Xiao Jianhua: what a former billionaire’s trial reveals about China’s ultra-rich

It’s hard to be a billionaire in President Xi Jinping’s China. All that money. All this success. All that influence. And, if you’re the wrong person, using one of them risks getting you kidnapped – and imprisoned.

The fate of former billionaire Xiao Jianhua is another canary in Beijing’s dystopian coal mine.

He was an eccentric. It was also excessive.

He lived a life of luxury surrounded by a hand-picked all-female security delegation.

They weren’t up to it.

Xiao was kidnapped five years ago from a hotel in Hong Kong. Locked in a wheelchair and taken out of the building by a Communist Party security team, his offense remains unknown.

At the time, the “One country, two systems” arrangement between the former colony and the mainland was supposed to separate their legal systems.

This fragile independence has since been virtually destroyed.

Today, Hong Kong’s rapid decline as an independent and regulated trading center of Asia is reflected in the plight of the Chinese entrepreneurs it nurtured.

Five years after his disappearance, Xiao – a tech whiz turned investor from a non-status Chinese family – will now face trial. The charges remain secret. All we know is that his wealth and excesses caused his popularity to rise rapidly among Beijing’s ruling elite. And he has forged close ties with global political and business leaders.

It was always going to be a volatile mix.

“Wealthy Chinese are often compared to fattened geese: the party feeds them – through connections – and ends up consuming them,” says James Palmer, deputy editor of Foreign Policy.

“But some, like Xiao, are a very different species. Parrots, perhaps: intelligent, pirates and with the dangerous potential to reveal secrets.”

He is not the only billionaire to have been snapped up by the Communist Party.

Investment tycoon Guo Guangchang disappeared in 2015. Trading in his asset management company was suspended. A few days later, he reappeared with authorities saying he was “assisting in investigations”.

Several other general managers disappeared around the same time, to adopt much reduced roles. Prominent among them is former Ant Group founder Jack Ma.

Insurance company chief Wu Xiaohui divorced a granddaughter of Chinese leader Deng Xiaoping in 2015. Then, in 2017, he disappeared – only to suddenly show up a year later for fraud.

Xiao held stakes in the personal businesses of many members of the Chinese Communist Party leadership. He has acted as a financial advisor, investment broker and business partner.

“Xiao was part fixer, part potential scapegoat, appeasing senior officials and working with political connections on behalf of the wealthy,” Palmer notes.

Tracking his net worth through China’s convoluted accounting systems has proven difficult for analysts. But some believe it was more than US$6 billion.

In the end, Xiao may have had her fingers in too many pies.

A fragile autocrat

Xi’s favorite tactic to disempower his political opponents has been to subject them to his “anti-corruption” campaigns. Xi, himself estimated to be worth around $10 billion, has pursued such purges relentlessly since he ascended to power in 2013.

“Xiao’s clients included people close to Xi,” says Palmer. “But it didn’t protect him – on the contrary, it put him in more danger.”

Xi doesn’t like discussing his family’s wealth. And Xiao dared to tell the New York Times about it in 2014.

Now, like the Chinese journalists who dared to detail the privileged life of President Xi’s daughter, Xi Mingze, he finds himself behind bars.

“Xiao was certainly aware of the precariousness of his position, spending most of his time outside mainland China once Xi came to power,” Palmer notes.

The 50-year-old was granted Canadian citizenship in 2008. But he has maintained Hong Kong as the center of his business operations.

He was supposed to be independent. Secured.

So why make it a public spectacle five years later?

“The trial may be a show of Xi’s power as he prepares for the 20th Party Congress in the fall, where his power will be formally consolidated for an unprecedented third term,” Palmer says.

Xi breaks the rules.

The age of 69 is supposed to be the mandatory retirement age for Communist Party officials. Xi’s 69th birthday was June 15.

And terms in the top job should be limited to two five-year terms. But Xi has changed the rules to grant himself perpetual power – if he chooses to accept it.

So diverting attention to other rule breakers may suit his agenda.

“Just what he is charged with, and which former officials are suspended for being linked to him, will be telling,” Palmer concludes.

struggle for prosperity

Xi regularly proclaims a program for the equitable sharing of China’s wealth.

He dubbed it “Common Prosperity”.

But is it real?

“When Xi pretends to be interested in a greater [wealth] redistribution, whether it does or not, the media of China’s economic elite and world-class investors will talk about it,” says Wei Cui, a professor at the University of British Columbia.

The economic numbers, he says, tell the real story.

“Xi’s regime has so far delivered the longest-lasting and deepest tax cuts in China since 1994 — and many of those tax cuts have delivered extraordinary benefits to China’s urban wealthy.”

This means that the top 1% of people in China are only taxed 10 cents on the dollar.

It’s a similar story for large state-controlled corporations.

“The Chinese government has made significant corporate tax cuts since 2019,” Wei adds.

“He repeatedly reduced the value added tax [VAT] rate from 2016 to 2019. And he made a big payroll tax cut in 2020.”

Thus, high-profile attacks on influential businessmen and political elites may serve a different purpose than the one being broadcast.

“Xi’s egalitarian credentials are much weaker than the West claims,” ​​Wei says.

“But if China’s poor have hope for a better future, they have nowhere else to turn.”

power corrupts

Xi’s anti-corruption campaigns have ensnared some four million Communist Party officials, including around 400 above the rank of vice minister.

Xi was quick to explain why.

“After 10 years…some unhealthy tendencies which had not been contained for a long time have been brought under control, many problems which have plagued us for a long time have been solved, and serious potential dangers in the party, the country and the army have been rooted. out,” Xi reportedly said last week.

“The Chinese Communist Party does not have its own interests, and party officials should not have selfish interests,” he said. Instead, party officials “must put all their effort into making sure people live a good life.”

To back this up, he once again unleashed his disciplinary watchdogs, ordering them to adopt a “zero tolerance” and “no mercy” attitude.

“There is still a long way to go to prevent all sorts of interest groups from converging and corrupting our officials. There is still a long way to go to effectively tackle the more invisible and deep-rooted corruption, and we still have a long way to go to eradicate it completely,” he said.

The campaign produced results. But Xi wants more.

Last week, he called on his anti-corruption body to step up “political oversight” of local officials and ensure “full, accurate and comprehensive” implementation of its policies.

“[You should] guiding and supervising party members and cadres to truly understand the main policies of the party central, keep them in line with the party central at all times, and solidly implement its decisions,” Xi said.

“There will be no compromise, no facade, no sleight of hand based on local or short-term interests. [We must] ensure that the implementation has no deviation, no compromise and no distortion.”

But Communist Party leaders and their families are among the wealthiest people in China. Although it is a matter of strict censorship.

Every major Chinese company must have Communist Party members on its board.

But success can be expensive. If you don’t have the right family ties.

A study found that being on the Hurun Rich List of China’s most successful entrepreneurs triples the chances of being arrested or investigated over the next three years.