There’s little transparency in large Chinese conglomerates. They’re often layers of companies with unclear ownership and difficult to verify financials. Their leadership is often politically well-connected.
At the same time regulation of these entities is unclear as well. When the Chinese government decides to take an interest in the operation and systemic risks posed by these companies which rapidly expand through acquisitions both domestically and around the world, it’s not always clear whether it’s because of regulatory violations (or explicit as to which ones) or a signal of internal power struggles inside the government — whose faction is in and whose is out?
HNA Group is struggling. Their travel assets include — among others:
- At least a portion of Chinese airlines such as Beijing Capital Airlines; Fuzhou Airlines; Hainan Airlines; HK Express; Hong Kong Airlines; Lucky Air; Tianjin Airlines; and Urumqi Air
- Stakes in international airlines such as Azul, Comair, TAP Air Portugal, and a pending acquisition of an equity stake in Virgin Australia
- Interests in NH Hotels, Red Lion Hotels, Carlson Hotels, Swissport, ICE – International Currency Exchange, and Rio de Janeiro–Galeão International Airport
- Airline caterers Gate Group and Servair
- They’re the largest investor in Hilton
Mainland China cut off access to cheap loans last year as part of a crackdown on ‘irrational outbound investment’ which is also related to a crackdown on corruption and a desire to stem capital flight. HNA has been selling some assets and borrowing from private equity to meet its obligations.
Perhaps in even greater trouble is Anbang, the insurance conglomerate which lost out on a bid to buy Starwood out from under Marriott. (They then considered buying IHG.)
Waldorf=Astoria New York, Owned by Anbang. Credit: Hilton
This despite Anbang’s Chairman being married to Deng Xiaoping’s granddaughter, and Anbang director Chen Xiaolu’s father being a military commander who served Mao Zedong. Interestingly Levin Zhu, son of a former Chinese Premier, has been listed as an Anbang director though has publicly said he never agreed to be on the board.
Wu Xiaohui, former chairman and general manager of Anbang Insurance Group Co., Ltd. (hereinafter referred to as Anbang Group), was prosecuted according to law on suspicion of economic crime. In view of the fact that Anbang Group acts in violation of laws and regulations and may seriously endanger the solvency of the Company, in order to maintain the normal operation of Anbang Group and protect the legitimate rights and interests of consumers, according to the relevant provisions of the Insurance Law of the People’s Republic of China, the CIRC decided in 2018 February 23 on the implementation of the Anbang Group take over the deadline of one year.
This is being done to protect “[t]he legitimate rights and interests of consumers and stakeholders” The company’s debts are being honored, operations continue, and the company will remain privately owned though there will be an “equity restructuring.”