Pingyang County’s verdant hills still hint at a long-lost China.
Rice paddies and villages surround its bustling towns, and in the
fields, farmers wade into the mud to plant seedlings as they have for
thousands of years.
It
is an odd place to find the people behind a Chinese corporate
powerhouse that is turning heads on Wall Street with a global takeover
binge. Yet the area is home to a tiny group of just such people —
small-time merchants and villagers who happen to control
multibillion-dollar stakes in the Anbang Insurance Group, which owns the Waldorf Astoria in New York and a portfolio of global names and properties.
American regulators are now asking who these shareholders are — and whether they are holding their stakes on behalf of others.
The
questions add to the mystery surrounding a company that seemed to come
out of nowhere, surprising deal makers with offers to pay more than $30
billion for assets around the world.
Anbang’s
shopping spree is part of an outflow of money from China that has
reshaped global markets but has often been shrouded in secrecy,
sometimes by prominent Chinese looking to shift their wealth abroad
without attracting attention at home. That poses a problem for
international regulators trying to identify the buyers behind major
acquisitions and to assess the riskiness of these deals.
The
Anbang shareholders in the Pingyang County area hold their stakes
through a byzantine collection of holding companies. But according to
dozens of interviews and a review of thousands of pages of Anbang
filings by The New York Times, many of them have something in common:
They are family members and acquaintances of Wu Xiaohui,
Anbang’s chairman, a native of the county who married into the family
of Deng Xiaoping, China’s paramount leader in the 1980s and ’90s.
In
many ways, Anbang and Mr. Wu appear to be archetypal products of
China’s mix of freewheeling capitalism and Communist Party dominance, a
formula that has fueled nearly four decades of untrammeled growth.
Anbang got its start as an auto insurance
company in 2004 in the eastern Chinese city of Ningbo. For years it was
only a minor player. But it took off as it became more aggressive with
its finances, buying stakes in Chinese banks and bringing in money by
selling high-risk, high-yield investment funds to ordinary Chinese.
Mr.
Wu, 49, a former car salesman and low-level antismuggling official, led
Anbang through this transformation and is now known as one of China’s
most successful businessmen. He wears tailored suits and polished
loafers, hobnobs with the likes of Stephen A. Schwarzman of Blackstone, and sometimes holds court at Harvard.
But he does not appear in Anbang’s filings as an owner.
It
is common in China for the wealthy to have their shares in companies
held in others’ names. Known in Chinese as baishoutao, or white gloves,
these people are often trusted relatives or acquaintances. Many defend
the practice as a way to protect their privacy in a nation where riches
can be a political liability. But others say white gloves can be used to
hide ill-gotten gains and thwart corruption investigators.
Anbang did not respond when asked if Mr. Wu was a shareholder and declined to answer questions about its owners.
The
company, a spokesman said, “has multiple shareholders who have made all
required disclosures under Chinese law. They are a mix of individual
and institutional shareholders who made a commercial decision to invest
in the company. Anbang has now grown to be a global company thanks to
the support of these long-term shareholders.”
For
investors and regulators, white gloves can make it difficult to
evaluate the financial health of a Chinese buyer. Ownership may be
concentrated in the hands of a few people, posing hidden risks, and
companies with government connections could be vulnerable to political
shifts or become magnets for corruption.
“It
is very important for businesses to know who they are ultimately doing
business with, and for investors, what they are investing in,” said
Keith Williamson, a managing director in Hong Kong at Alvarez &
Marsal, a firm that carries out corporate fraud investigations.
It
is not clear whether the shareholders in the Pingyang County region are
holding large stakes on behalf of anyone else. But on May 27, Anbang withdrew
its application with New York State to buy an Iowa insurer, Fidelity
& Guaranty Life, for $1.6 billion. Regulators had asked about ties
between several shareholders with the same family names, said one person
briefed on the matter who spoke on the condition of anonymity.
A $6.5 billion deal
for a portfolio of hotels that includes the Essex House in New York and
several Four Seasons locations is awaiting results from a security
review by the American government. In March, Anbang withdrew a $14
billion bid for Starwood, the operator of Sheraton and Westin hotels, in
a move that surprised Wall Street.
The company could come under greater scrutiny as it prepares to sell shares
in its life insurance business on the Hong Kong stock exchange next
year. Already, at least one major New York-based investment bank has
raised concerns about Anbang’s ownership after studying its shareholding
structure to evaluate whether to help with its overseas deals,
according to two people involved in the matter who asked not to be
identified because the process was private. The bank did not participate
in Anbang’s deals.
Separately,
the Chinese magazine Caixin reported in May that Chinese regulators
were examining Anbang’s riskier financial products. It is unclear where
that inquiry stands or whether Anbang’s ownership structure is being
investigated.
Continue reading the main story
President Xi Jinping has waged a campaign against graft since taking office, and the use of white gloves has recently come under scrutiny.
