China's 'Extraordinary Rendition' of Executives

♠ Posted by Emmanuel in , at 12/13/2015 01:32:00 PM
Detaining executives without due process or explanation: Does the PRC's actions constitute economic terror?
Leave it to the Communist Party to find a way to roil Asian markets one way or another. Having (sort of) learned their lesson not to suddenly and drastically devalue their currency as per the events of this past August, they are now devaluing slowly but surely. But, you do have to wonder about its continuing habit of locking up corporate executives without an undisclosed location. In honor of the American's "extraordinary rendition" of anyone anywhere in the world without due process for detention and interrogation, well, China's powers-that-be are practicing exactly the same thing on corporate types.

With world markets unsettled by China's economic slowdown, falling commodity prices, and the impending rise in US rates, the timing could not have been worse for the PRC to make the the head of one of its largest non-state-owned conglomerates vanish. Imagine what would happen if the head of, say, General Electric was detained and held incommunicado indefinitely and you wouldn't be far off:
The baffling disappearance of Chinese executives in recent weeks has drawn attention to the ruling Communist Party’s practice of holding people incommunicado either as targets of investigations themselves or to help with probes of others.

The most recent example came last night, when Caixin magazine reported that Guo Guangchang, the billionaire chairman of Fosun International Ltd. couldn’t be contacted. Fosun suspended its shares today and its bonds plunged by a record before the company said Guo was assisting justice authorities with a probe. Other high profile cases in recent weeks included two members of Citic Securities’ executive committee who became unreachable earlier this month, along with Yim Fung, the chief executive officer of Guotai Junan Securities Co.

The Chinese word for unreachable -- shilian, which means “lost contact” -- has become a euphemism in China for the party holding executives and officials for questioning or arrest, often indefinitely and at an undisclosed location. That practice has long been criticized by human rights activists who say the lack of transparency and accountability opens the door to abuses such as torture.
Despite being extraordinarily curious to non-Chinese observers, these acts have become so ordinary as to even have terms as to whether the detainees are party or non-party members:
The detentions, known as “shuanggui” if the party detains one of its members and “shuangzhi” if a non-party member is held as part of a probe, has featured prominently in President Xi Jinping’s campaign to root out corruption that he says is now rife in the ranks of the party’s more than 87 million members. People can be detained even if they are not the target of a probe themselves. reported today that Guo was helping with a corruption investigation into former Shanghai vice mayor Ai Baojun. Fosun didn’t specify the subject of the probe, other than to say Guo will be able to participate in the company’s decisions on “substantial issues.”

The Central Commission for Discipline Inspection, the agency leading the anti-corruption campaign, didn’t respond to a fax seeking comment. The main problem with the practice is that it isn’t transparent, said Zhu Lijia, a professor of public policy at the Chinese Academy of Governance. “Nobody really knows what happens inside the room, and that’s dangerous without regulations,” Zhu said.
The larger point is this: markets hate uncertainty, and detaining prominent industrialists is hardly the way to increase market confidence. For one thing, we don't even know if Guo Guangchang is being charged with corporate malfeasance. Stay tuned. 

12/14 UPDATE: The elusive Guo Guanchang has made a public reappearance. Supposedly, Fosun in not under investigation. If so, it makes you wonder why the PRC would inflict so much harm on an unsuspecting company:
Fosun said on Sunday it was not the focus of the investigation. Liang Xinjun, chief executive, added that Mr Guo was “assisting the judicial authorities with an investigation, but it is not because the company has problems”. When Mr Guo entered the conference room in Shanghai on Monday, employees applauded for an extended period, according to a person present at the meeting. 

A European executive whose company works closely with the Chinese conglomerate said that all of the group’s portfolio companies had sent representatives to the conference. “They weren’t expecting Guo to be there and there was relief when he showed up. Fosun suggested that he had been helping with an investigation but that neither he personally nor the company is under investigation,” the executive said. “They are not expecting any more public updates, either from Fosun or from the investigation. He has done his bit now and it is over.”