Shares of China Renaissance Holdings Ltd. plummeted by as much as 73% upon resuming trading in Hong Kong on Monday, following a 17-month suspension triggered by the detention of its former Chairman, Bao Fan. As of 11:00 a.m., the company’s shares were down 63%, resulting in a loss of approximately HK$2.6 billion ($334 million) in market value.
The trading halt, which began after Bao’s detention amid a broader anti-corruption crackdown, has been a significant strain on the company’s operations and financial health. Bao was detained in early 2023 under an unspecified investigation as part of a larger campaign targeting financial sector corruption. His absence severely impacted the company, leading to a substantial revenue decline and staff turnover.
China Renaissance reported a loss of nearly 74 million yuan ($10.4 million) for the first half of the year, with revenue dropping 39% to 329 million yuan. For 2023, the company recorded a loss of 471.9 million yuan, marking its second consecutive year in the red. Employee numbers fell by 31% from the end of 2022 to 521 by June.
To address internal issues and bolster investor confidence, the company enlisted AOGB CPA Ltd. to review its records. The assessment found no evidence of Bao approving his own expenses but did reveal a senior staff member’s employment related to a loan deal, which some media speculated might be linked to Bao’s investigation.
The situation highlights the risks faced by businesses in China amid increased regulatory scrutiny and anti-corruption measures under President Xi Jinping. In 2023 alone, over a hundred financial executives and officials were implicated in the crackdown. This tightening of regulations has also led to pay reductions within the sector, aligning with Xi’s push for “common prosperity.”
Four of China Renaissance’s executive directors have committed to not selling their combined 2.2% stake for six months or until March 7 of the following year. Bao’s wife, Hui Yin Ching, has been appointed as a non-executive director and holds 48.71% of the company’s shares.
Bao Fan, a former banker at Morgan Stanley and Credit Suisse who founded China Renaissance in 2005, has been instrumental in significant deals in China’s tech sector, including the formation of Didi Global Inc. and Meituan. Despite official statements from Beijing supporting private businesses, the tightening of regulatory scrutiny has unsettled China’s business elite.
In February, there was reported interest from a Hong Kong-based financial group with Middle Eastern backing and a couple of small Chinese brokerages in acquiring parts of China Renaissance, including its trading licenses.
