UPDATE: Guo Guangchang has reappeared at a Fosun meeting - and shares in the company promptly fell 10% on the Hong Kong exchange. The company confirmed he had been 'assisting in certain investigations', but no one seems to know what those investigations were about or why there was a need for such secrecy. Better than the wall of silence, but not much.
The billionaire chairman of one of China’s largest conglomerates has disappeared. Guo Guangchang, China's 19th richest person and chairman of Fosun International hasn’t been seen since yesterday, prompting the firm to suspend trading of its shares to protect them from an almost inevitable rout.
Sadly, such drastic action wasn’t available for British travel company Thomas Cook, which entered into a major joint venture with Fosun earlier this year to gain access to the lucrative Chinese market. Shares in Thomas Cook - 5% of which are owned by Fosun - fell as much as 5% this morning to 109.9p as the news hit the European markets.
One pities the poor PA who has to write this out-of-office message: ‘I’m sorry, the chairman has disappeared so isn’t receiving emails right now. Probably. He’ll get back to you if and when he returns.’ Yet that’s effectively what companies in China are having to do (if not in those words) as an epidemic of vanishing business leaders strikes the country.
Guo, ‘the Chinese Warren Buffett’ whose company owns Club Med and a stake in Cirque du Soleil and recently received EU approval to buy a Eurozone bank, is not the only one to disappear this month - or even this week. Yim Fung, the boss of Guotai Securities, went missing three weeks ago, while two investment bankers at Citic Securities disappeared on Monday.
Inevitably, there has been speculation that the disappearances are connected to China’s high profile anti-corruption drive, which has intensified since ‘speculators’ caused the Shanghai markets to seize over the summer.
It’s important to stress that Guo’s disappearance is not necessarily corruption related – there are no confirmed reports of what happened, only rumours that he was arrested coming off an internal flight. Whatever the cause, though, it’s hard to imagine a worse response from Fosun than the public wall of silence it’s erected over the issue. The same can be said for the Chinese authorities, if indeed they are involved.
China faces a tricky dilemma. Corruption is poison for economic development. If it is indeed endemic, then it is necessary to give a clear sign that the rule of law will be applied to everyone, no matter how powerful. But business will only thrive when the people doing business feel secure. Chief executives and chairmen don’t just ‘disappear’ in Europe and America – such things belong in tin pot dictatorships, not advanced economies. Being too aggressive could have a chilling effect on the market.
Whatever the solution, transparency is essential - and currently China is about as transparent as a Beijing smog. If the country wants to foster confidence that it is a stable and secure place to do business, it needs to make it clear what’s happening and why, rather than allowing speculation to fester.
In the meantime, whatever has happened to Guo, Thomas Cook and the various western companies Fosun is involved with will just have to wait – and suffer the pain of uncertainty as they do.