In May 2021, a group of Chinese banks agreed to lend investment bank China Renaissance $300 million, with one condition: if Bao Fan, the company’s well-known founder, were no longer its largest shareholder or CEO, they could repay early demand.
Almost two years later, lawyers could soon be poring over that clause. Bao’s disappearance last week, announced in a company filing, has thrown into turmoil the country’s massive tech industry, which the dealmaker helped build.
The fate of Bao and his company, which has been at the center of Chinese tech funding for years, is a crucial test of Beijing’s attitude toward the industry. A two-year government crackdown has already sidelined Alibaba CEO Jack Ma, decimated the huge for-profit education industry and hit investments worldwide.
“The question is – will it spread?” said Desmond Shum, author of Red Roulette, a treatise on working in Chinese finance. “This is a very, very scary moment for the industry.”
When China Renaissance was listed in Hong Kong in 2018, it was the culmination of years of success in the rise of the tech industry in mainland China.
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 providing software solutions to Asian companies that was listed on the Nasdaq stock exchange in 2000.
In 2005, he launched China Renaissance to capitalize on the fast-growing technology industry. His success stemmed in part from personal relationships he built with many of China’s future tech billionaires during his early years at Morgan Stanley and Credit Suisse.
The bank was soon offering M&A, IPO, and capital management services to the rising tech stars. It has had clients including Tencent, Alibaba and Didi and boasted of advising on around 980 transactions worth $146 billion as of June 2020.
China Renaissance decided to focus on the technology and healthcare sectors, rather than competing across industries with foreign conglomerates like Goldman Sachs or China’s domestic and state-backed banks like Citic Securities.
But its fate has changed in the wake of China’s official crackdown on the tech sector. Revenue in the first half of last year fell more than 40 percent year-on-year, taking the group from a profit of RMB1.2 billion (US$175 million) for the first half of 2021 to a loss of 154 million RMB drove.
For China Renaissance, Bao’s absence could be devastating. Shares of the bank closed nearly 30 percent lower on Friday after 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, attracting customers and crafting the intricate deals that have shaped the fortunes of many of China’s multibillion-dollar CEOs and entrepreneurs.
“Nobody at China Renaissance works harder than he does,” said a person close to the bank.
Major mergers in the country’s tech industry, such as between food supplier Meituan and restaurant ratings provider Dianping, and ride-hailing companies Didi and Kuaidi, would not have been possible without him, the person said.
China Renaissance has become more closely associated with the country’s government sector in recent years, though it still makes most of its money from tech deals.
In 2017, China Renaissance entered into a strategic partnership with ICBC International, a division of state-owned bank ICBC. ICBC International provided the bank with a $200 million line of credit secured by pledged China Renaissance shares, and demanded that the borrowed funds be repaid soon after their Hong Kong listing.
Cong Lin, a figure instrumental in this deal, joined China Renaissance later in 2020 and until recently served as President and Head of Securities.
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His appointment to lead the group’s securities business marked China Renaissance’s first major hire of a well-connected banker with deep connections in China’s state-owned banking system.
In September last year, a branch of China’s Securities and Exchange Commission demanded that Cong attend a “supervisory meeting.” Three days later, Cong quietly parted ways with key positions in the group’s securities department. He was arrested by Chinese authorities around this time and no longer appears under the management listed on China Renaissance’s website.
Some people close to Bao believe that his troubles may be linked to Cong’s since his disappearance follows his first lieutenant’s clash with authorities. Others speculate that Chinese authorities may be pursuing information related to his years of backroom dealings in the tech industry.
In its filing last week on Bao’s disappearance, China Renaissance tried to downplay the impact of his absence on the company, saying it had no information to suggest his “unavailability was related to the group’s business and/or operations.” related or could stand which continues 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 was due to “bureaucratic sensitivities” surrounding Cong.
“Everyone in the industry will fundamentally differentiate themselves,” he said. “If I were in the industry, I would leave the country.”
Additional reporting by Hudson Lockett in Hong Kong