In another strange twist in China’s ongoing battle against corruption and the reigning in of the country’s big-spending conglomerates, Anbang Insurance Group chairman Wu Xiaohui has been removed from his position and is now facing criminal charges. The various branches of the company will now be taken over by the relevant Chinese banking and insurance regulators. This effectively puts many of Anbang’s overseas acquisitions, such as the New York Waldorf Astoria, under the operation of Chinese state bodies.
Wu Xiaohui has been removed from his position at Anbang Insurance Group and will face charges
Reports about state investigation of Wu started last summer and prompted substantial fears of increased scrutiny of Chinese companies and concerns about the future of the conglomerate.
Anbang’s overseas holdings include the Waldorf Astoria in New York, Dutch insurer Vivat, South Korea’s Tongyang Life, and 16 other American landmark hotels formally owned by Strategic Hotels & Resorts.
The China Insurance Regulatory Commission stated that the company had engaged in “illegal business operations which may seriously endanger the company’s solvency.” The government takeover was done with the goal of maintaining the company’s stable operation and is set to last a year.
With the takeover of the conglomerate by Chinese regulators, Anbang’s overseas holdings, including New York’s Waldorf Astoria, will now be controlled by Chinese state bodies
Anbang had emerged from obscurity only a few years ago under Wu’s leadership by making several high-profile acquisitions. It was these same acquisitions, by Anbang and other firms like HNA and Fosun, that prompted concern within state regulatory bodies about capital flight from China.
Notably, however, is that Anbang’s expansion globally was not marked by the same levels of debt that has characterized some acquisitions by some of China’s other major conglomerates, particularly HNA. In this sense, Anbang is still on a substantially more stable footing than some of its Chinese conglomerate peers.
Wu’s top-level political connections have been noted extensively in recent years and he even married a granddaughter of Deng Xiaoping, China’s late paramount leader. These connections have prompted speculation of Wu using his government connections to further his business interests.
Large-scale borrowing has not characterized Anbang’s global push, prompting speculation that the company has utilized government connections to facilitate global purchases
Hu Xingdou, an economist at the Beijing Institute of Technology, was quoted by the South China Morning Post in June of last year in regards to the launching of an investigation into Wu’s dealings. Hu noted, “Amid the glamourous outbound deals and the rapid rise of the insurer in just 13 years, there’s a big question worth asking: where does the seemingly ceaseless flow of money come from?”
Concerns about the ownership structure and stakeholders of the group prompted an investigation by The New York Times two years ago and American regulators have attempted to probe the identity of Anbang’s shareholders and whether they hold shares on behalf of other parties.
Without a clearer picture of the charges being leveled against Wu, it is unknown what this will mean for Anbang or its international holdings. It nonetheless seems that Wu and Anbang were fated to receive some sort of crackdown considering the scrutiny being leveled at the company and its enigmatic head on both sides of the Pacific.