Business and Finance

Das Evil Kapital

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wangshi

(China Vanke Chairman Wang Shi)

Speaking of the pot calling the kettle black, nothing sounds weirder than a Chinese real estate developer accusing a private insurer of bringing in sinful capital, which incidentally pushed up the former’s stock price to a historic high.

In what has become one of China’s most spectacular melodramas of the year, the attempted hostile takeover of China’s largest home builder, China Vanke, by a little known insurance conglomerate, Baoneng, creates a sense of intrigue so intense that it almost redefines how a corporate deal could be received by the Chinese society. In the process, it reveals the multi-layered, fantastic imagination that the society attaches to capital and those who wields it.

The substance of the event is pretty simple on the surface. In the time span of less than half a year, the Baoneng conglomerate has acquired tens of billions RMB worth of Vanke’s share through the stock market. Quietly, the insurer had become Vanke’s largest shareholder with 22.45% of its total shares by Dec 17, a dramatic increase from only 5% four months earlier.

Nothing in the public domain suggests that Baoneng’s operation violates any written rules. This is reflected in the authority’s largely ambivalent attitude toward the deal up to this point. China’s securities watchdog has openly expressed its willingness to “leave the matter to the market”, while its supervisory body for banking is “looking into” potential exposure of local banks to risks involved in the deal. But what Baoneng essentially does is disrupting Vanke’s carefully maintained shareholder structure that has been in place for two decades. The essence of that structure is highly dispersed shareholding that allows senior management a freehand in steering the company. Until Baoneng emerged on the horizon, China Resources, a state-owned conglomerate friendly to the Vanke management, had been Vanke’s largest shareholder owning about 15% of its shares. Other major shareholders held less than 6% combined.

This explains why those most unsettled by Baoneng’s move are Vanke’s senior managers, specifically its chairman, the 60-year-old Wang Shi.

In an internal speech made public on Dec 18, Wang makes it clear that he does not welcome Baoneng as Vanke’s no.1 shareholder. He sneers at the new comer’s business as risky and irresponsible, which will tarnish Vanke’s stellar reputation as China’s most credit-worthy home builder.

According to details revealed by the Chinese media, Baoneng financed its 40-billion-RMB stock market advancement on Vanke largely through margin financing, layers of collateralized loans leveraged by money from its sales of Universal Life Insurance that is often marketed as short-term investment products. In his speech, Wang blasts the financing model as excessively risk-taking. He is not without his points. Equity investment as a long-term investment strategy would put pressure on Baoneng’s short-term based money line. In an event of large-scale redemption of the ULI product or unexpected regulatory intervention, the insurer will face serious liquidity problems.

But Wang’s criticism of his fervent bidder goes beyond finance. His account of his first face-to-face encounter with Yao Zhenhua, the man behind Baoneng, betrays a hint of contempt: “He appeared not able to control his mouth… Nobody has heard of such persons before. They came out of nowhere and suddenly got very rich using leveraged money.

Unlike his “nobody” adversary, Wang has been the torch bearer of Chinese entrepreneurship for as long as “entrepreneurship” is valued in China. Being the founder of Vanke, Wang has led the legendary company for 31 straight years. Vanke was the second earliest stock ever listed on China’s Shenzhen Stock Exchange, with its trading code 000002 as a badge of honor.  Over the years, Wang has cultivated a larger-than-life public image that sets him apart from the typical “Chinese businessman”. He is adventurous, spending his leisure time climbing Mount Everest, kayaking in the torrents of western China and flying gliders over the sky. He radiates wisdom, taking three years off his corporate chairmanship to ruminate about Japanese history at Harvard; He advocates for a business culture that sounds refreshing for a Chinese audience: He claims that Vanke never bribes anyone to get business deals in China; He promotes high-quality, sustainable architecture and neighborhood; He serves as WWF US’s board member and delivers inspiring speeches at the world’s most prestigious green events.

