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Anbang is big test of China's non-market market

Anbang is big test of China's non-market market

The Chinese government on Friday seized control of Anbang Insurance Group, one of the country's most politically connected companies and a firm that recently held talks with a company owned by the family of Donald Trump's son-in-law Jared Kushner.

The CIRC also said Anbang's chairman and key shareholder, Wu Xiaohui, has been prosecuted for economic crimes.

China Insurance Regulatory Commission (CIRC) claimed that the move is taken to maintain normal operation at the company and protect consumers' rights.

"We can see that the authorities intend to strike a balance between de-risking and financial stability", said Mr Zhou Hao, an economist at Commerzbank in Singapore, noting that personnel changes among the top financial regulators indicate that the targeting of company debt will intensify over the coming year. It also lessens uncertainty hanging over listed Chinese companies that Anbang has large stakes in, including China Minsheng Banking Corp.

"Illegal operations at Anbang may have seriously endangered the company's solvency, prompting the government to take control", the statement read. "There are no plans to sell shares in your company", the companies quoted Anbang as saying in similar filings to the Shanghai and Shenzhen stock exchanges. "The government doesn't want to run the company directly in the long term, but it could break Anbang up and arrange for pieces of it to be acquired by more established firms".

Anbang's deal making in recent years was helped in part by rising sales of investment-type products, many of which allowed holders to redeem in as little as two years with little or no penalties.

Anbang is of particular interest because its chairman, Wu Xiaohui, married a granddaughter of the former Chinese leader Deng Xiaoping.

"This appears to be an unprecedented takeover - a Chinese-style hostile takeover", Scott Kennedy, an expert on China at the Center for Strategic and International Studies in Washington, told Reuters.

Anbang, which started out as a vehicle insurance firm with state-owned backers, is recognised as one of China's richest and most opaque conglomerates.

"This says to the market "tread carefully" - if they hadn't already got that message".

The takeover will not affect Anbang's debt obligations, the statement said. Past year it ended talks to invest $400m in Kushner Companies' troubled 666 Fifth Avenue tower block in a deal that had raised ethics concerns with USA lawmakers.

The case adds to an avalanche of scandals in China's insurance industry.

Anbang distributes insurance through multiple channels, with the bulk going through banks. The Anbang announcement comes just days before the ruling party was expected to meet behind closed doors to approve personnel appointments and government restructuring decisions, Bloomberg reported Thursday.

Those holdings include the iconic Waldorf Astoria hotel in NY, a $5 billion property portfolio in Japan and Strategic Hotels & Resorts, a USA hotel chain acquired for $6.5 billion.

New York's landmark Waldorf Astoria Hotel, pictured on June 27, 2016.

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