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Epoch Times
11-08-2025
- Business
- Epoch Times
China's Disappearing CEOs and the Flaw of ‘State Capitalism'
Bao Fan, founder, chairman, and CEO of China Renaissance Group, an investment bank led by one of the country's most famed rainmakers, holds a news conference on its IPO in Hong Kong on Sept. 13, 2018. Bao Fan, founder, chairman, and CEO of China Renaissance Group, an investment bank led by one of the country's most famed rainmakers, holds a news conference on its IPO in Hong Kong on Sept. 13, 2018. Bobby Yip/Reuters Commentary Imagine you are working as an investment banker in one of China's most famous companies. Everything is going well—a high-paying job, good social status, and finally, you're making money from the math you learned in university. Then, suddenly, your CEO disappears! This is what happened in China. Bao Fan, a Chinese billionaire and chief executive of China Renaissance Holdings, went missing in February 2023. A year later, news came out that he had resigned from all roles at his firm. Still, no one knows where he is. This is not a unique event—it is part of a larger phenomenon: the disappearing Chinese CEOs. Story continues below advertisement 'The Machine Refused to Obey' The mixture of capitalism and socialism is not new. The Economist published an article titled ' The Case of China's Vanishing Chairmen .' Losing contact with chief executives has become a common theme in China. Two listed Chinese companies announced in November 2023 that 'their chairmen had vanished without a trace.' They tried to reach them via WeChat and contacted family members, but with no success. There's an interesting pattern: executives most often disappear from firms with high levels of debt. This phenomenon of disappearing CEOs reveals something deeper. It's not just a tactic of the Communist Party; it exposes an inherent flaw in the Chinese mixture of capitalism and socialism is not new. Though with different characteristics, Lenin tried state capitalism as well. After the enormous failures of his War Communism policies (7,196 percent inflation in 1922, just to name one), he launched the New Economic Policy (NEP). And from the beginning, he noticed the problems of state capitalism. 'The machine refused to obey the hand that guided it .... It was like a car that was going not in the direction the driver desired, but in the direction someone else desired—as if it were being driven by some mysterious, lawless hand, God knows whose, perhaps of a profiteer, or of a private capitalist, or of both.' It wasn't a lawless hand; it was the invisible hand. Lenin's subtle but profound amazement reveals the flaw in the Chinese model: the machine refuses to obey the party that guided it. The Internal Contradictions of State Capitalism The term internal contradiction is mostly used in Marxist literature, but it's well-suited to explain what's happening in China and other state capitalist countries. There's an inherent paradox in the Chinese model—after a while, the vague distinction between market and state stops working. One of Xi's favorite sectors is the public-private partnerships: firms that aren't fully state-owned or privately owned, but a mixture. In theory, they aim to capture the productivity and efficiency of the free market, but at the same time, they resist the mission-indirection that is inherent to market processes. Story continues below advertisement This is the core contradiction. The productivity and efficiency of the private sector are possible only through risk-taking—betting on an unknowable future. That's why Frank Knight argued that entrepreneurial action is tragic at heart—it is uncertainty. And the sad truth is: most entrepreneurs fail. According to the US Bureau of Labor Statistics, 49 percent of new businesses fail in their first five years. But this failure is as important as success. It's what makes economic growth possible. As Ludwig von Mises wrote , 'It is profit and loss that force the capitalists to employ their capital for the best possible service to the consumers.' Without loss, there is no discovery. Without discovery, there is no innovation. The Future of State Capitalism Although the Chinese model is showing its weaknesses—from vanishing CEOs to The 'loss' part is what guides us. But the Chinese model—and all state capitalist models—seek to eliminate loss, through regulation or planners' 'wisdom.' They want an economic system that doesn't fail. But what we get is the vanishing of CEOs and chairmen. The internal uncertainty embodied in the market cannot be solved with government regulation and planning. Uncertainty should be embraced rather than tamed, because it deals with known unknowns and unknown unknowns. Only epistemological humility can help us navigate it, not attempts to play the Chinese model is showing its weaknesses—from vanishing CEOs to shrinking growth —it seems the world is moving toward state capitalism. As Ilias Alami and Adam Dixon argue in their book ' The Spectre of State Capitalism ,' this is a global phenomenon, not confined to China and Asia. Since 2000, the scales of the