The stark contrast between the public images of Wang and Yao creates an interesting tension that defines initial reaction to the Vanke-Baoneng conflict. Specters were somehow led to believe that there are two kinds of businesses, those that are benign and decent, and those that are hostile and crooked. Wang’s internal speech certainly helps create this impression by invoking the “barbarians at the gate” image, which spreads across newspaper headlines in the following days. The narrative was also enhanced by Wang’s influential admirers, the most excessive of which declares that “Vanke can lose Wang Shi. But China can’t lose him.” As a former chief editor of one of China’s most popular business newspapers puts it, Wang’s Vanke represents the “truthfulness, goodness and beauty” in the Chinese business community for its uphold of basic business ethics and rationality. The editor “shed tears” after learning about Wang’s current difficulties.

Whereas 30 years of relatively robust business does speak to the strength of Vanke’s business model and Wang’s leadership, whether it is a sign of its moral superiority is debatable. Actually many people were put off by Wang’s overtly ethical criticism of Baoneng, seeing it rather as a kind of biased arrogance. For Wang Shi, introducing the ethical argument into a corporate deal cuts both ways. While he can once again brand Vanke’s cleaner-than-thou business culture, some questions Wang’s fundamental business ethics of openly rejecting a perfectly legitimate major shareholder who may actually improve Vanke’s performance in the stock market. Interestingly, Baoneng issued a public statement on Dec 18 confronting Wang on the ethical question head on: “Where is the conflict between the pursuit of optimal, efficient capital deployment and an open, transparent social order?” In his speech, Wang speaks highly of Vanke’s regard for its hundreds of thousands of small shareholders. However, people also point out the contradiction that the management never did anything to boost the company’s stock performance, even when they had the chance to do so through a stock buyback in 2014. It turns out to be a fateful decision not to do so, as it hands Baoneng an opening (80% of Vanke’s shares were outstanding in the stock market at that time).

As financial observers are debating the wisdom of Vanke’s business decisions, and more importantly, the disturbing trend of insurance money flooding the securities market shopping for real estate equities, wider discussions about the deal are turning decisively “Olympian”. The dramatic clash between business titans teases out a deep-seated suspicion that big capitals are but proxies of more powerful interests behind them, and therefore their conflict must represent power struggles on a much higher level. In other words, this is modern China’s financial Trojan War, where the Greeks and Trojans are fighting on behalf of their rivaling Gods.

The theory goes that both Wang Shi and Yao Zhenhua are front-men of their respective political patrons, who belong to adversarial cliques of the Party. Wang’s unspecified patron controls the China Resources conglomerate (Vanke’s biggest shareholder before Baoneng’s bid), which has recently been disciplined under the anti-corruption campaign (its chairman was arrested last year). Baoneng’s attempt to seize control of Vanke is another assault on the big boss behind Wang Shi from its political rivals. The intriguing participation of Anbang Insurance in this financial drama further fuels this line of speculation. As Baoneng was making strides in the stock market, Anbang, a company widely associated with prominent “princelings,” quietly increased its stake in Vanke to over 6%, making itself the “swing vote” between the two fighting camps. If Anbang represents the will of another God which may decide the fate of Troy, is it Athena or Apollo?

A cautious mind would notice that this political reading of the Vanke-Baoneng deal shows signs of stretching reality to fit an imagination about the politics of Chinese elites. It assumes that the supposed political enmity among powerful party figures extends naturally from the political arena to the corporate realm through “proxies”, and that large Chinese corporations, no matter how complicated their financing is, can be neatly assigned to particular political figures who are involved in a zero-sum power game.

But this kind of alternative narrative does broaden the base of the story’s audience, as it proves to be something more “entertaining” than cold financial details. The abundance of conjectures and the shortage of ascertainable facts also make the story much more social-media-friendly, leaving most serious media outlets high and dry. One observer senses the irony in the popularity of the story: as something fundamentally non-relatable to most Chinese watchers, it manages to create an almost magnetic theatrical effect.

The vulgarization of the story does not stop at political gossips. Both Wang and Yao’s personal lives were added into the recipe to make it more flavory. In particular, Wang’s once high profile love affair with a young actress was held against him as indication of his sluggishness in recent years, which supposedly led to his unpreparedness in response to Baoneng’s ambush. It fits well into a misogynist tradition of Chinese classic stories, where the fall of a male hero is often blamed upon a seductive female partner. “All of a sudden many people jump out to teach Wang Shi, and everybody, a lesson: how women cost ambitious men their world.”

