Ping An sale hits raw nerve in China
By Paul Mackintosh - 14/01/13
Some commentary only indirectly related to private equity this week – although it does directly affect a leading private equity investor, as Ping An Insurance Group was looking to expand its investment into RMB PE funds, until new CSRC regulations against insurance company commitments to PE funds not co-managed by the investor reportedly forced a pullback towards the end of last year. Because yes, this week I’d like to spotlight HSBC’s difficulties over its sale of its Ping An stake – and the overall situation for accountability and transparency in China, and even in Hong Kong. This is going to rachet up regulatory and political risk for Greater China investors for quite some time to come.
To recap briefly: HSBC’s problems in consummating its c. US$9.4 billion deal, according to the reports, revolve around China Development Bank’s reluctance to finance the buyer, Thailand’s Charoen Pokphand Group (CP Group), over concerns about funding for initial payments made by CP Group to HSBC. Western and other reports linked previous Ping An stake sales to the family of China's outgoing Premier Wen Jiabao.
Nerves in China are raw on the whole issue. Similar Western investigative reporting used listed company information available in Hong Kong to reveal the holdings and personal wealth of relatives of Wen and PRC president-in-waiting Xi Jinping. Now concerns in Hong Kong have increased over changes proposed by the Financial Services and Treasury Bureau and the Companies Registry to restrict information publicly available on company directors. The Hong Kong Journalists Association and local activist David Webb have denounced the proposals.
Concurrently, protests over censorship and official pressure on Guangdong’s Southern Weekend and the Beijing News have gained unexpected support, putting China’s new leadership into a reactive stance. The supposed smooth transition in China’s leadership to a relatively conservative new platform last November now appears to be running into trouble. Xi himself is now making strident – and possibly connected – public statements about the rule of law in China. These could be intended to consolidate a reformist power base against conservative Communist Party of China (CPC) factions, or to draw public attention away from the censorship protests in the same way that anti-Japanese feeling was stoked over territorial disputes after the leadership change. But the underlying social and political tensions in China do not appear to be going away, despite reports of resurgent economic growth. Opacity and lack of accountability is patently damaging the interests of Western investors in China, and stoking tensions inside the PRC. It is time for the CPC to tackle the reformist challenges it ducked last November.