mixed economy have tilted toward the state. The number of state-owned enterprises (SOEs) among the world's 2,000 largest firms has doubled over that period. These state-linked giants now control $45 trillion in assets—half of global GDP. And it's not only SOEs. The number of sovereign wealth funds (SWFs) has increased sixfold in the past two decades. As of 2024, 176 sovereign wealth funds operate worldwide. By 2023 figures, they control $11.8 trillion in assets—more than any hedge fund in the world. The world is drifting toward greater statism—a trend that is far from new. As Milton Friedman put it in one of his final speeches 'After the fall of communism, everybody in the world agreed that socialism was a failure. Everybody in the world, more or less, agreed that capitalism was a success. And every capitalist country in the world apparently deduced from that what the West needed was more socialism.' Story continues below advertisement His remark captures the irony of our time: even in victory, capitalism is retreating. The double-digit inflation of the COVID era, the productivity puzzle in the West, shrinking growth, and vanishing CEOs in the East are all signs of the failure of the state capitalist model. But we can't overcome this new statism until we change the climate of opinion. The challenge is that this model is portrayed as 'neoliberalism' or 'capitalism.' At least with postwar statism, everyone agreed it was statism. But not this time. If you read the so-called critiques of neoliberalism, it sounds like we are living in Nozick's Utopia—but we're not. The evidence is quite clear, and we must understand this new statism in order to overcome it.
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First Post
09-08-2025
- Business
- First Post
The case of Bao Fan, China's star banker released from detention after 2 years
Bao Fan, founder of China Renaissance and one of China's most influential dealmakers, has been released after over two years in detention. His disappearance in 2023 shocked the business community and rattled markets. While his return has boosted investor sentiment, questions remain over the opaque investigation read more Bao Fan, founder, Chairman and CEO of China Renaissance Group, an investment bank led by one of the country's most famed rainmakers, holds a news conference on its IPO in Hong Kong, China, September 13, 2018. File Image/Reuters More than two years after vanishing from the public eye during a mainland investigation, celebrated investment banker Bao Fan has been released, according to multiple news reports. The 54-year-old founder of China Renaissance Holdings Ltd, widely considered one of the most influential financiers in China's technology sector, had been in custody since early 2023. The reasons for his detention and details of his legal situation remain undisclosed. The news of his release first surfaced in a report by Chinese financial outlet Caixin, citing multiple unnamed sources. STORY CONTINUES BELOW THIS AD While there has been no official confirmation from the authorities, China Renaissance's stock surged on the Hong Kong exchange as the development spread through markets. What we know about Bao Fan Born in Shanghai in 1970, Bao studied abroad before embarking on a career at leading international investment banks. He worked at both Morgan Stanley and Credit Suisse, gaining experience in capital markets, corporate finance, and advisory work. In 2005, he co-founded China Renaissance alongside two other partners, building it into a boutique investment bank that would play a defining role in the country's internet economy. The firm became known for facilitating high-profile mergers in the fast-growing technology sector. Bao personally oversaw complex deals, including the combination of ride-hailing services Didi and Kuaidi, the merger of food delivery rivals Meituan and Dianping, and the integration of online travel platforms Ctrip and Qunar. His network of relationships extended to founders of major companies such as Alibaba, Tencent and other top-tier digital firms. By 2015, Bao's influence was recognised when he was named among the 50 most significant figures shaping markets, ideas, and policy. Three years later, China Renaissance was listed on the Hong Kong Stock Exchange, marking a milestone in the firm's expansion. When Bao Fan disappeared The turning point came in February 2023, when China Renaissance informed investors it could not reach its founder. Soon afterwards, the company issued a statement saying Bao was 'co-operating in an investigation' being carried out by certain mainland authorities. No further public explanation was provided. Reports in Chinese media linked his situation to an inquiry involving former China Renaissance president Cong Lin. Cong, who had joined the bank in 2020 from ICBC International, was summoned by the China Securities Regulatory Commission in September 2022 for a 'supervisory discussion.' STORY CONTINUES BELOW THIS AD Within days, he had stepped down from key roles in the company's securities unit and was later detained. His current status remains unknown, and no formal charges against him have