On Dec 21, Vanke applied for the suspension of trading in its stocks for as long as three months, citing “significant asset restructuring” as a reason. The move was widely read as a way to strike back at Baoneng, which faces liquidity pressure on its leveraged debts. A recent Caixin report reveals that Wang has been busy approaching potential equity investors to improve Vanke’s shareholding structure. But given the fact that very few shares outstanding remain on the market, it will not be an easy job.

Two days later, the mysterious Anbang Insurance issued a statement publicly supporting “the stability of Vanke’s senior management”, essentially busting the conspiracy theory that Anbang, and the political forces behind it, are set to overthrow Wang Shi’s real estate empire. With Anbang’s more than 6% share on Wang’s side, the situation improves almost overnight for Wang’s team. But Anbang’s real intention with Vanke remains unclear.

The general public probably will never know what actually happened behind the scene during these hectic days and nights of December 2015. No one is there to write the Chinese version of “The Barbarians at the Gate”, which is a lamentable fact for long-time observers of the country’s finance reporting scene. (Only Caixin’s detailed investigative report on the case is probably an exception.) No matter who emerges in the end as the winner of this bid for the control of China’s largest home developer, the loser is already visible: it’s the idea of “philosopher-king capitalists” as the progressive force to change China. The Vanke drama has revealed the fragility of the public image that Wang Shi and an entire class of so-called progressive Chinese capitalists have built for themselves. To the Chinese public, not only are their moral positions dubious, their independent agency is also under question. The widespread public perception that they are just puppets of much more powerful masters provides a real valuation of their moral capital in this country and how shaky their moral high ground really is. Expecting entrepreneurs like Wang Shi to provide the kind of moral leadership that can lift the society out of its value vacuum is almost like betting on Hector to win the Trojan War.

Li Ka-shing’s Indignation

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李嘉诚

What on earth can agitate the steely Superman? It turns out all it takes is an article written by some dubious “researcher” from a Chinese institute.

On Sept 29, the 87-year-old Hong Kong billionaire Li Ka-shing, nicknamed “Superman Li”, broke his cool by releasing to the Chinese media a statement in response to a controversy that had been raising eyebrows all over the country in the past two weeks. It started with an article titled “Don’t Let Li Ka-shing Run Away” that appeared on the WeChat platform of a major think tank run by the state-owned news agency Xinhua. In that article, author Luo Tianhao accused Li of being ungrateful and opportunistic by cashing out his real estate properties in mainland China and moving investments to Europe. It then moved on to instruct Li to do three things, with a tone at once condescending and menacing: invest in lower profit industries in mainland China; hold on to “symbolic” properties in the mainland and Hong Kong as a token of his loyalty and confidence; do more philanthropy. The author also spent a good portion of the article belittling Hong Kong’s business tycoons and highlighting their relative “dispensability” compared to the early days of China’s reform and opening.

As many Chinese observers have pointed out, the significance of that particular article is probably overblown by its somewhat unfortunate pick-up by the Xinhua-affiliated think tank. Likely what happened was that some inexperienced editor in charge of its WeChat account innocently carried it without realizing the potential explosiveness of its content. Commentators also dug out the bogus nature of the author’s numerous self-claimed titles, revealing that he was nothing but an aggressive self-promoter.

In a society where the ruling elites are accustomed to communicate in codes and hide political intentions behind cryptography, the probability of the signal-hungry public to misread or over-interpret things runs high. But even if this is a classic example of overreaction to an essentially trivial piece of opinion, the waves it stirred up and the fact that people so naturally associated it with some sort of high-level intention speaks to a deep-rooted concern that had been fermenting over this past summer.

