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Chinese regulator takes over Anbang: Massive insurer made example of in wider effort to keep money at home
President Xi Jinping has plenty of motivation to take action on Anbang Insurance Group. Not only had the company come to symbolize debt-ridden conglomerates through a series of lavish overseas purchases, but the speed at which the company had expanded raised concerns as to the wider impact failure could have. So far it would appear policy revisions have been successful in halting the flow of money out of the country. The messages many businesses in China will have deduced very swiftly is the President, now rated among the most powerful to ever lead the country in the Communist era, is operating from a position of strength and is not to be tested. Recent events very much point towards Anbang being made an example of to provoke other companies into action suiting government needs.
The decision by the China Insurance Regulatory Commission (CIRC) to take control of Anbang, following charges of fraud and embezzlement for the former chairman and general manager, was actioned due to concerns the company had broken regulations and harmed the capacity to pay claims. A very public takeover was about the wider potential impact. What the future holds for Anbang remains unknown, but the most likely outcome is the insertion of new handpicked management armed with a clear message as to how things are to be done.
A key motivating factor in the takeover of Anbang was a clear desire on behalf of the government to insulate the economy from the adverse consequences of risky investments. The message to other companies that have sent large amounts of money overseas is clear: bring money home and reduce risk. Between them, Wanda, HNA and Anbang spent tens of billions of dollars around the world during 2016, but during 2017 spending plummeted in line with overseas spending by the whole economy. The billionaire chairman of Wanda, Wang Jianjin, has been selling numerous properties outside of China and seeking to heap attention on domestic investments. These and other companies should take note of the tone Beijing has set by taking over Anbang in such a public manor.