Relatives of a top Chinese regulator profited enormously from the purchase of shares in a once-struggling insurance company that is now one of China’s biggest financial powerhouses, according to interviews and a review of regulatory filings.
The regulator, Dai Xianglong (戴相龍), was the head of China’s central bank and also had oversight of the insurance industry in 2002, when a company his relatives helped control purchased a big stake in Ping An Insurance (平安保險) that years later would be worth billions of US dollars. The insurer was drawing new investors ahead of an initial public offering (IPO) after averting insolvency a few years earlier.
With attention to the wealth amassed by families of the politically powerful in China growing, the investments made by Dai’s relatives illustrate that the riches extend beyond the families of the political elite to the families of regulators with control over the nation’s most important business and financial levers. Dai, an economist, has since left his post with the central bank and now manages the country’s US$150 billion social security fund, one of the world’s biggest investment funds.
How much the relatives made in the deal is not known, but analysts say the activity raises further doubts about whether capital markets are sufficiently regulated in China.
“While not per se illegal or even evidence of corruption, these transactions feed into a problematic perception that is widespread in the PRC [People’s Republic of China]: The relatives of China’s highest officials are given privileged access to pre-IPO properties,” said Nicholas Howson, an expert in Chinese securities law at the University of Michigan Law School.
The company associated with Dai’s relatives that bought the Ping An stake was controlled by a group of investment firms, including two set up by Dai’s son-in-law, Che Feng (車豐), as well as other firms associated with Che’s relatives and business associates, the regulatory filings show.
The company, Dinghe Venture Capital (鼎和創業投資), got the shares for an extremely good price, the records show, paying a fraction of what a large British bank had paid per share just two months earlier. The company paid US$55 million for its Ping An shares on Dec. 26, 2002. By 2007, the last time the value of the investment was made public, the shares were worth US$3.1 billion.
In its investigation, the New York Times found no indication that Dai was aware of his relatives’ activities, or that any law was broken. However, the relatives appear to have made a fortune by investing in financial services companies over which Dai had regulatory authority.
In another instance, in November 2002, the same company acquired a big stake in Haitong Securities (海通證券), a brokerage firm that also fell under Dai’s jurisdiction, according to the brokerage firm’s Shanghai prospectus. By 2007, just after Haitong’s public listing in Shanghai, those shares were worth about US$1.6 billion, public filings showed.
Later, between 2007 and 2010, Dai’s wife, Ke Yongzhen (柯永珍), served as chairwoman on Haitong’s board of supervisors.
A spokesman for Dai and the National Social Security Fund did not return telephone calls seeking comment.
Jenny Lau, a spokeswoman for Che, denied by e-mail that he had ever held a stake in Ping An. Lau said that another businessman had bought the Ping An shares and, when faced with financial difficulties, had sold them to a group that included Che’s friends and relatives, but not Che.