Economists were among the first to cry foul of the mentality embodied in the article. They dubbed it “anti-market” and maintained that Li Ka-shing’ accumulation of wealth in the mainland was essentially a market phenomenon and should be encouraged. Applying moral judgments on market transactions (including cashing out) is going to affect the business community’s confidence in the system itself. The same sentiment also defines the reaction to the government’s botched effort to rescue a sliding stock market in the summer. Instead of “letting the market play a decisive role”, the authority displayed an assortment of administrative weaponry: suspension of IPOs, banning short selling and arresting a journalist whose exclusive report about the possible wrapping-up of governmental rescue efforts sent the market downward again. In both the Li Ka-shing and the stock market cases, observers sense the ominous encroachment of the logic of power into the sanctity of the marketplace, the former features demagogy, mass mobilization and coercion, while the latter run under the principles of contractual spirit, mutual consent and free will.  People satirically refer to the authority’s stop-running-away mindset as “the foundation of this strong nation” and a “panacea” to every conceivable problem the country faces.

But as business writer Wu Xiaobo writes, in the case of Li Ka-shing, as in many Hong Kong tycoons of his generation, the line between politics and market is never that clear-cut. He even considers Li the symbol of a business philosophy that treasures and embraces the partnership with an ascending power. By supplying the power with much needed capital and support, Li got handsome returns from his investment and therefore became the “biggest winner of China’s transition.”

That ambivalent relationship with power becomes an original sin that Li’s critics exploit. The author of the original article argues that since real estate development in China is almost impossible without some forms of governmental “benevolence”, Li’s cashing out is no less than an equivalence of betrayal. His status as the richest Chinese man on earth (only recently taken over by Wanda Group’s Wang Jianlin) also means that every move he takes carries a symbolic meaning beyond the transaction itself. As early as 2013, when Li’s initial shift of his portfolio to outside mainland China and Hong Kong drew public attention, Wang Shi, president of one of China’s largest real estate developers, sent out a Weibo post reminding everyone: “The very shrewd Mr. Li Ka-shing is selling properties in Beijing and Shanghai. This is a signal. Be careful!” And when China’s economic troubles make business transactions, be it stocks or real estate properties, an issue of allegiance, Li finds himself caught in a spot utterly uncomfortable.

It is particularly unfortunate that Li, a man who builds his life time of business career on optimally timed transactions on a global scale and an extreme prudence in cash flow management, would have to respond to morally charged allegations of ingratitude and disloyalty. Li’s Chinese biographer, Xu Zhiyuan, once compared Li with the likes of John D. Rockefeller, Henry Ford, Bill Gates and Akio Morita, all of whom were short-listed for the London Times’s 1999 award of the “Entrepreneur of the Millennium.” Unlike his great peers who had either enjoyed large home markets or generous government support, Li launched his business from a tiny free port city. From the very beginning he had to face the global market or perish, and up until this point his global portfolio still stands out among Chinese businesses.

His relationship with mainland China has also been complicated. Originally coming from Guangdong province, he spent a good part of his adolescent years sending back money to his mother and siblings who remained in the mainland while he struggled to make ends meet in Hong Kong, where his father died abruptly of tuberculosis and he himself almost died of the same disease. It was this attachment to his hometown that brought him back in the 1980s to set up the first university in the region of Chaoshan, so that kids from the same modest roots as his could receive first-class education. A 2013 profile of Li in a Chinese magazine also took note of his interactions with then Chinese leader Deng Xiaoping. Even though Deng individually received Li twice in 1986 and 1990, an absolute privilege, it was until after Deng’s 1992 speech in Guangdong that finally inject confidence in Li of China’s future. As a perfect example of his signature prudence, Li only started large scale investment in the mainland after that point, which sets him apart from Hong Kong’s other pro-Beijing tycoons who got into the game much earlier.

Xu, his biographer, noticed a sort of “unsophisticated patriotism” in Li. “His generation has experienced violent turbulence (in modern Chinese history). They have a special craving for a wealthy and strong China, and a deep affection for its traditional culture. For them, China is not only just a market. It’s an identity and a place where they can help change.”

This probably explains the tone of Li’s response to the article which sounds hurt and indignant. It is already quite unusual for the old man, who largely stays out of the spotlight, to make such a statement to begin with. The brief press release to the Chinese media contains a distinct personal touch of Li Ka-shing. In response to allegations of him being “unpatriotic”, he listed contributions to the mainland through his multi-billion dollar foundation, in particular the Shantou University endeavor which he dedicated more than a quarter of a century of his time. He quoted Su Shi, the poet from a thousand years ago, to describe his own sense of belonging: “Where my heart finds its inner peace, I call it my homeland.”

