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China's top tech banker goes missing, unnerving finance industry

Bloomberg
Bloomberg2/17/2023 12:36 PM GMT+08  • 5 min read
China's top tech banker goes missing, unnerving finance industry
Bao has been out of contact with the company for about two days, a person familiar with the matter said. Photo: Bloomberg
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Bao Fan’s knack for closing complicated deals and spotting rising tech stars made him one of China’s most influential financiers.

His sudden disappearance this week — linked to a Chinese government investigation — is now sending chills through the country’s business elite and raising fresh doubts about whether President Xi Jinping’s crackdown on the private sector has run its course.

While there’s no indication the China Renaissance Holdings Ltd. chairman has become a target of regulators, the investment bank said late Thursday it had lost contact with Bao. The banker’s family was told he’s assisting an investigation, a person familiar with the matter said.

Cong Lin, the firm’s former president, has been involved in a probe by authorities since September, the person said, asking not to be named discussing private information.

In the absence of any official comment from Chinese authorities on Bao’s whereabouts, speculation about his fate has dominated talk among financiers and tech executives across Hong Kong and mainland China. Bao has sprawling connections and is privy to information related to the country’s biggest entrepreneurs, advising giants including Alibaba Group Holding Ltd. and Tencent Holdings Ltd.

Increasingly in China, a suddenly absent boss has come to signal a crackdown or investigation by authorities. In many cases, the person is said to be “assisting” graft probes. Publicly listed companies typically report they have lost contact with the executive and need to make their own inquiries into what happened within the country’s opaque legal system.

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A suave and outspoken dealmaker, Bao built China’s pre-eminent tech-focused investment bank. He convinced a Jack Ma-backed company to become a cornerstone investor when his firm went public in 2018 and has been the go-to banker for the biggest tech stars.

Bao is among China’s “western-educated individuals with lots of connections with the global financial elite,” said Victor Shih, an associate professor at University of California San Diego who specializes in China’s banking policies. “We don’t see those types suddenly running into such serious trouble that often.”

Bao studied English literature at China’s prestigious Fudan University and received a master’s degree in business and economics from the BI Norwegian School of Management in 1995.

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He once said it was his mission to “participate in the value creation of the greatest entrepreneurs” in China.

A former banker at Morgan Stanley and Credit Suisse Group AG, Bao founded China Renaissance in 2005, making a name for the firm by brokering tough mergers that led to the formation of ride-hailing service Didi Global Inc. and food-delivery giant Meituan.

His bank helped with 574 private placements for companies including Grab Holdings Ltd. and Kuaishou Technology, raising a total of US$41 billion ($54.95 billion) for the companies before the listing five years ago.

His firm was a bookrunner on JD.com Inc.’s US$2 billion US initial public offering in 2014, and a top underwriter for Kuaishou Technology’s Hong Kong listing in 2021, the biggest internet IPO since Uber Technologies Inc.’s debut in 2019.

China Renaissance has also been a prolific investor, backing companies including NIO Inc. and WuXi AppTec Co. Bao later expanded his businesses into wealth management and brokerage services.

The firm had about 48.6 billion yuan ($9.47 billion) under its investment management at the end of June 2022, according to its most recent interim report.

Bao Upbeat

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Even after China’s yearlong crackdown on the tech sector, Bao was upbeat. He convinced investors from Southeast Asia and the Middle East to back his expansion into private equity, while focusing on investments in health care, consumer brands and enterprise technology over the past two years.

Authorities have remained quiet about Bao’s disappearance. China Renaissance declined to comment beyond what it disclosed in an exchange filing.

In a memo to its staff on Friday, the firm’s executive committee urged its employees to stick together, not believe rumours or spread them. “Please trust in the group and the executive committee, don’t fret and it’s okay that we run into some troubles in the short term,” the committee said.

China Renaissance tanked 28% on Friday in Hong Kong.

“This could be a long-term overhang on the stock, given Bao is the key man for the company,” said Willer Chen, senior analyst at Forsyth Barr Asia Ltd.

The bank’s former president Cong held various positions at Industrial & Commercial Bank of China Ltd. He left China Renaissance last year, a person familiar with the matter said.

It’s unclear whether Bao’s disappearance marks the escalation of further inspections on China’s finance industry.

President Xi launched a broad anti-corruption probe in late 2021 targeting the nation’s US$60 trillion financial sector, which has brought down dozens of officials. The probe has also implicated the investment banking community, ensnaring bankers from brokerages including Everbright Securities Co. and Guotai Junan Securities Co.

The government recently eased its stance toward the private sector, lauding Ant Group Co. for following the Communist Party’s leadership and resuming ride-hailing service Didi in app stores. It has also issued sweeping measures to prop up the real estate sector.

“For a high profile investment banker like this, if the government is behind Bao Fan’s disappearance, they should have thought about the publicity implications of their actions,” said Shih. “For regulators, they do have to tread carefully, private investors in China are on edge already. The party has tried to assure them the regulatory action is going to be more gentle going forward.”

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