past experience says that’s a story that never ends well, especially if you’re an ex-Morgan Stanley prodigy whose old Shanghainese family comes from money, foreign affairs and banking.

Murder on the dance floor

Bao Fan, the billionaire founder and chairman of private investment bank China Renaissance, is a goner. He’s been out of contact with his company for days and both Caixin and Bloomberg seem happy to run with stories of his screaming silence after a little ‘he said, she said’ secondhand source reporting.

Caixin says someone’s said Bao hasn’t returned calls, made an appearance at the Renaissance offices or appeared in public since earlier in the week.

He could be tired, on a bender, or even has COVID-19 like everyone else. Or we could go with the exclusive from the very well-placed Caixin which says “several people close to Bao – including a Hong Kong-based ‘market participant’ – (apparently) say they couldn’t get in touch with Bao for two days.”

Caixin says Bao didn’t respond to calls or – God forbid – random WeChat messages made on Thursday.

Bao’s startling subtraction from China’s already divided tech finance world comes as a select portion of President Xi’s key December address to China’s central economic work conference got itself published in the must-read party journal, Qiushi, a day before.

As a TV series about Xi’s anti-corruption career gets top ratings around the country, the president was all about markets being clean and foreign money being welcome.

His wonderful words arrive for the public just a fortnight before the “We’re Going This Way Two Sessions” Communist Party get together in Beijing.

This latest incredibly significant meeting puts the past administration – crawling with cadres Xi didn’t really choose – to bed and brings pocket-men like the Butcher into play. It also traditionally lays out Xi’s economic targets and priorities for the year ahead.

According to his words in Qiushan this week, Xi wants outside money to get its arse flooding back into China. To do that heads need roll as a show that the new act is clean.

“Looking around, both developed and emerging nations will make foreign investments a key national policy, which leads to a more competitive landscape in terms of attracting foreign investment.”

Etc etc.

The good bad old days: Bao Fan

Which brings us to the space where Bao was a few days ago.

Hands down, Bao Fan is/was The Banker for China’s tech sector.

He has/had a black book of the profoundest guanxi and of the deepest connections within China’s once grand, more recently stomped on internet industry. His handmade bank, China Renaissance, is known for sorting out IPOs for China’s most prominent names, like the ride-hailers Meituan and Didi and the e-commerce monster JD.com.

A deal broker of the highest order, Bao carved out a stellar career at the heart of China’s high-profile tech transactions.

Bao started China Renaissance, the boutique investment bank, in 2005, as a private equity adviser for Chinese tech. This week, after a bunch of calls from Caixin, it conceded it’d been unable to locate or contact its founder, chairman and CEO.

It’s like the ANZ misplaced Shayne Eliot after the AFR said you’d better look for your CEO.

“The board is not aware of any information that indicates that Mr. Bao’s unavailability is or might be related to the business and or operations of the Group which is continuing normally,” the Hong Kong listed CRH said in a statement.

Perhaps more troubling, Bloomberg has Bao’s family as reportedly saying the banker is assisting police with formal inquiries.

Following the news, shares of China Renaissance crashed circa 50% early in Hong Kong trading on Friday.

In 2015 alone, Bao’s Renaissance marched through more than one M&A deal a month across China’s booming internet sector.

He was on the coal face of all the industry-shaking mergers including group buying service and consumer review platforms Meituan and Dianping.

And he was at the heart of the joyrides that became the initial offers for Didi and Kuaidi, then China’s leading ride-hailing apps.

Bloomberg says Bao is assisting authorities in an investigation involving former China Renaissance President Cong Lin. What the inquiries are driving at is the new Sword of Damocles hanging over China’s fintech sector.

Following the money: Cong Lin

China Renaissance listed on the Hong Kong Stock Exchange (HKSE) back in 2018 after it raised US$350 million. According to an HKSE filing, Bao remains China Renaissance’s controlling shareholder with a 48.81% stake.

In September 2022, reports broke that the president of China Renaissance and chairman of its Hong Kong securities unit, Cong Lin, had been grabbed by government authorities.

Caixin says the investigation of Cong “was said to be related to his work at ICBC Financial Leasing, the financial leasing unit of state-owned Industrial and Commercial Bank of China”.

Sources tell Caixin that Bao and Cong have close ties. Although if I’m the president of the bank you run, I reckon that’s probably a given.

Bao invited Cong onboard as president of China Renaissance and chairman of its HK securities unit in July 2020. Caixin says Cong was paid tens of million yuan in annual salary.

What we do know is that in the months following Cong’s plum appointment, ICBC Financial Leasing lent Renaissance a bunch of yuan – more than a good billion – which it took into its public listing, and which it reportedly paid back thereafter.

If there’s a nub somewhere, it could lie therein.

Although, let’s be frank. These guys don’t need nubs.

The Broker Butcher is back: Wu Qing

As reported by Bloomberg the new boss over at China’s newly vibrant market regulator is a name which surely still strikes fear into the hearts of maverick brokers from Shanghai to Hong Kong.

Wu Qing earned the cheery title “The Broker Butcher” for butchering errant traders in China’s post millenium tech boom.

This is the man Bloomberg says is slated to become the head of the China Securities Regulatory Commission (CSRC).

Wu’s been killing time rather than bankers as the vice mayor of Shanghai, funnily enough where he became buds and worked alongside Li Qiang, China’s incoming Premier. Wait… China’s notoriously inexperienced, plucked out of nowhere, but incredibly close to Uncle Xi incoming Premier.

That was when Li, as party chief of Shanghai, showed what absolute mindless loyalty to the President can get you.

Wu himself comes with the kind of cache that Xi admires. According to Bloomers, he gutted more than 30 firms over regulation breaches when he ran markets in Shanghai, back in the day.

The plan is pretty transparent. The markets will run red with the blood of both wayward participants and political enemies.

That’ll scare a few foreign investors, but more importantly it’ll ensure no silly business. In the mid to long term, foreign participants will be wooed and won, assured that there’s recourse to a law with sharpened teeth.