Pingyang County’s verdant hills still hint at a long-lost China. Rice paddies and villages surround its bustling towns, and in the fields, farmers wade into the mud to plant seedlings as they have for thousands of years.
It is an odd place to find the people behind a Chinese corporate powerhouse that is turning heads on Wall Street with a global takeover binge. Yet the area is home to a tiny group of just such people — small-time merchants and villagers who happen to control multibillion-dollar stakes in the Anbang Insurance Group, which owns the Waldorf Astoria in New York and a portfolio of global names and properties.
US regulators are now asking who these shareholders are — and whether they are holding their stakes on behalf of others.
Illustration: Yusha
The questions add to the mystery surrounding a company that seemed to come out of nowhere, surprising dealmakers with offers to pay more than US$30 billion for assets around the world.
Anbang’s shopping spree is part of an outflow of money from China that has reshaped global markets, but has often been shrouded in secrecy, sometimes by prominent Chinese looking to shift their wealth abroad without attracting attention at home.
That poses a problem for international regulators trying to identify the buyers behind major acquisitions and to assess the riskiness of these deals.
The Anbang shareholders in the Pingyang County area hold their stakes through a byzantine collection of holding companies.
However, according to dozens of interviews and a review of thousands of pages of Anbang filings by the New York Times, many of them have something in common: They are family members and acquaintances of Wu Xiaohui (吳小暉), Anbang’s chairman, a native of the county who married into the family of Deng Xiaoping (鄧小平), China’s paramount leader in the 1980s and 1990s.
In many ways, Anbang and Wu appear to be archetypal products of China’s mix of freewheeling capitalism and Chinese Communist Party (CCP) dominance, a formula that has fueled nearly four decades of untrammeled growth.
Anbang got its start as an auto insurance company in 2004 in the eastern city of Ningbo. For years it was only a minor player, but it took off as it became more aggressive with its finances, buying stakes in Chinese banks and bringing in money by selling high-risk, high-yield investment funds to ordinary Chinese.
Wu, 49, a former car salesman and low-level anti-smuggling official, led Anbang through this transformation and is now known as one of China’s most successful businessmen. He wears tailored suits and polished loafers, hobnobs with the likes of Stephen Schwarzman of Blackstone, and sometimes holds court at Harvard University.
However, he does not appear in Anbang’s filings as an owner.
It is common in China for the wealthy to hold shares in companies in the name of others. Known in Chinese as baishoutao (白手套), or white gloves, these people are often trusted relatives or acquaintances. Many defend the practice as a way to protect their privacy in a nation where riches can be a political liability, but others say white gloves can be used to hide ill-gotten gains and thwart corruption investigators.
Anbang did not respond when asked if Wu was a shareholder and declined to answer questions about its owners.
The company “has multiple shareholders who have made all required disclosures under Chinese law. They are a mix of individual and institutional shareholders who made a commercial decision to invest in the company,” a spokesman said. “Anbang has now grown to be a global company thanks to the support of these long-term shareholders.”
For investors and regulators, white gloves can make it difficult to evaluate the financial health of a Chinese buyer. Ownership may be concentrated in the hands of a few people, posing hidden risks, and companies with government connections could be vulnerable to political shifts or become magnets for corruption.
“It is very important for businesses to know who they are ultimately doing business with, and for investors, what they are investing in,” said Keith Williamson, a managing director in Hong Kong at Alvarez & Marsal, a firm that carries out corporate fraud investigations.
It is not clear whether the shareholders in the Pingyang County region are holding large stakes on behalf of anyone else. However, on May 27, Anbang withdrew its application with New York state to buy an Iowa insurer, Fidelity & Guaranty Life, for US$1.6 billion.
Regulators had asked about ties between several shareholders with the same family names, said one person briefed on the matter who spoke on the condition of anonymity.
A US$6.5 billion deal for a portfolio of hotels that includes the Essex House in New York City and several Four Seasons locations is awaiting results from a security review by the US government.
In March, Anbang withdrew a US$14 billion bid for Starwood, the operator of Sheraton and Westin hotels, in a move that surprised Wall Street.
The company could come under greater scrutiny as it prepares to sell shares in its life insurance business on the Hong Kong stock exchange next year.
At least one major New York-based investment bank has raised concerns about Anbang’s ownership after studying its shareholding structure to evaluate whether to help with its overseas deals, according to two people involved in the matter who asked not to be identified because the process was private. The bank did not participate in Anbang’s deals.
Separately, the Chinese magazine Caixin reported in May that Chinese regulators were examining Anbang’s riskier financial products. It is unclear where that inquiry stands or whether Anbang’s ownership structure is being investigated.
Chinese President Xi Jinping (習近平) has waged a campaign against graft since taking office, and the use of white gloves has recently come under scrutiny.
