Anbang drama is coda to China’s M&A craze

Chairman of Anbang Insurance Group Wu Xiaohui attends the China Development Forum in Beijing, China, March 18, 2017. REUTERS/Thomas Peter

HONG KONG (Reuters Breakingviews) - The drama at Anbang Insurance Group could be a coda to China’s M&A craze. Late on Tuesday, the acquisitive Chinese outfit said its Chairman Wu Xiaohui was temporarily unable to fulfil his duties for personal reasons. The New York Times and China’s Caijing magazine, both citing sources, said he had been detained. Decoding what is happening where mainland business meets politics is never straightforward. Still, one way to read this is as a further sign that Beijing is fed up with splashy foreign dealmaking.

A number of factors could be at play. First, regulators are cracking down on domestic insurers following a period of fast growth fuelled by high-yielding investment products. Last month an Anbang unit was temporarily blocked from issuing new ones. Some insurers have also dabbled in corporate raiding, further angering authorities.

Second, China is gearing up for its party congress later in the year, a twice-a-decade reshuffle where President Xi Jinping will seek to consolidate control. That may have set off a factional squabble. Anbang has elite connections, to former paramount leader Deng Xiaoping’s family and Communist Party scion Chen Xiaolu among others. It is not obvious if these links are assets or liabilities at present. Wu may have also misfired by getting into a public fight with Caixin, an influential business magazine, over exactly who owns Anbang.

Third, last year’s record $220 billion of announced foreign deals prompted China to look harder at outbound mergers and acquisitions, especially big or strange ones. It doesn’t want companies frittering money away on trophy assets, disguising capital flight, or embarrassing the nation. Here, Anbang could hardly have a higher profile – for example, holding abortive talks with Kushner Cos, the real estate firm previously led by President Donald Trump’s son-in-law, about redeveloping a flagship New York tower. It is telling that Anbang’s compatriot HNA, which has been even busier recently, earlier this month vowed to slow down its pace of new deals.

For Wu, this could still prove a blip. Fosun Chairman Guo Guangchang is still in charge after briefly assisting authorities in late 2015. And China Inc’s impetus to do foreign deals will not go away entirely. But this episode seems likely to encourage further caution from China’s tycoons.


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