The case of China’s president disappearing
“Whe is lost communication with our chairman,” is a strange announcement from the board of a listed company to its investors. This can lead to a fall in the share price. In China the confusion can continue for months, casting a shadow over the company’s future. Such announcements have become so common this year that a state-owned newspaper, Secure Times, offered advice to leaders dealing with extinction. “Don’t hesitate when it comes to publishing these issues,” the paper said in November. He reminded companies that they have a duty to keep investors informed of any major events that affect their operations. This includes a chairman or chief executive who cannot be contacted.
Two different listed Chinese companies – a children’s fitness company and an agricultural one – warned investors on November 29 that their chairs had disappeared without a trace. The fitness company, My Gym Education, said it “tried to communicate by phone and WeChat messages but was unable to reach Wang Hongying”, its chairman. “After contacting her family, the company could not find out why she lost contact with her.
These latest incidents followed two other disappearances at a live streaming company and a drug dealer earlier that month. All told, at least 11 Chinese listed companies have issued disclosures this year, warning investors that executives or board members have disappeared. A review of corporate publications and Chinese media reports indicates that this strange phenomenon has become more common in 2023.
When a company reports an executive missing, it is generally assumed that they have been detained by the police. A look at this year’s issues suggests as much. In rare cases, the police release statements. In November, about two weeks after executive DouYu, the livestream, disappeared, police in the southwestern city of Chengdu confirmed his arrest. He is accused of operating a casino. More often, the authorities keep mum. China has never publicly acknowledged the detention of Xiao Jianhua, a businessman who was kidnapped by Chinese agents in Hong Kong in 2017 and imprisoned in 2022 – facts confirmed by authorities in Canada, where Mr. Xiao is also a citizen.
It is more common for the companies themselves to tell their investors about their holdings. In February China Renaissance said that its chairman, Bao Fan, was “cooperating in an investigation that was carried out by some authorities in the People’s Republic of China”. The revelation came ten days after the boutique investment bank reported it was secretive. (Mr. Bao is still missing and authorities have never confirmed his whereabouts.) Property developer China Fortune Land Development noted that its co-chairman had “left the board” after the company confirmed its retention.
But they are finding out, investors are getting nervous. The share prices of troubled companies usually fall on the news. China Renaissance’s Hong Kong-listed share price fell by around 30% in February when rumors of Mr Bao’s disappearance began to spread. It has stayed around that level ever since. When the chairman of a successful hedge fund, Greenwoods Asset Management, was arrested this year, wealthy Chinese became concerned about a wider crackdown on the asset managers who manage their fortunes.
Executives usually disappear from companies with high levels of debt. This year the most common image was the chairman of a property developer. That industry has seen widespread deficits in the past two years. The two most recent cases in November are both linked to Zhongzhi, a wealth manager that recently said it has $36bn in unpayable debt. Zhongzhi has big stakes in both the fitness company and the agriculture company, but also dozens of other large listed companies. As China’s economy slows, more businesses are likely to collapse – and lose their bosses. ■
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