Employees of Missing Hong Kong Billionaire Are Barred From Leaving China

Employees of Missing Hong Kong Billionaire Are Barred From Leaving China
By PAUL MOZUR and MICHAEL FORSYTHEFEB. 13, 2017
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The offices of Tomorrow Group, the conglomerate controlled by Xiao Jianhua, in Beijing. Credit Fred Dufour/Agence France-Presse — Getty Images
HONG KONG — At least 30 employees of a Hong Kong billionaire who was whisked to China about two weeks ago have been stopped from leaving the mainland, with many more probably unable to travel, two people familiar with the matter said on Monday.
It has become increasingly apparent that Beijing’s dragnet extends far beyond the billionaire, Xiao Jianhua, and is now closing in on dozens, if not hundreds, of his employees in one of the most far-reaching crackdowns on a private Chinese conglomerate in the nearly four decades since the country began to embrace free markets.
Mr. Xiao, one of China’s wealthiest and most politically connected financiers, was said to have been removed from his apartment at the Four Seasons in Hong Kong in a wheelchair, his head covered by a sheet or a blanket. He is believed to have been taken by boat to the mainland, where he is now in police custody, according to people familiar with the investigation into his disappearance.
Mr. Xiao’s inside knowledge of the financial dealings of China’s most powerful families may have overridden any concerns about violating Hong Kong’s autonomy under the “one country, two systems” arrangement.

In another development, an employee who worked on the computer systems at Mr. Xiao’s companies was detained at the Hong Kong airport on Sunday evening, suspected of committing passport violations while trying to fly to Japan, the people familiar with the matter said.
The employee, who is still being held, was in Hong Kong working on securing the companies’ networks, one of the people said.
The moves signal that Mr. Xiao, 45, is in serious trouble and that his companies are unlikely to be spared amid a widening crackdown.
Companies under Mr. Xiao’s Tomorrow Group, which was founded in 1999, control tens of billions of dollars in assets, and its holdings have included stakes in more than 30 financial institutions, including Ping An, one of China’s biggest insurers, as well as Harbin Bank and Industrial Bank.
His apparent abduction comes before an important Communist Party meeting expected to take place in October or November. There, the party will name as many as five new members to the elite Politburo Standing Committee, the group of seven men at the pinnacle of political power in China.
In the months leading up to the conclave, held once every five years, the party puts stability at a premium, and Mr. Xiao, through his substantial holdings, is seen as having the potential to bring instability to China’s stock markets.
Bill Bishop, who publishes the widely read Sinocism newsletter on Chinese politics, said that China’s leaders, including the president, Xi Jinping, and the Communist Party’s top antigraft enforcer, Wang Qishan, might see Mr. Xiao’s company as a “systemic threat to the stock market” in a year when stability is paramount.
“It seems like a no-lose move for Wang and Xi,” Mr. Bishop said by email.
One Hong Kong newspaper, the South China Morning Post, which is owned by the mainland’s Alibaba Group, said that Mr. Xiao was “assisting investigations” into China’s stock market gyrations in 2015. Shares in Shanghai climbed to highs in early June of that year, only to fall more than 40 percent in just over two months.
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An undated photograph of Mr. Xiao in Beijing. He was said to have been removed from his apartment at the Four Seasons in Hong Kong in a wheelchair, his head covered by a sheet or a blanket. Credit The New York Times
The full extent of Mr. Xiao’s wealth is not known. One person close to Mr. Xiao said his true wealth was many multiples more than the $5.8 billion in assets that the Shanghai-based Hurun Report, which tracks China’s wealthy, assigns to him.
The clampdown at the borders illustrates the lengths China is willing to go to secure the man who long served as the de facto banker to the Chinese Communist Party elite. The case has also chilled Chinese and Hong Kong elites, as it demonstrates an increasing willingness by Chinese security forces to encroach into Hong Kong, which is supposed to run its own affairs.
The employee currently detained by Hong Kong’s Immigration Department was stopped while trying to fly to Tokyo from Hong Kong International Airport on Sunday night, two people said. The man, Yao Long, worked in information technology at one of Mr. Xiao’s companies and had come to Hong Kong to work on strengthening the company’s cybersecurity within China, one person said.
The Immigration Department, which is still holding Mr. Yao, is investigating whether his travel documents are valid, the person said. It is unclear how Mr. Yao would have been able to enter Hong Kong with the documents, but one possibility is that China invalidated the passport while he was in Hong Kong, the person said.
A spokesman for the Hong Kong Immigration Department declined to comment, saying the agency did not discuss individual cases.
But invalidating a passport would not be particularly abnormal, according to Jonathan Man, a lawyer who advised Edward J. Snowden, the former National Security Agency contractor.
“It’s done by other countries; with Snowden, the U.S. revoked his passport — it’s quite a normal way if you want to get a person,” Mr. Man said in a telephone interview. “You cancel his passport to prevent him from going anywhere else,” he said, adding that Beijing has a number of ways to get people to come back over the border.
While it is not clear what will happen to Mr. Yao, Mr. Man said that the Immigration Department would quite likely have to decide whether to charge him with a crime within 48 hours. At that point, if he is not charged but has an invalid passport, he would probably be unable to travel anywhere other than China.
Attempts to contact Mr. Yao were unsuccessful.
China’s domestic news media has been largely silent on Mr. Xiao, possibly because his situation is so politically delicate after he helped relatives of Mr. Xi’s divest from a financial company, The New York Times reported in 2014.
But on Sunday, the influential financial magazine Caixin suggested that the investigation into Mr. Xiao’s company might have been going on for many months before his apparent abduction and rendition to the mainland on Jan. 27. The report also hinted at the possible reach and influence of Mr. Xiao’s empire.
The magazine, citing people it did not identify, reported that one of the country’s top newspapers covering the Chinese stock market, Securities Daily, had been controlled by Mr. Xiao’s Tomorrow Group. Through three corporate shareholders, Tomorrow owned more than a third of the media company and influenced its editorial decisions to portray Tomorrow and its affiliates in a positive light, the magazine said.
Caixin reported that the newspaper’s top official had been removed from his post and expelled from the Communist Party for “serious disciplinary violations,” which usually means corruption.
That official, Xie Zhenjiang, lost his job as chairman of the newspaper in late December, the company said in a statement at the time. On Jan. 4, trading in the company’s stock was suspended because “important information cannot be kept safe or has been leaked,” it said.
https://www.nytimes.com/2017/02/13/world/asia/xiao-jianhua-hong-kong-china.html