Disappearance of dealmaker Bao Fan casts chill across China’s tech sector


In May 2021, a group of Chinese banks agreed to lend $300mn to investment bank China Renaissance with a condition: if Bao Fan, the company’s well-known founder, ceased to be its largest shareholder or was no longer chair of the board they could demand early repayment.

Nearly two years later, lawyers may soon be poring over that clause. The disappearance of Bao last week, announced in a company filing, has set on edge the country’s vast tech industry that the dealmaker helped to build.

The fate of Bao and his company, which has for years been at the heart of financing Chinese tech, is a pivotal test of Beijing’s stance on the industry. A two-year government crackdown has already sidelined Alibaba chief Jack Ma, decimated the vast for-profit education industry and hit investments globally.

“The question is — is it going to spread out?” said Desmond Shum, author of Red Roulette, a memoir on working in Chinese finance. “For the industry it’s a very, very scary moment.”

When China Renaissance listed in Hong Kong in 2018, it was the culmination of years of success in the rise of mainland China’s tech industry.

Bao, in his early 50s, began his career as an M&A banker at Morgan Stanley and Credit Suisse and later worked as head of strategy at AsiaInfo Technologies, a company that provides software solutions to Asian enterprises and listed on the Nasdaq exchange in 2000.

In 2005, he launched China Renaissance to capitalise on the fast-growing tech industry. His success stemmed in part from personal relationships with many of China’s future tech billionaires, formed in his early years at Morgan Stanley and Credit Suisse.

Soon, the bank was offering merger and acquisition, initial public offering and capital management services to the nascent tech stars. It had clients such as Tencent, Alibaba and Didi and boasted of advising on approximately 980 transactions worth $146bn by June 2020.

China Renaissance decided to focus on the tech and healthcare sectors instead of competing head-to-head across industries with foreign groups such as Goldman Sachs or China’s homegrown and state-backed banks such as Citic Securities.

Yet its fortunes have changed as a result of China’s regulatory crackdown on the tech sector. Revenue in the first half of last year fell by more than 40 per cent from a year earlier, pushing the group from a Rmb1.2bn ($175mn) profit for the first half of 2021 to a loss of Rmb154mn.

For China Renaissance, Bao’s absence could be devastating. The bank’s shares closed almost 30 per cent lower on Friday following news of his absence.

China Renaissance did not respond to a request for comment.

Bao is the face of the bank and the main rainmaker roping in clients and putting together complicated deals that have shaped the fortunes of many of China’s multibillion-dollar business leaders and entrepreneurs.

“No one at China Renaissance works harder than he does,” said a person close to the bank.

Important mergers in the country’s tech industry, such as between food delivery group Meituan and restaurant rating provider Dianping, as well as ride-hailing companies Didi and Kuaidi, would not have been possible without him, the person said.

China Renaissance has in recent years become more closely connected to the country’s state-owned sector, though it still makes the majority of its money through tech deals.

In 2017, China Renaissance formed a strategic partnership with ICBC International, a division of the state-owned bank ICBC. ICBC International provided the investment bank with a $200mn credit line backed by pledged China Renaissance shares, stipulating the borrowed funds be repaid soon after its Hong Kong listing.

Cong Lin, a figure instrumental in that deal, later joined China Renaissance in 2020 and was until recently its president and head of its securities unit.

His recruitment to lead the group’s securities business marked China Renaissance’s first big hire of a well-connected banker with deep ties in China’s state-owned banking system.

In September last year, a branch of China’s securities regulator demanded Cong come in for a “supervisory discussion”. Three days later, Cong quietly exited key positions in the group’s securities unit. He was detained by Chinese authorities around that time and no longer appears among the management listed on China Renaissance’s website.

Some people close to Bao believe his problems could be linked to Cong’s, with his disappearance coming on the heels of his lieutenant’s own run-in with authorities. Others speculate Chinese authorities could be chasing information related to his years of backroom dealmaking in the tech industry.

In its filing last week on Bao’s disappearance, China Renaissance sought to downplay the impact of his absence on the company, saying it was not aware of any information indicating his “unavailability is or might be related to the business and/or operations of the group which is continuing normally”.

For Shum, the situation was at a “crossroads”, and it was unclear whether the government was sending a message to the tech industry or the incident arose from “bureaucratic sensitivities” related to Cong.

“Anybody in the industry will basically stand off,” he said. “If I’m in the industry, I would leave the country.”

Additional reporting by Hudson Lockett in Hong Kong

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