Behind Fan Bao’s Detention—a Suspected Quid Pro Quo
Financier has been questioned about former senior executive at his investment bank
Chinese financier Fan Bao, who went missing last month, has been detained by authorities in mainland China in connection with a corruption investigation targeting a former senior executive at the investment bank he founded, according to people familiar with the matter.
The investment bank, China Renaissance Holdings Ltd. , disclosed on Feb. 16 that it had been unable to contact Mr. Bao, who serves as the bank’s chairman and chief executive. On Sunday, it said in a regulatory filing that it had since discovered Mr. Bao is aiding an investigation being carried out by authorities in China, which it didn’t name.
Mr. Bao was detained in February by antigraft investigators in relation to a case involving Cong Lin, the former president of China Renaissance and chairman of its Hong Kong securities subsidiary, the people said. Mr. Cong became the target of a government investigation related to his dealings before joining China Renaissance and was detained in September, leading to his departure from the company, according to some of the people.
The information office of China’s cabinet, the State Council, which handles press inquiries on behalf of the government, didn’t immediately respond to a request for comment and declined to transmit a request for comment to the Communist Party’s central corruption watchdog.
Before Mr. Bao’s detention, authorities had spoken to him several times over a period of months regarding the probe of Mr. Cong, the people said. Investigators asked Mr. Bao about a suspected quid pro quo involving a loan Mr. Cong helped arrange for China Renaissance before joining the firm, but Mr. Bao didn’t provide them with all the information they sought, according to some of the people.
Mr. Bao is being held under a special form of detention known as liuzhi, or “retention in custody,” according to the people. Under that system, a person may be detained for up to six months without access to a lawyer. It couldn’t be determined whether authorities planned to formally arrest or charge him.
Asked for information about Messrs. Bao and Cong, China Renaissance referred to its statement to the Hong Kong stock exchange on Sunday about Mr. Bao’s assisting an investigation, adding it would make further announcements “as and when appropriate.”
News of the disappearance of Mr. Bao, a top deal maker in China’s technology sector, ricocheted around finance and business circles. China Renaissance’s share price tumbled 28% after the company confirmed on Feb. 17 that it was unable to reach him.
China Renaissance, whose business spans securities trading, equity underwriting and investment management, said in its most recent exchange filing on Feb. 26 that it is operating normally and being supervised by its executive committee.
Mr. Bao’s predicament and the official silence surrounding it have stirred consternation among the country’s business elite. Some say they fear the Communist Party’s opaque enforcement tactics will continue to weaken the country’s beleaguered private sector even as Beijing strives to project a more business-friendly image following a rash of regulatory crackdowns and pandemic restrictions that dented economic growth.
A veteran of Morgan Stanley and Credit Suisse Group AG , Mr. Bao helped broker mergers that formed Chinese ride-hailing company Didi Global Inc. and e-commerce company Meituan. He is a familiar face on the international financial-conference circuit.
The 52-year-old’s detention is partly related to a $200 million credit line provided to China Renaissance in 2017 by ICBC International Holdings Ltd., a division of the state-owned Industrial & Commercial Bank of China Ltd. , according to people familiar with the investigation. The loan was secured by shares in a vehicle controlled by Mr. Bao and was due to be repaid after China Renaissance went public in Hong Kong. ICBC International was also one of the sponsors of the IPO that raised close to $350 million in September 2018.
Mr. Cong was serving as head of ICBC International at the time of the loan and joined China Renaissance in 2020, two years after the investment bank went public. One question investigators have is whether Mr. Bao offered Mr. Cong a position at his bank to secure the funding, the people said.
Mr. Cong was supposed to join China Renaissance in 2019 but the move was delayed by a protracted departure audit process, according to some of the people. Chinese government and state-owned enterprise officials must go through an audit looking for signs of malfeasance before being allowed to leave their posts.
Chinese investigative media outlet Caixin earlier reported that investigators were looking into Mr. Cong’s role in the loan to China Renaissance.
Questions about the loan arrangement arose as part of a larger investigation into Mr. Cong’s dealings at ICBC International, and earlier at ICBC’s financial leasing affiliate, where he held several senior positions, according to some of the people. Several other executives at both ICBC divisions have been targeted by corruption probes over the past year, including two deputy governors of the bank’s Guangdong and Yunnan branches.
Mr. Cong has been unreachable since late last year, according to people familiar with the matter. China Renaissance hasn’t released any statement about Mr. Cong’s disappearance.
ICBC didn’t reply to requests for comment.
China’s business community has been unnerved by the disappearances of several prominent figures since leader Xi Jinping launched an aggressive anticorruption drive that has unfolded largely behind closed doors. One of the best known figures, Canadian-Chinese financier Xiao Jianhua, was sentenced to 13 years in prison on corruption charges last year, a half-decade after he was snatched from his home in a luxury hotel in Hong Kong and smuggled across the border without explanation.
Others have resurfaced only after collaborating with investigators. The billionaire chairman of Shanghai-based conglomerate Fosun Group, Guo Guangchang, returned to work after briefly being taken away to assist with an unspecified investigation in 2015. The same year, Yim Fung, chairman of Hong Kong-listed brokerage firm Guotai Junan International Holdings Ltd. , vanished under similarly mysterious circumstances only to resurface a month later.