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Why is China cracking down on prominent business figures?

William Yang in Taipei
March 1, 2023

The disappearance of Chinese banker Bao Fan has renewed concerns about Beijing's crackdown on entrepreneurs. Experts say the development will cause investors to lose confidence in China.

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Bao Fan
Bao Fan is the latest Chinese entrepreneur to have disappearedImage: Bobby Yip/REUTERS

The sudden disappearance of a Chinese billionaire has thrust the spotlight once more upon China's crackdown on prominent entrepreneurs.

Bao Fan, one of the most prominent bankers in the country who established China Renaissance in 2005, has been missing for more than two weeks.

In a stock market filing on Sunday, China Renaissance Holdings said that Bao was currently "cooperating in an investigation being carried out by certain authorities" in China.

The company didn't offer further details about the whereabouts or conditions of its chairman and chief executive, whose disappearance raised concerns about a possible crackdown on China's financial services sector.

Who is at risk?

Following Bao's disappearance, the company's shares listed in Hong Kong fell by up to 29%, before rallying by 2.3% on Monday.

Some experts describe the disappearances as "terrifying." And Bao is not the only victim.

Last September, China Renaissance President Cong Lin was taken into custody after an investigation into his work at the financial leasing division of state-owned bank ICBC, according to the economy news outlet Caixin.

"We have no idea what type of conditions they are under," said William Nee, the research and advocacy coordinator for Chinese Human Rights Defenders (CHRD). "We don't know if they are being detained at a hotel or whether they are in some type of prison cells."

Nee added that all these practices were against the rule of law, and the trend of prominent entrepreneurs being targeted shows persecution is not only affecting dissidents or ethnic minorities.

"In this case, we see some of the core issues in China, including enforced disappearance and being denied access to lawyers, affecting some of the most powerful people in China," he told DW.

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Why is China targeting prominent entrepreneurs?

Even though the international community views enforced disappearance as a type of human rights violation, some analysts say the Chinese Communist Party (CCP) views it as "standard practice."

"The Chinese government has used the same method on many people, and the only reason we know the disappearance of prominent entrepreneurs is that they are big names," said Yaqiu Wang, the senior China researcher at Human Rights Watch (HRW).

Bao is not the first Chinese billionaire to have been forced into disappearance or arrested. Over the last few years, close to half a dozen Chinese billionaires have been endured this process for certain periods of time. Guo Guangchang, nicknamed China's Warren Buffet and the founder of Fosun Group, disappeared for a few days in 2015.

Additionally, Chinese-Canadian businessman Xiao Jianhua went missing in Hong Kong in 2017 and his trial reportedly began last July. In 2020, Alibaba founder Jack Ma also vanished from the public eye for several months as he was preparing to publicly list the digital payments company Ant Financial.

Founder and Executive Chairman of Alibaba Group Jack Ma
Jack Ma stepped down as Alibaba chairman in 2019. China's richest man boasts a net worth of nearly $40 billionImage: Bobby Yip/File Photo/REUTERS

Too powerful for the CCP?

Some experts say the reason why Beijing is cracking down on entrepreneurs is that they need to ensure their companies or business practices are in line with the CCP's priorities.

"Xi Jinping believes this is how the system should work, and while entrepreneurs make profits, pay taxes, and hire people, they also need to make sure their business falls in line with CCP's goals," said Dexter Roberts, a senior fellow at the Atlantic Council's Indo-Pacific Security Initiative.

"Part of the crackdown is real concerns about [these businesses'] control over sensitive data and part of it is just these companies being influential. For Xi Jinping, it's all about these private companies becoming too powerful and they are challenging state-owned companies. In his view, they are not showing proper respect to the CCP," Roberts told DW.

Nee from CHRD added that in the cases of Jack Ma and Bao Fan, they were likely targeted by the Chinese government due to Beijing's concerns about their businesses threatening its political monopoly on power or gaining too much control over the financing of the tech sector in China.

"The government is trying to curb ambitions of the tech sector and ensure that while they want these companies to be successful, they also want the companies to be under the firm guidance of the party," he said.

How will the trend affect China's private sector?

As Beijing's crackdown on prominent entrepreneurs continues, experts say the trend will cause investors to lose confidence in the Chinese market.

"The CCP has been suppressing private enterprises for many years, and sometimes their policies can lead to the sudden crackdown on an entire industry," said Chinese legal scholar Teng Biao.

"The arbitrary arrests and convictions of Chinese entrepreneurs can leave private entrepreneurs at a loss, or cause investors to lose confidence in the Chinese market, China's political future, and China's investment environment. Many international and domestic entrepreneurs have lost confidence in China and have diverted the money they were supposed to invest in China to other places," he added.

Logo of Ant Group at its headquarters in Hangzhou
Jack Ma vanished from the public eye for several months as he was preparing Ant Financial's IPOImage: CFOTO/picture alliance

Roberts agreed that the trend is creating a chilling effect among capable entrepreneurs in China.

'Scare the entrepreneurs into line'

"Xi Jinping and the senior members of the CCP may think they can scare the entrepreneurs into line while letting them keep doing business, creating jobs and paying taxes," he told DW. "Since China's economy is in such a bad shape, they need the private sector more than they realized."

Nee from CHRD added that for Chinese entrepreneurs who hold a different nationality, there is no guarantee that they will be spared in Beijing's ongoing crackdown, as Chinese Canadian businessman Xiao Jianhua's case has shown.

"If you are a foreign business person, you really need to think carefully about your security and what you would do in the contingency that you were detained in China," Nee told DW.

"As we see in Bao Fan's case, international laws and standards with respect to detention are not recognized in China. The Chinese government will not abide by international laws and standards," he added.

Yaqiu Wang from HRW thinks Beijing's crackdown on civil society will only intensify during Xi Jinping's unprecedented third term in office.

"Judging from the past ten years under Xi Jinping's rule, the trend of suppression will become more and more serious," she said. "His methods will become more brutal and secretive, and people's basic rights will be less secure."

Edited by: Keith Walker