Exclusive: Billionaire Investment Banker Bao Fan May Face Bribery Charges, Sources Say

Bao Fan, a prominent Chinese financier and founder of China Renaissance Holdings Ltd., may face prosecution for alleged bribery following an investigation that has captivated China's venture capital sector. Bao was taken into custody approximately two years ago, with the case now progressing through the judicial system, having been transferred to the procuratorate for review and potential prosecution. This development is linked to an investigation into Cong Lin, a former executive at the state-owned Industrial and Commercial Bank of China Ltd. (ICBC), who was hired by Bao in 2020 with a sign-on bonus of about 20 million yuan ($2.9 million). Investigators have identified this payment as potential corruption [para. 1][para. 2].

Bao considered the sign-on bonus a normal market practice, although it was considered rare by a person from a Chinese mainland-backed institution. Sign-on bonuses are common in Hong Kong financial institutions, but the substantial sum paid to Cong has drawn scrutiny [para. 3]. Meanwhile, Bao's wife, Hui Yin Ching, who took over as chairperson after Bao stepped down in February, is seeking potential buyers for the company. Interest has been shown by several Chinese and foreign institutions. However, the sale process, which had entered the bidding stage, has been suspended due to the critical phase of Bao's case [para. 4][para. 5].

Bao had contemplated selling China Renaissance prior to his detention, with indecision about selling the entire group or just its mainland securities license. The firm's value, significantly tied to Bao’s personal connections, has diminished without him, reducing its desirability to primarily its mainland securities license [para. 6][para. 7]. The firm's application for this license under the Mainland and Hong Kong Closer Economic Partnership Arrangement has sparked controversy. It is alleged that China Renaissance exploited ambiguities in the agreement to obtain it. This license is recognized as the company's remaining valuable asset amidst its challenges [para. 7].

The securities license application is being reviewed amid the ongoing investigation into Bao. Li Geping, a former official at the China Securities Regulatory Commission, assisted in securing the license in exchange for shares in China Renaissance Securities [para. 8]. Li recently faced disciplinary action, being expelled from the Communist Party and under investigation for suspected criminal activities starting in December 2023 [para. 9].

Bao, a Shanghai native, became one of China's prominent investment bankers after establishing China Renaissance in 2005. The company went public on the Hong Kong Stock Exchange in 2018. Bao's network in China's internet sector elevated his status within venture capital circles, having facilitated significant mergers and acquisitions among major companies like Alibaba, Tencent, and JD.com [para. 10][para. 11]. His case parallels the investigation of Cong, who held leadership roles at ICBC and China Renaissance. Despite extensive financial experience, Cong fell under scrutiny in 2022, although specific details about the probe remain undisclosed [para. 12].

News of Bao's disappearance in February 2023 caused upheaval in the venture capital world, leading to a significant drop in China Renaissance's share prices. Trading was suspended in April 2023 and, upon resumption in September, shares continued to decline, currently hovering significantly below their initial IPO price and prior peaks [para. 13].