China hands rare death sentence to former asset-management head

Lai Xiaomin was found guilty of bribery, embezzlement and bigamy; his punishment comes as crackdown on the financial sector intensifies.

Lai Xiaomin pleads guilty in August in a Tianjin court. Picture: AFP

China sentenced the former chairman of one of the country’s biggest state-owned asset-management companies to death on bribery and corruption charges, a striking signal in Beijing’s campaign to rein in financial risk-taking.

Lai Xiaomin, chairman of China Huarong Asset Management from 2012 to 2018 when he was fired for graft, was accused by a local Chinese court in the northern city of Tianjin of taking bribes totalling a record high of more than 1.79 billion yuan, equivalent to $US277 million.

Mr Lai’s crimes were particularly serious, the court said on Tuesday, given the scale of his bribery, which included several transactions in the hundreds of millions of yuan each as well as the act of proactively soliciting bribes. The court characterised him as being “lawless and extremely greedy,” with his actions “endangering the nation’s financial security and financial stability.” Mr Lai couldn’t be reached for comment.

By Chinese law, officials can face the death penalty, either by firing squad or lethal injection, for bribery totalling as little as three million yuan. Still, Chinese courts seldom resort to the death penalty for corruption, and accounts of financial bribery in China frequently total in the tens of millions of yuan.

The former head of regional Hengfeng Bank in eastern Shandong province was sentenced to death last year for accumulating illegal gains amounting to more than 10 billion yuan, but the sentence came with a two-year reprieve, meaning it will likely be converted to life imprisonment.

Mr Lai was considered especially corrupt, according to Chinese bankers and industry analysts, given that he was a senior party cadre committing crimes while working for the state-owned company as well as the nation’s banking regulator.

His harsh sentence comes as Beijing seeks to reinvigorate its tough stance on the financial sector after a year focused mostly on boosting the domestic economy amid the COVID-19 pandemic’s impact on global growth.

Analysts expect Chinese authorities to centre their efforts on regulating the financial and technology sectors this year. In recent months, Chinese regulators have moved to rein in billionaire Jack Ma and his Ant Group, ordering the financial-technology giant to shift focus from lending back to its mainstay payments business.

A broader, longer-term clampdown on corruption began under Chinese leader Xi Jinping in 2012. It has targeted a number of high-profile financial executives, from the head of insurer Anbang Insurance Group, who is serving an 18-year prison term, to financier Xiao Jianhua, who hasn’t been heard of since speculation of his abduction by Chinese law-enforcement agents in Hong Kong in 2017.

In the few cases involving a death sentence in recent years, Zhang Zhongsheng, the former vice mayor of a coalmining town in northern Shanxi province, was executed in 2018 after being convicted of accepting more than 1 billion yuan in bribes.

Zhao Liping, a former police chief in Inner Mongolia, was executed in 2017 for murdering a woman and accepting bribes of more than two million yuan.

Neither of the men was as highly ranked as Mr. Lai at the time of the former chairman’s arrest.

The Tianjin court didn’t say whether Mr Lai would appeal. A death sentence in China requires final approval from the country’s supreme court.

China Huarong Asset Management is one of four “bad banks” that Beijing established in the late 1990s to bail out China’s largest state-owned lenders. Banks were saddled with nonperforming loans to state-owned businesses, the scale of which threatened to clog the flow of credit in the economy. Beijing’s idea — which initially proved successful — was that professional disposal of the debt could turn into a profitable business.

Managing nonperforming loans became tougher in the past decade, however, as China’s economy slowed, leaving banks with even more bad debt, including that of the private sector.

Under Mr Lai, Huarong was known in the financial industry for aggressively expanding its loans business and raising debt overseas.

The former chairman was unusually open to foreign reporters at China’s annual legislative meetings. In 2016, he told The Wall Street Journal that authorities should inject fresh funds into asset managers like Huarong to free up liquidity.

Beijing’s campaign to rein in debt and financial risk gathered steam with the appointment of a new banking regulator in 2017 as well as the appointment the following year of Liu He, a trusted ally of Mr Xi, as vice-premier overseeing the economy.

When Mr Lai was detained and expelled from the party in October 2018, analysts viewed it as a signal from Beijing that Chinese asset managers had overreached.

Guo Shuqing, the then-head of China’s Banking and Insurance Regulatory Commission, said the industry should learn from Mr. Lai’s case.

In addition to his bribery, the court ruled that Mr Lai was married to more than one woman. In collusion with others, Mr Lai also took advantage of his positions to illegally seize public funds of more than 25.1 million yuan between the end of 2009 and January 2018, it added.

Although Mr Lai provided information about major crimes of his subordinates that proved to be true, the court said it wasn’t enough to grant him leniency. It noted that most of Mr Lai’s crimes were committed after the Chinese Communist Party’s 18th Party Congress in 2012. Mr. Xi launched his far-reaching antigraft campaign immediately following that meeting, investigating tens of thousands of party members in the following years.

Mr Lai pleaded guilty in August to charges of taking bribes, embezzlement and bigamy. A report by China’s state-run Xinhua News Agency at the time said he expressed remorse in his final statement.

The Wall Street Journal