Shortly before the pandemic hit, during a visit to a large Chinese city, I spent a leisurely afternoon with an academic working at one of the country’s best business schools.
Our long conversation was enjoyably interrupted by the arrival of around a dozen of his most promising students.
They had all got there the hard way, notching top marks every year in one of the world’s most competitive education systems, before acing the gruelling National College Entrance Examination or gaokao, at the end of senior high school. Each had then been accepted into this particular and very prestigious institution.
At that point they could relax – but only a bit. Their undergraduate programme was another brain-belter that taught them to think critically about finance, economics, accounting, management science and so on.
They were an incredibly intense and eclectic bunch with only two things in common: none of them liked sport much (I asked); and all of them wanted to work overseas. More specifically, in New York.
As they saw it, if you made money in the US, it was yours to keep and to put to work where and how you liked. Whereas in China, noted one student: “it can always be taken away from you.”
That conversation came to mind when reading about Bao Fan. The billionaire financier went missing somewhere around February 14. He has not, as of the time of publication, been seen since.
Bao’s disappearance has made a lot of headlines – and for good reason. The 52-year-old founding partner and chief investment officer of Beijing-based and Hong Kong-listed China Renaissance, is an old-fashioned investment banking rainmaker for the modern age.
For years, his firm won mandates on many of the technology sector’s biggest capital markets deals.
China Renaissance advised on the merger of delivery firms Meituan and Dianping, and the ensuing IPO in Hong Kong. It has underwritten 10, $300 million-plus Hong Kong initial stock offerings since the start of 2017, including Kuaishou’s $6.23 billion IPO in January 2021, according to Dealogic.
And it did more than issue financial advice. Its flagship fund Huaxing Growth Capital, which raised $550 million in October 2021 – and another $800 million four months later – has invested in many dynamic tech firms, including electric vehicle maker Li Auto and artificial intelligence platform Mininglamp Technology.
Connect the dots
Bao’s disappearance may be rationalized in any number of ways. Most likely Beijing wants just to question him.
“The whole saga is very concerning,” says a veteran China-facing investment banker. “Tech and SOE [state-owned enterprise] clients of his firm should be concerned equally.”
Many connect the dots to Cong Lin, a former head of subsidiary Huajing Securities, and a key figure in a longstanding tie-up between Renaissance and ICBC International, a unit of the state-run bank.
China needs lots of fresh capital from foreign corporate and institutional investors to jump-start an anaemic economy
Around last September, Cong was accused of violating securities laws and detained by authorities.
Beijing states that no one is above the communist party, and certainly not above president Xi Jinping. When Ant Financial founder Jack Ma fell out with the party in late 2020, shortly before regulators shelved Ant’s $34.4 billion IPO, Ma wasn’t seen again for months, and still hasn’t returned to public life in full.
This episode has come at absolutely the worst time. China needs lots of fresh capital from foreign corporate and institutional investors to jump-start an anaemic economy following extended Covid-related lockdowns.
Moreover, the country is emerging from the pandemic era in a very unsettled state. Many of its biggest and most prominent global-facing corporates are either big-and-clunky SOEs or tech firms that are huge but, like many of their Silicon Valley peers, not greatly innovative.
Next level
Beijing wants to build more truly innovative ‘hard-’ or ‘deep-’tech firms able to disrupt markets or create new ones, as mainland-facing investment bankers have recently explained to Euromoney. Firms that take AI or quantum computing or carbon capture to the next level.
What they could do with is someone capable of identifying the right companies, pumping them full of money, and then taking them public. Someone with the capacity and capabilities of Bao, a man who started his career as an M&A banker at Morgan Stanley and Credit Suisse and who built a firm that describes itself as a “leading financial institution empowering China’s smart economy”.
His disappearance suggests that the next generation of financial thinkers and do-ers graduating from China’s business schools will be keener to get on the plane to New York than ever.