He strikes back at the article as “chilling” and representing a “cultural revolution mindset.” Yet while he defends his business decisions as based on a sound and common-sensical logic detached from political considerations, he also makes a gesture that shows his acute sense of his place: “We should not let this meaningless fight over words to become the focus and a distraction from the important message that President Xi tries to send through his state visit to the United States.” The old man, the second richest Chinese on this planet and a self-described “compassionate lion”, is following the thousand-year-old tradition of the Chinese merchant class: showing his subordination to his King.

People’s Uber

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Uber

It is probably more than a simple play of words that Uber China names its low-end line of service “People’s Uber” (人民优步). The egalitarian connotation sets it in contrast with its Chinese competitors, who invariably give their equivalent services a sense of privilege, calling them “exclusive car services” (专车).

Egalitarian or not, all these smartphone-based, internet-powered car-hailing services are subversive forces that are now sweeping through Chinese cities, upending the old, inefficient order of taxis and their government-backed companies.

In recent months, the struggle between the old order and the new forces has escalated into a national feud with the outbreak of taxi driver strikes in many Chinese cities, violent clashes between taxi drivers and Uber drivers, and ground-breaking lawsuits that try to define the legality of such services.

It is a situation that proves thorny for the government. As recent cases show, Uber and other copycat services are so wildly popular with an urban, tech-savvy class profoundly dissatisfied with the taxi services that any moves against the Ubers induce vocal discontents online, at a time when the top leadership is trying hard to woo the support of this group. But on the other hand, the interests that Uber threatens are also highly organized and entrenched. Their response to the advance of the Ubers can easily turn massive and nasty.

Two cases last week vividly illustrate the above dilemma. On May 21 the Beijing transportation administration carried out a major crackdown on what they considered “black taxis”, which involved private cars running Uber-like services. When pictures of the crackdown emerged on the internet, showing enforcement officers using hammers to forcefully break into cars and drag out drivers, they were greeted with an outburst of indignation and ridicule. Liberal commentators questioned the legality of such actions; Public figures, including well-known stand-up comedian Joe Huang and movie star Yao Chen, used their Weibo accounts to express discontent and disbelief. Tough-in-the-cheek Weibo personalities readily made fun of the authority by teasing them about “why not using the anvil as well.”

On the same day in Tianjin, a mega-city two hundred kilometers away from Beijing, taxis drivers took matters into their own hands. One of them solicited an “exclusive car service” as a customer, and then brought the car to a pre-arranged destination, where a group of taxi drivers waited to “give the driver a lesson”. Apparently, the Uber driver was not easily intimidated. He sent out a WeChat alert to his community of similar drivers, and in no time, hundreds of them came to his rescue. A major stand off and violent clash quickly ensued, which in the end required police to help disperse.

Caught between the wild popularity of internet car-hailing services among urban middle class consumers and the intransigent taxi interests, the central government’s position so far has been stubbornly ambiguous, if not outright self-contradictory. In Nov 2014, the spokesperson for China’s Ministry of Transportation publicly declared that internet-based car services “should not be killed with one strike of the rod.” It was widely read as a half endorsement of the Ubers until, four months later, the Minister himself hardened the Ministry’s stance by famously saying that “private vehicles should NEVER be allowed into the commercial services”, citing safety concerns as the main consideration.

But Uber and its sister services continued their aggressive expansion unabated. Part of the reason might be the existence of a mixture of seemingly authoritative signals which are subject to all kinds of favorable interpretations. Only recently, China’s Premier Li Keqiang has been advocating the concept of “Internet+”, a vision to upgrade China’s economy to a more information and data powered platform. And early this year, while numerous local governments were ramping up their campaigns against the Ubers, China’s central news agency Xinhua and the party’s no.1 propaganda outlet People’s Daily were publicly supporting such services with a series of widely circulated opinion pieces. For a nation so accustomed to reading the “tea leaves” of the coded signals from the top, such an environment is fertile for over-enthusiastic (mis)judgments.

