China extends crackdown to tycoon's staff: Sources

Dragnet closing in on dozens, if not hundreds, of Xiao Jianhua's employees

HONG KONG • At least 30 employees of a Hong Kong-based 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 have said.

It has become increasingly apparent that Beijing's dragnet extends far beyond the billionaire, Mr Xiao Jianhua, and is 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 China 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 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, people familiar with the matter said on Monday.

The moves signal that Mr Xiao, 45, is in serious trouble and that his companies are unlikely to be spared amid a widening crackdown.

The employee, Mr 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 cyber security within China, one person said.

The Immigration Department, which is still holding Mr Yao, is investigating whether his travel documents are valid, the person added.

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 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.

One Hong Kong newspaper, the South China Morning Post, which is owned by the mainland's Alibaba Group, said 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 per cent in just over two months.

Mr Bill Bishop, who publishes the widely read Sinocism newsletter on Chinese politics, said China's leaders, including President Xi Jinping and the Communist Party's top anti-graft enforcer, Mr 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 e-mail.

NYTIMES

A version of this article appeared in the print edition of The Straits Times on February 15, 2017, with the headline 'China extends crackdown to tycoon's staff: Sources'. Print Edition | Subscribe