Xi Jinping Takes Down Another ‘Tiger’

Former tycoon Xiao Jianhua’s comparatively light sentence portends harsh punishment for Chinese officials

By: Toh Han Shih

The relatively lenient sentence of Chinese tycoon Xiao Jianhua, who was given 13 years in prison with a fine of RMB6.5 million (US$953,480) on August 19, is likely to signal calamity for many officials (including current and former senior apparatchiks) and boost President Xi Jinping’s bid for a third term, analysts said.

Whatever the baby-faced Xiao’s crimes, the case raised an international furor in 2017 when, on January 28, Chinese agents kidnapped Xiao, a naturalized Canadian citizen, from the Four Seasons hotel in Hong Kong and spirited him across the border to the mainland, raising concerns over Hong Kong’s autonomy under One Country, Two Systems.

Canadian officials were barred from attending the closed-door trial. Asked about Xiao’s right to consular access as a Canadian citizen on August 19, Chinese foreign ministry spokesman Wang Wenbin said Xiao was not entitled to such rights as Chinese law doesn’t recognize dual nationality. State media have reported that thousands of fugitives including financial criminals have been brought back from overseas in what has been dubbed “Operation Fox Hunt” – 1,421 in 2020 alone.

“The lack of transparency in Mr. Xiao’s legal process is very concerning, as is the ongoing lack of consular access, which prevents us from being able to assess his wellbeing,” Canada’s foreign ministry said in a statement.

It was clear, however, why China wanted the 50-year-old tycoon back. The scale of his financial crimes runs in the hundreds of billions of yuan and he has inflicted huge damage on China’s financial security, said Zhang Shaoqian, an academic in the law college of Shanghai Jiaotong University, in a post on Weibo, a Chinese social media platform.

Xiao probably cut a deal with the Chinese authorities by providing them with lots of information on powerful people, said an analyst who declined to be named, enhancing Xi‘s “Tigers and Flies” anti-corruption campaign, which has been running without letup since Xi came to power in late 2012, with more than 100,000 people indicted for corruption. Flies refer to minor players, while Xiao fits the bill of Tiger by being a politically connected billionaire with the potential to wreak havoc on the nation’s financial system.

The Shanghai No. 1 Intermediate People’s Court also fined Xiao RMB6.5 million (US$953,480) and fined his conglomerate Tomorrow Holdings RMB55 billion (US$8.1 billion), according to a post on Weibo by People’s Court Daily, a newspaper of China’s Supreme Court, on the same day. The trial of Xiao and Tomorrow Holdings began on July 4, the People’s Court Daily said.

From 2001 to 2021, Tomorrow Holdings and Xiao gave bribes totaling RMB680 million (US$100 million) to “many officials” to cover up their financial crimes, the People’s Court Daily revealed. In an indication that these officials will be charged in court, the People’s Court Daily disclosed their cases are being handled separately.

The crimes of Xiao and Tomorrow Holdings were extremely serious, but the defendants confessed to their crimes and helped the authorities to chase the associated illegal assets, the People’s Court Daily explained. Moreover, Xiao made “positive contributions”, so he and Tomorrow Holdings received lenient punishment, the state-owned newspaper added.

“Wow! He got off very lightly! The scale of the fraud he masterminded with the assistance or connivance of many corrupt officials makes it massive by any scale. He must have bent over backwards to cooperate,” a risk consultant told Asia Sentinel.

If Xiao had refused to cooperate with the authorities, he would have faced a longer jail sentence or a worse fate, said the risk consultant, who declined to be named. In China, corrupt officials receive harsher punishment than the businessmen who bribed them, because the officials are deemed to have committed greater breach of trust, the risk consultant explained.

Some officials have been sentenced to life imprisonment by Chinese courts for taking bribes of RMB540 million or less, but it is inappropriate to compare their sentences to Xiao’s punishment, an analyst of the Cercius Group, a geopolitical consultancy headquartered in Canada, told Asia Sentinel.

“This perceived leniency is more of a warning to several Red families of former senior officials to not prevent Xi from being re-elected during the 20th Party Congress and, potentially, to stay out of his way when he restructures the national economy,” said the analyst. Otherwise, he can easily use Xiao Jianhua’s testimony to lay down corruption charges at the feet of powerful families.”

Xiao extensively cooperated with the Chinese authorities, the Cercius Group analyst said, “which means that Xiao is worth more alive and he provided the Chinese government, but mainly Xi Jinping, with enough evidence or black material to gain compliance from former senior officials for the 20th Party Congress if need be.”

Xi aims to give himself a third term as President at the 20th Congress of the Chinese Communist Party which is expected to be held between September and November. Gaining a third term would break the two-term limit laid down by the late Deng Xiaoping. Some domestic rivals of Xi are believed to oppose the extension of his presidency beyond two terms.

From January 2010 to January 2017, many financial institutions controlled by Xiao and Tomorrow Holdings illegally received RMB311.6 billion (US$45.7 billion) of funds from Chinese people by promising to repay their principal with interest, according to People’s Court Daily. From July 2012 to January 2017, Baoshang Bank, which was then controlled by Xiao, illegally transferred RMB148.6 billion of clients’ funds and entrusted assets to Tomorrow Holdings, added People’s Court Daily. The People’s Bank of China took over Baoshang Bank in 2019, and in August 2020, it went bankrupt.

From November 2013 to January 2017, Xiao and Tomorrow Holdings manipulated three Chinese insurance firms to illegally transfer RMB190.9 billion of insurance funds to Tomorrow Holdings, People’s Court Daily revealed. The three insurance firms are Huaxia Life Insurance, Tianan Life Insurance, and Yi’an P&C Insurance, which were previously owned by Tomorrow Holdings. The Chinese government took over these three insurance firms in July 2020.

“Tomorrow Holdings used the abovementioned ill-gotten gains to acquire financial institutions, securities and foreign investments etcetera,” said People’s Court Daily.

In recent years in China, many defendants were sentenced to prison for 10 years or more for economic crimes of far smaller scale than Xiao’s offenses, yet Xiao’s punishment was very lenient for the size of his crimes, Zhang noted. Part of the reason for the lenient sentence of Xiao is he and Tomorrow Holdings have returned part of their ill-gotten gains through methods like selling company assets and bringing back overseas funds, Zhang explained.

Toh Han Shih is chief analyst of Headland Intelligence, a Hong Kong risk consultancy.