Kenneth Lieberthal, an influential China expert in the US, once observed that it is difficult for outsiders “to determine with confidence which outcomes reflect strategic decisions by China’s national leaders and which instead reflect inherent dynamics of the political system that are beyond the control (and some-times against the wishes) of those leaders.” The Uber situation is a typical illustration of this challenge as at times you can’t tell whether matters are manifestations of the political will from the top, or mere reactions prompted by local power dynamics. Take the above mentioned Tianjin for example, on the one hand the municipal government announced all internet-based car-hailing services “illegal” a few months ago, on the other hand it has thenceforth only penalized eight “illegal” vehicles. It is likely that such actions were mere tokens to placate the protesting taxi interests, which were particularly vocal in Tianjin. There the ownership of taxis belongs to individual owners rather than large taxi companies, the former being much more financially vulnerable. Such a unique local set-up produces interactions that project uncertainty onto the national level where every development is closely watched by many.

The raw subversive power of Uber is creating problems for regulators all over the world. While the Chinese authorities are not the only ones scratching their heads, they do face a peculiar challenge of lacking institutionalized means to negotiate a legitimate compromise with the numerous interests involved. When an official from China’s central planning agency (NDRC) got interviewed for the Uber question, he made a typically dialectic instruction to the local governments: seriously take into account the need of the public, while at the same time handle the historically accumulated problems (i.e. taxis) with grace.

Not very instructive.

The Curious Case of Anbang Insurance

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image

“Who is Anbang Insurance?” The Fortune magazine asked when this Chinese company virtually unknown to the West announced its acquisition of the legendary Waldorf Astoria New York in Oct 2014.

Ironically, most people in China had the same question when that piece of news emerged in the Chinese media (the news spread in China with a sense of pride of course). Such a line of inquiry only intensified after Anbang’s other high profile moves in the Chinese capital market raised eyebrows, especially its attempts to become the dominant stakeholder in two of China’s largest privately owned banks, China Merchants and China Minsheng.

The English website of Anbang Insurance is innocuous enough that you would readily mistake it for a small company doing business on Alibaba. Its stated vision is so lame (“help customers to achieve dreams”) to an extent that it almost appears dubious. Yet this is a company that has grown its total asset from 500 million RMB (75 million USD) to 700 billion (110 billion USD) in a mere decade (2004-2014).

And last week, one of China’s most influential newspaper, Southern Weekly, threw national spotlight on the company by publishing a 4-page front page story.(Original report has already been deleted from its official website) It unleashed an ominously curious turn of events that triggered interesting speculations about the clash of forbiddingly powerful forces that are redefining China’s political landscape.

To understand the events described below, you first need to know that China’s seemingly unitary political system is actually made of rival factions of power. These factions are basically extensive patronage webs centered around a few very powerful people. For instance, it is widely believed that former President Jiang is the chief of the “Shanghai Gang”, officials and political operatives who derived their influence and clout from working in Shanghai (where President Jiang’s career was launched). Similarly, former President Hu has his own patron-client network known as the “Youth League Faction”, as most of those involved have gained power through moving up the ranks of the Communist Youth League system, where President Hu served as chief secretary before becoming a political star and heir apparent. The current Chinese President, Xi Jinping, comes from a completely different background. Unlike his two predecessors who came from relatively modest roots, he was the younger son of a former vice premier and right-hand person of the reformist leader Deng Xiaoping. In China, such sons and daughters of former revolutionary leaders are dubbed “princelings.” It is said that they are currently engaged in an intensive power struggle against other factions over the future course of China.

What Southern Weekly revealed last week was nothing short of a little bomb. It first established that Anbang’s president, Wu Xiaohui, was actually the son-in-law of Deng Xiaoping’s beloved daughter Deng Nan. Then, after sifting through complex share-holding records, the journalist further claimed that Anbang’s de facto man in control was Mr. Chen Xiaolu, who happened to be the son of Marshal Chen Yi and son-in-law of General Su Yu (both legendary revolutionary military leaders). The three companies that Chen controls own a collective 51.36% of Anbang’s stakes. Simply put, Anbang is controlled by very powerful “princelings”.

