In the old days, many children of top-ranking officials would work for government agencies or SOEs.
Over the past 10 years, it has been common for these offspring to work for foreign investment banks after they finished their studies overseas.
But that is not where the real money is. The ultimate goal is usually to establish their own financial firms. Leveraging their political connections, such private financial operations have flourished amid the liberalization of the sector.
It is also believed that through numerous financial dealings, these private insurers and other financial institutions have successfully laundered huge amounts of funds with dubious sources.
Nevertheless, when private insurance companies carried out rampant speculation in China’s A shares last year, they started to draw the attention of regulators.
Authorities and the media began to dig into the source of funds and complicated relationship hiding in the shadows.
Xiang Junbo, former chairman of the China Insurance Regulatory Commission, has been put under investigation since April.
In fact, since the dismissal of Xiang, market participants have expected more companies will be involved in the scandal. Private financial firms that have expanded rapidly in recent years are seen to be most at risk.
Anbang Insurance which has been an active player in the stock market, suddenly said in a statement earlier this week that chairman Wu Xiaohui was no longer able to perform his duties because of personal reasons.
Wu’s situation might be related to charges against Xiang.
Investors have rushed to unload companies in which Anbang holds a stake, fearing the firm could get into financial difficulties and forced to liquidate its holdings.
Anbang Group was set up in 2004 with a registered capital of only 500 million. It later established its life insurance unit and asset management unit.
The group also snapped up a number of foreign financial firms, which helped boost its total assets to almost 2 trillion yuan.
The question on everybody’s mind is who would be next to fall after after Wu.
This article appeared in the Hong Kong Economic Journal on June 16
Translation by Julie Zhu
[Chinese version 中文版]
– Contact us at [email protected]