“White gloves are accompanied by power’s black hands,” the Communist
Party’s disciplinary watchdog wrote in a report last year.
Questions
about Anbang’s owners come as Chinese companies make deals around the
world — sometimes representing efforts by China’s powerful to move money
out of the country, as the economy slows and the party tightens its
grip on everyday life.
China
has encouraged some capital outflow to improve the performance of its
investments and expand its influence. But the subject of the elite
moving money overseas is politically sensitive, raising questions about
the source of their wealth and their confidence in the Chinese economy.
Luo
Yu, the son of a former chief of staff of China’s military, said
China’s most politically powerful families had been transferring money
out of the country for some time.
“They
don’t believe they will hold on to power long enough — sooner or later
they would collapse,” said Mr. Luo, a former colonel in the Chinese Army
whose younger brother was a business partner with one of Anbang’s
founders. “So they transfer their money.”
At
its founding in 2004, Anbang had an impressive list of politically
connected directors. Records show early Anbang directors included Levin
Zhu, son of a former prime minister, and Chen Xiaolu, the son of an army marshal who helped bring Communist rule to China.
Then
there was Mr. Wu, who was born Wu Guanghui but was known as Wu Xiaohui
from a young age. Relatives said he grew up in a Catholic family; a
crucifix sat on his aunt’s dining room table, and she wears a necklace
with a portrait of the Virgin Mary.
Mr.
Wu married Zhuo Ran, a granddaughter of Deng, the Chinese leader who
brought China out of the chaos of the Mao era. Together, Mr. Wu, Ms.
Zhuo, Mr. Chen and their relatives owned or ran the companies that
controlled Anbang, according to company filings.
Anbang
leapt onto the global stage with last year’s purchase of the Waldorf
Astoria and its aborted bid for the Starwood chain. By this year,
Anbang’s assets had swelled to $295 billion.
It
is not clear what prompted Anbang’s sudden interest in overseas assets.
But the shift came after a reshuffling of its ownership structure that
also led to the injection of more than $7.5 billion into the company.
Company
documents filed with Chinese agencies show that the number of firms
holding Anbang’s shares jumped to 39, from eight, over six months in
2014. Most of those firms received large injections of funds. At the
same time, Anbang’s capital more than quintupled.
Ms.
Zhuo disappeared from the ownership records by the end of that year.
Many of Mr. Wu’s relatives did as well. Mr. Wu and Mr. Chen had
disappeared earlier from the records.
Mr.
Zhu, who does not appear to have owned shares, disappeared in paper
filings from Anbang’s roster of directors by 2009, though he was listed
as a director on online government filings as late as 2014.
Mr.
Wu, Mr. Chen and Mr. Zhu did not respond to requests for comment, and
Ms. Zhuo could not be reached. In March, Mr. Zhu told Chinese reporters
that he was not an Anbang director.
Anbang’s
current shareholding firms are not well-known names in China, and some
appear to have been set up just to hold Anbang shares. One lists its
address as the empty 27th floor of a dusty Beijing office building. Two
more list an address at a mail drop above a Beijing post office.
Using
corporate filings, The Times compiled a list of nearly 100 people who
own shares in the firms and traced about a dozen to Pingyang County or
nearby. Reporters visited the area, in China’s eastern Zhejiang
Province, and interviewed dozens of residents, including several whose
names appeared on the list. They also interviewed an uncle, an aunt and a
nephew of Mr. Wu.
The
latter two, as well as others in the area, said one name matched that
of his sister, Wu Xiaoxia. The family members said several other names
matched those of Mr. Wu’s extended kin, including two cousins and others
on his mother’s side of the family. Through their various stakes in
Anbang shareholding companies, these people control a stake representing
more than $17 billion in assets.
Other
names matched local acquaintances of Mr. Wu, including Huang Maosheng, a
local businessman who confirmed in a brief phone interview that he had a
business relationship with Mr. Wu but declined to elaborate.
One
village leader and neighbors identified the names of four of Mr.
Huang’s relatives — including some whom they described as common workers
— from among those on the list. Their Anbang holdings represent about
$12 billion in assets.
Another
resident, Mei Xiaojing, said two names on the list matched those of her
relatives. Asked if she knew Mr. Wu, she said, “Well, yes,” then ended
the phone conversation and did not respond to subsequent calls. Through
multiple holding companies, those three people have a stake representing
about $19 billion in Anbang assets.
As
Anbang rose, so did Mr. Wu’s profile. In 2013 Mr. Wu secured a yearlong
position as a visiting fellow at the Asia Center of Harvard, joining a growing list of politically connected Chinese billionaires with ties to Harvard.
Ezra F. Vogel, a professor emeritus at Harvard who wrote a biography of Deng, said he met Mr. Wu on several occasions.
“He
had this staff of sharp people who were working for him,” Mr. Vogel
said. “It seems that they were doing the detail work, and he was the
friendly man supplying the connections.”
Continue reading the main story
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