What struck most observers was not the information that Anbang is controlled by princelings. After all, such rumors have been floating around ever since its acquisition of Waldorf Astoria in New York. It was the fact that Southern Weekly managed to print it out as a front page story at such a delicate time that generated a tremendous sense of intrigue. As China’s flagship investigative newspaper in the past decade, Southern Weekly’s precipitous decline of prestige lately is itself a tragic reflection of the demise of China’s once prospering media scene. As a liberal leaning paper that have spearheaded groundbreaking reports triggering far-reaching social changes, it was subject to targeted and harsh censorship in recent years, leading to an exodus of journalistic talents and mediocre reports as a result. It was in this context that last Thursday’s publish of the edgy Anbang report looked refreshing for many.

The timing of this expose couldn’t have been more interesting because almost at the same time, another political scandal unfolded in front of the public’s eye. On the eve of Jan 30, rumors started to spread on China’s social network sites that China Minsheng’s president, Mao Xiaofeng (unrelated to Chairman Mao) had been “taken away” by the Communist Party’s Central Disciplinary Committee. Major media outlets such as the well-connectedCaixin quickly confirmed the news on the next day. The two seemingly unrelated incidents had one important connection: Anbang had been very aggressive in accumulating China Minsheng’s share in the past year and had quickly become it’s No.1 shareholder (22%).

“Coincidentally”, Mao Xiaofeng, China Minsheng’s disgraced president, used to be a rising star within the Communist Youth League system, before he parachuted into China Minsheng at the age of merely 30. He is also widely believed to be closely associated with Ling Jihua, President Hu’s chief of staff who was one of President Xi’s biggest anti-corruption targets last year. Ling accumulated his political capital almost entirely from the Youth League ranks.

A narrative quickly developed in the circles of China’s politico-economic observers: Anbang’s aggressive pursuit of China Minsheng is a struggle for economic dominance of the rival factions. Mao’s arrest was a sign of the disadvantaged Youth League Faction. Southern Weekly’s mysteriously well-timed expose was the Youth League Faction’s desperate attempt to regain the upper hand by tarnishing the names of the princelings (through questioning the legitimacy of their wealth).

But if this conjectured narrative has some validity (there ARE other credible claims that the China Minsheng incident was an isolate case), the Youth League Faction’s fight back quickly seemed doomed. The day after Southern Weekly’s report came out, Chen Xiaolu, who Southern Weekly alleged was Anbang’s de facto man in control, circulated a statement on his WeChat Friend Circle (something equivalent to a Facebook page) saying, jokingly, “I wish I was controlling Anbang.” He claimed that his appearance in Anbang related events were only tokens of friendship with Wu Xiaohui, without any material gains. He also maintained that all of Anbang’s recent acquisitions were legal transactions overseen by the country’s regulatory bodies. As if things weren’t interesting enough, Caixin followed the next day with the “revelation” that Wu Xiaohui had “terminated” his marriage with Deng’s granddaughter. It looked like a coordinated backlash for Southern Weekly was on the way.

Whether Chen’s breezy claims were true matters little now. Southern Weekly capitulated only three days after its applauded report. On Monday Feb 2, it released a formal apology, saying that “it failed to do fact checking on SOME of the facts of its Anbang report.” Just which facts were not checked, it didn’t say.

The apology was read by some as no less of a white flag. And people again started to worry about the fate of this beloved paper of the Chinese liberals.

But there are others who were less sympathetic. Again assuming the validity of the clan rivalry narrative, they saw Southern Weekly as just another puppet used for their masters’ own purpose. So much for editorial independence.

The Chinese likes to use the Go Game metaphor to describe grand political maneuvers hard to be fully grasped by the lay person. “A big game of Go is being played.” They would say. President Xi’s campaign to consolidate power is just such a game. Maybe future chroniclers of China’s modern history would take note and make sense of what actually happened from Jan 30 to Feb 2, 2015.

Originally posted on Feb 7, 2015