Chinese Banking Regulator Clamps Down on Dalian Wanda, HNA, Fosun and Anbang

On June 22, the China Banking Regulatory Commission (CBRC) told domestic banks to assess their exposure to “systemic risks” associated with “some large enterprises.”  The order was communicated in an email, which specifically mentioned Dalian Wanda, Fosun International, HNA Group, Anbang Group and Zhejiang Rossoneri Investment as the targeted entities.

All five entities are among China’s most prominent overseas investors.  In the case of Dalian Wanda, the company has been a prominent player in investments designed to complement Beijing’s priority objectives, including with regard to “One Belt, One Road,” and, in particularly, recently referenced as a possible successor entity to take over the strategically significant Bandar Malaysia project that has already strained the bilateral China-Malaysia relationship in recent weeks.

It also happens that most of these companies have supported President Xi Jinping’s personal goal of China becoming a world soccer power.  In the case of Anbang, the company has endured a turbulent few weeks, with the opaque company’s CEO, Wu Xiaohui, detained for questioning by the authorities.

Overall, the CBRC order seems designed to curb financial practices that risk exacerbating credit risks in the domestic banking system.  In so doing, however, authorities appear to be targeting some of the country’s most active and well-connected companies, including those that have seemingly been close to the personal agendas of President Xi.  Some of these companies, however, may have overstepped their bounds and, in the process, engaged in what is now deemed unwanted overseas foreign direct investment (likely pertaining to the “trophy” investments that have made up part of their recent activity).

In December 2016, the National Development and Reform Commission, Ministry of Commerce, People’s Bank of China and State Administration of Foreign Exchange announced that they were monitoring “irrational” overseas investment from companies making non-core business investments in the real estate, hotels, film, entertainment and sports industries – broadly speaking the industries targeted by the five companies included by today’s CBRC order.  The move against “irrational” FDI ratcheted up in March 2017, when People’s Bank of China governor Zhou Xiaochuan complained that investment in these sectors “doesn’t bring much benefit to China and has caused some complaints overseas.”