“White gloves are accompanied by power’s black hands,” the CCP’s disciplinary watchdog wrote in a report last year.
Questions about Anbang’s owners come as Chinese companies make deals around the world — sometimes representing efforts by China’s powerful to move money out of the country, as the economy slows and the party tightens its grip on everyday life.
China has encouraged some capital outflow to improve the performance of its investments and expand its influence. However, the subject of the elite moving money overseas is politically sensitive, raising questions about the source of their wealth and their confidence in the Chinese economy.
Luo Yu (羅宇), the son of a former chief of staff of the Chinese military, said that China’s most politically powerful families had been transferring money out of the country for some time.
“They don’t believe they will hold onto power long enough — sooner or later they would collapse,” said Luo, a former colonel in the People’s Liberation Army whose younger brother was a business partner with one of Anbang’s founders. “So they transfer their money.”
At its founding in 2004, Anbang had an impressive list of politically connected directors. Records show early Anbang directors included Levin Zhu (朱雲來), son of a former prime minister, and Chen Xiaolu (陳小魯), the son of an army marshal who helped bring CCP rule to China.
Then there was Wu, who was born Wu Guanghui (吳光輝), but was known as Wu Xiaohui from a young age. Relatives said he grew up in a Catholic family; a crucifix sat on his aunt’s dining room table, and she wears a necklace with a portrait of the Virgin Mary.
Wu married Zhuo Ran (卓苒), a granddaughter of Deng, the Chinese leader who brought China out of the chaos of the Mao Zedong (毛澤東) era. Together, Wu, Zhuo, Chen and their relatives owned or ran the companies that controlled Anbang, according to company filings.
Anbang leapt onto the global stage with last year’s purchase of the Waldorf Astoria and its aborted bid for the Starwood chain. By this year, Anbang’s assets had swelled to US$295 billion.
It is not clear what prompted Anbang’s sudden interest in overseas assets. However, the shift came after a reshuffling of its ownership structure that also led to the injection of more than US$7.5 billion into the company.
Company documents filed with Chinese agencies show that the number of firms holding Anbang’s shares jumped to 39, from eight, over six months in 2014. Most of those firms received large injections of funds. At the same time, Anbang’s capital more than quintupled.
Zhuo disappeared from the ownership records by the end of that year. Many of Wu’s relatives did as well. Wu and Chen had disappeared earlier from the records.
Zhu, who does not appear to have owned shares, disappeared in paper filings from Anbang’s roster of directors by 2009, though he was listed as a director on online government filings as late as 2014.
Wu, Chen and Zhu did not respond to requests for comment, and Zhuo could not be reached. In March, Zhu told Chinese reporters that he was not an Anbang director.
Anbang’s current shareholding firms are not well-known names in China, and some appear to have been set up just to hold Anbang shares. One lists its address as the empty 27th floor of a dusty Beijing office building. Two more list an address at a mail drop above a Beijing post office.
Using corporate filings, the New York Times compiled a list of nearly 100 people who own shares in the firms and traced about a dozen to Pingyang County or nearby.
Reporters visited the area in Zhejiang Province and interviewed dozens of residents, including several whose names appeared on the list. They also interviewed an uncle, an aunt and a nephew of Wu.
The latter two, as well as others in the area, said one name matched that of Wu Xiaohui’s sister, Wu Xiaoxia (吳曉霞). The family members said several other names matched those of his extended kin, including two cousins and others on his mother’s side of the family.
Through their various stakes in Anbang shareholding companies, these people control a stake representing more than US$17 billion in assets.
Other names matched local acquaintances of Wu Xiaohui, including Huang Maosheng (黃茂生), a local businessman who confirmed in a brief telephone interview that he had a business relationship with Wu, but declined to elaborate.
One village leader and neighbors identified the names of four of Huang’s relatives — including some whom they described as common workers — from among those on the list. Their Anbang holdings represent about US$12 billion in assets.
Another resident, Mei Xiaojing (梅小京), said two names on the list matched those of her relatives.
Asked if she knew Wu Xiaohui, she said: “Well, yes,” then ended the telephone conversation and did not respond to subsequent calls.
Through multiple holding companies, those three people have a stake representing about US$19 billion in Anbang assets.
As Anbang rose, so did Wu Xiaohui’s profile. In 2013 he secured a yearlong position as a visiting fellow at the Asia Center of Harvard, joining a growing list of politically connected Chinese billionaires with ties to Harvard.
Ezra Vogel, a professor emeritus at Harvard who wrote a biography of Deng, said he met the Chinese tycoon on several occasions.
“He had this staff of sharp people who were working for him,” Vogel said. “It seems that they were doing the detail work, and he was the friendly man supplying the connections.”
Additional reporting by Michael Corkery
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