Five years after being nabbed in a Hong Kong hotel, Chinese-Canadian financier Xiao Jianhua has been officially sentenced to 13 years in prison, and ordered to pay a $8.1 billion fine for his role in the financial conglomerate: Tomorrow Holdings.
The company, which had massive stakes in banks, insurers and property developers, has been accused of being embroiled in a series of illegal activities, including “illegally obtaining public deposits, breach of trust, bribery, and the illegal use of funds,” according to a ruling issued by the Shanghai First Intermediate People’s Court on Friday Aug. 19.
The court also personally fined Xiao an additional 6.5 million yuan ($950,000) for the crimes.
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According to the ruling, Xiao had used his financial network to offer pooled funds and sell insurance and other faulty investment products — scamming over 311.6 billion yuan (over $45 billion) from his investors.
“The criminal acts of Tomorrow Holdings and Xiao Jianhua seriously damaged the financial management order, seriously endangered the country’s financial security, seriously infringed on the integrity of the state staff, and should be severely punished according to law,” the court said.
The Shanghai court added that from 2001 to 2021, Xiao and Tomorrow Holdings offered “shares, real estate, cash and other assets to government officials totaling more than 680 million yuan,” in efforts of evading financial supervision and continuing to seek illegitimate interests.
Anti-corruption probes intensify
Xiao’s trial marked his first public appearance since 2017 when he was arrested from a Four Seasons hotel in Hong Kong. Authorities said they had been working for several years to locate Xiao after he fled the mainland with an estimated $6 billion with him.
The sentence also comes at a time when Chinese leader Xi Jinping’s administration has placed a greater emphasis on “financial risk control” in an economy that has been riddled with challenges stemming from unrelenting “zero-COVID” lockdowns, and financial turmoil in its real estate, industrial, and tech sectors.
China’s investigations into Xiao and his financial network — which included more than 40 financial institutions since early 2000 — is part of a broader effort to root out illicit activities and ensure financial stability as confidence in the $59 trillion financial system begins to wane, Bloomberg reported.
Collapsing house of cards
In overseas Chinese media circles, Xiao Jianghua is widely suspected of being a “white glove” — or bagman — for powerful figures in the Chinese Communist Party (CCP), specifically those who rose to influence in the years prior to Xi Jinping taking office.
SinoInsider, a New York-based China risk consultancy, writes that Xiao is connected to the regime faction centered around former Party boss Jiang Zemin. In particular, the analysts believe Xiao to have served Jiang’s right-hand man, former Chinese vice president Zeng Qinghong.
The Jiang faction has been the main target of Xi’s anti-corruption campaign, with hundreds of senior officials purged having some association with the former CCP leader. Jiang Zemin was in power from 1989 to the early 2000s, and was the de facto most powerful force in Chinese politics until Xi came to power in 2012.
Control of “nine financial firms” linked to Xiao since mid-2020 were also seized. Now-failed Baoshang Bank Co. — a bank that reportedly had links to the financier, and may have played a larger role in the schemes — is also being investigated after authorities assumed control of the bank earlier this year, citing concerns over its “serious credit risks.”
The court added that since 2004, Xiao and Tomorrow Holdings controlled multiple financial institutions and internet financial platforms, including Baoshang Bank — via “multiple layers of indirect shareholders and anonymous ownership.”
Furthermore, Beijing revealed that Xiao would not receive consular services from Canada despite his dual nationality. “After checking with relevant authorities, Xiao Jianhua is charged for past criminal acts by relevant organs in China,” Ministry of Foreign Affairs Spokesman Wang Wenbin said on Aug. 19 during a press briefing.
“According to China’s law, we don’t recognize dual nationality. China tries its citizens for criminal acts according to law, and [Xiao] doesn’t have the right to consular protection of other countries.”
The Shanghai court did say, however, that Xiao had received a “more lenient sentence” after he pled guilty and cooperated in the “recovery of some stolen goods.”