been announced. In May 2023, a Chinese financial publication reported that Bao was being held by disciplinary and supervisory officials. Sources familiar with the matter later told Reuters that his detention was connected to the investigation into Cong. The Chinese Ministry of Public Security and the Central Commission for Discipline Inspection has not commented publicly. How China Renaissance was affected The disappearance of its founder deeply unsettled China Renaissance. Trading of its shares was suspended in April 2023 because the bank was unable to finalise its audited annual results in Bao's absence. When trading eventually resumed in September 2024, the stock dropped by 72 per cent on its opening day. The company narrowly avoided being delisted. The leadership structure changed significantly over this period. In February 2024, China Renaissance announced that Bao had resigned from all formal positions 'for health reasons and to spend more time on his family affairs.' This did not lead to his release, and he remained in custody for several more months. Co-founder Xie Yi Jing initially assumed the chairmanship but stepped down less than a year later. STORY CONTINUES BELOW THIS AD In October last year, Bao's wife, Hui Yin Ching, was appointed as chairwoman, while Bao continued to be the controlling shareholder. The operational challenges mounted. The firm's revenues fell to RMB 777 million ($108 million) in 2024, about half of what it earned in 2022. It has recorded three consecutive years of losses. Headcount declined sharply — by 37 per cent between 2022 and the end of 2024, leaving a workforce of 475. Several senior executives left, including Andy Maynard, the former head of global equities, who later joined Deutsche Bank as head of equity execution for Asia-Pacific. China Renaissance also became the subject of acquisition interest. In 2024, a Hong Kong-based financial group with backing from West Asian investors explored a takeover, including acquiring the firm's trading licence. Two smaller Chinese brokerages also reportedly showed interest. Why Beijing may have been involved Bao's detention occurred during a far-reaching anti-corruption campaign championed by Chinese President Xi Jinping. In recent years, this campaign has targeted numerous high-ranking officials and corporate executives, particularly in finance. Hundreds of people have been questioned, disciplined, or charged as part of the effort to curb misconduct and promote the leadership's 'common prosperity' agenda. STORY CONTINUES BELOW THIS AD 'This is certainly a positive signal, as Bao was the most high-profile financier detained in recent years,' Christopher Beddor, deputy China research director at Gavekal Dragonomics told Reuters. 'Still, it won't change the fact that the anti-corruption campaign continues to churn through the financial sector, and the common prosperity campaign has led to sweeping pay caps and even clawbacks. China's financial sector remains a long way from its heyday only a few years ago.' The campaign has been accompanied by restrictions on executive pay, the scaling back of bonuses, and a push to discourage ostentatious lifestyles among financial professionals. It has also heightened unease among business leaders and foreign investors, particularly given the limited public information about such investigations. The climate for China's private sector has been challenging. Technology firms have faced tighter regulation, domestic consumption has remained subdued, and the real estate sector has struggled with debt. Internationally, Beijing continues to navigate strained trade relations with the United States. STORY CONTINUES BELOW THIS AD How the market reacted after Bao Fan's reported release When news of Bao's release began circulating on Friday, China Renaissance shares jumped 16.84 per cent to close at HK$6.87. This rally came despite the company making clear that Bao will not return to an active management role. 'Bao no longer participates in the company's daily management and operations,' it said in a statement, declining to address his personal circumstances. The stock remains far below its peak of HK$31.80 in February 2021. However, this year has seen a recovery in the share price, with gains of over 140 per cent so far in 2025, partly driven by renewed investor interest in China's technology industry and cryptocurrency ventures. Despite the turbulence, China Renaissance has made some strategic plays. In June, it disclosed an investment in stablecoin issuer Circle Internet Group through its Huaxing New Economy Fund. Circle's stock more than doubled upon listing in New York earlier that month, reported South China Morning Post. Bao's situation became one of the most prominent examples of a business leader disappearing under official scrutiny in China. The anti-corruption drive shows no sign of slowing, and recent incidents — such as a Wells Fargo senior banker being prevented from leaving the country as part of a criminal investigation — put a spotlight on the risks of operating at the top levels of China's corporate world. STORY CONTINUES BELOW THIS AD With inputs from agencies
