February 3, 2017 11:50 pm JST
Keith B. Richburg

'Abduction' threatens Hong Kong role as financial haven

Disappearance of billionaire Chinese resident raises fresh fears about rule of law

An exterior view of Four Seasons Hotel in Hong Kong where Chinese billionaire Xiao Jianhua was last seen on Jan. 27. © Reuters

In early 2016, the abduction of five Hong Kong booksellers by mainland Chinese security agents raised questions about the former British colony's future as a bastion of free speech.

Now, the latest apparent snatching of a Chinese billionaire, Xiao Jianhua, reportedly seized from his luxury harbor front apartment at the start of the Year of the Rooster, has raised doubts about whether Hong Kong can continue as an international financial center.

The 2015 booksellers' case rattled Hong Kong society because of the brazenness of the abductions, the inability of the government or police to provide answers, and the clear message that China's security apparatus cared little about respecting Hong Kong's supposed autonomy or its free press traditions.

The booksellers were all connected to a publishing house, Mighty Current, known for producing salacious, gossip-filled tomes banned in mainland China, including books about Chinese President Xi Jinping and his wife. The booksellers' disappearances -- and their reappearances on Chinese state television making awkward forced "confessions" reminiscent of the Cultural Revolution -- seemed a stark warning that Hong Kong's media freedoms stopped when Beijing's top leaders were ridiculed or had their private lives exposed.

The case of Xiao, one of the richest men in China -- and reportedly closely connected to the ruling elite -- sends a message that could be far more chilling. His apparent abduction, from the Four Seasons apartments at the International Financial Center, strikes directly at Hong Kong's role as a regional business hub and haven for bankers and businessmen, who felt protected by Hong Kong's rule of law and its independent judicial system.

Other Chinese tycoons have gone missing only to end up "assisting" police with investigations -- or being charged with graft. One, Guo Guangchang, the powerful chairman of the Fosun group conglomerate, went missing for three days in 2015, causing trading in his company's stock to be briefly suspended. Top executives of some Western multinationals, such as the Anglo-Australian Rio Tinto Group, have also been detained in China, and sometimes given long prison terms on trumped-up charges, including bribery and tax evasion.

In those cases, however, the tycoons were seized inside mainland China. Hong Kong was considered a legal safe zone, and some of China's wealthiest people had taken up apartments in the territory to avoid Xi's ongoing anti-corruption campaign on the mainland.

There has been growing evidence of the Chinese elite moving their money to Hong Kong to escape the anti-graft crackdown. A local jewelry wholesaler recently described to me how mainland Chinese millionaires and billionaires were suddenly more interested in snatching up precious stones -- easier to hide than stacks of cash, she said. Even car parking spaces in Hong Kong have been selling for escalating amounts, as mainland millionaires look for someplace safe to park their wealth.

If Xiao has indeed been taken to the mainland by security agents -- and the details of his disappearance are still murky -- then it would send a clear signal that Hong Kong's days as a financial haven may be over.

"It's now very clear that the Hong Kong government has completely failed to protect Hong Kong under One Country, Two Systems," Claudia Mo, an elected member of the local Legislative Council, said in the Financial Times, referring to China's blueprint for the territory, which has been a self-governing special administrative region of China since 1997. "Hong Kong is fast losing its status as an international business hub, as it becomes just another Chinese city," Mo said.

Huge uncertainty

Xiao's disappearance comes amid huge uncertainty in Hong Kong following an unexpected announcement from the unpopular head of the territory's government, C.Y. Leung, that he will not stand for a second five-year term. The head of government, known as the chief executive, is chosen by a 1,194-member committee. About a quarter of the committee's members come from the pro-democracy camp, including some affiliated with a series of "Occupy Central" protests that paralyzed the city in 2014.

The conservative pro-China establishment camp dominates the committee, and no one is expected to be selected without Beijing's blessing. But the pro-China candidates hoping to succeed Leung are now having to answer uncomfortable questions about Xiao's disappearance, and how they might better protect Hong Kong's autonomy from mainland meddling.

The case also comes just after China was accused of interfering in Hong Kong affairs by insisting that two young pro-independence elected legislators be prohibited from taking their seats, because they deliberately mangled their oaths of office to insult China during their October swearing-in ceremony. Beijing's National People's Congress Standing Committee laid down its order to exclude the two legislators before the case had made its way through local courts.

Hong Kong was handed back to China 20 years ago under a unique formula which was supposed to allow the territory "a high degree of autonomy," even as it was absorbed by the mainland. Under Hong Kong's governing document, called the Basic Law, mainland police and security agents are not supposed to operate in the territory.

Local police have said they are investigating the apparent kidnapping by reviewing closed-circuit television cameras for clues.

The abduction -- if it is that -- would also raise further concerns among foreign consulates for the safety of their citizens. Xiao was a Canadian citizen, but China in the past has indicated it considers nationals born in China to be Chinese citizens subject to Chinese law, regardless of what passports they hold. One of the abducted booksellers held a British passport; another was a Swedish citizen.

The big unanswered question -- the source of the deepest mystery -- is why Xiao would have been spirited away to the mainland. He was known as the bagman to China's "Red Princelings," the family members of the ruling Communist elite. Xiao became an expert at setting up shell companies to allow the princelings to invest overseas undetected. He is reported to have helped relatives of Xi offload their shares in a company that was mentioned in a Bloomberg report on the Xi family's wealth.

Has Xiao fallen victim to Xi's sweeping anti-graft campaign? Was he taken because he knew too much about the ruling elite and its offshore investments? Or was he taken because China's corruption-busters needed his know-how and expertise to locate the ill-gotten gains of a new target on their list? And does this mean that another top-level official in China is about to fall?

The answers will have to wait until Xiao finally re-emerges -- whether in person, to explain it was all a misunderstanding, or, more ominously, on state television, accused of crimes.

Whatever the explanation, it may not be enough to calm Hong Kong's fears -- or to restore its image as a financial safe harbor. That image, like Hong Kong's press freedom, was bundled into a car in the middle of the night and driven over the border. It may prove too difficult to get it back.

Keith B. Richburg, a former foreign editor of The Washington Post, is director of Hong Kong University's Journalism and Media Studies Center.

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