China takes over Anbang Insurance, prosecutes ex-chairman

Anbang has been involved in a number of high-profile deals, including the $1.95 billion purchase of New York's Waldorf Astoria in 2014 (AFP Photo/SPENCER PLATT) (GETTY IMAGES NORTH AMERICA/AFP)

Beijing (AFP) - China took over Anbang Insurance Group for a year on Friday and said its former chairman faces prosecution for "economic crimes" as the government stepped up its battle against corruption and excessive corporate debt.

The highly unusual measure appeared to signal concern about Beijing-based Anbang's stability and comes as the government looks to address a debt crisis that has fuelled warnings of potential financial contagion in the world's second-largest economy.

The China Insurance Regulatory Commission said Anbang, which has made a series of high-profile foreign acquisitions in recent years, had violated insurance regulations that may "severely" impair its ability to pay back debts.

The announcement clarified the fate of Anbang's chairman Wu Xiaohui, who was reported by Chinese media to have been detained last June.

The insurance regulator confirmed he was being "prosecuted for economic crimes."

A separate statement by government prosecutors in Shanghai said Wu was suspected of fraudulent fundraising and "infringement of duties."

The government, worried about capital outflows and reckless accumulation of debt, has over the past year implemented a host of measures to stem the flow of billions of dollars into what it has called "irrational" investments overseas.

In particular, it has striven to bring to heel companies such as Anbang, Wanda Group, and Fosun, which have been responsible for some of the highest-profile foreign acquisitions.

Anbang, established just 13 years ago, grew from a domestic seller of property insurance into a financial services powerhouse, hitting headlines in 2014 when it bought the landmark Waldorf Astoria in New York for a record $1.95 billion.

Anbang made a $14 billion bid for Starwood Hotels & Resorts Worldwide, but pulled out of a bidding war with Marriott.

It was also in aborted talks with Donald Trump's son-in-law and key adviser Jared Kushner to redevelop a Manhattan office tower, Bloomberg News reported last year.

- 'Stable overall' -

The insurance commission said a government task force deployed at Anbang will dispose of certain unspecified assets held by the company and revamp its ownership structure.

Anbang will remain a private company but the takeover will be extended for a maximum of one more year if the overhaul does not proceed as planned.

The regulator added that Anbang's current situation was "stable overall".

Bloomberg News reported last year that Beijing had ordered Anbang to sell all of its overseas assets, though the company denied that at the time.

Anbang could not immediately be reached for comment Friday.

The firm's website claims it has nearly 2 trillion yuan ($315 billion) in assets.

"Regulators want to solve Anbang's problems without triggering systemic risks," Zhou Hao, an economist at Commerzbank AG in Singapore, told Bloomberg.

"After weighing pros and cons, it's the best way."

After encouraging companies to seek their fortune in foreign markets, China has abruptly changed course since 2016.

In August the government said overseas investments in sports clubs, real estate, entertainment and other sectors would be restricted.

And in December it released a code of conduct for private companies investing abroad, saying they must operate within their financial means and core competencies and avoid high-leverage financing, among other things.

Wanda Group, in particular, has been placed in the government's crosshairs.

The commercial property company has diversified rapidly into entertainment, theme parks, sports and other sectors, but in recent months has sold off billions of dollars in assets after reports it was under official pressure.

Authorities appear to have grown concerned about the influence of such conglomerates, their mazes of subsidiaries and debt, and their capacity to trip up the Chinese economy.