Five years after vanishing, Chinese Canadian billionaire faces trial

There was no immediate indication of how long Xiao’s trial would last. Chinese courts rarely find defendants not guilty, meaning that he will almost certainly be convicted and sentenced.

Xiao’s case has been widely seen as part of the Chinese government’s continuing campaign to curb the debt-fueled excess that powered much of the country’s economic growth in recent decades. In 2020, Chinese authorities seized nine companies, worth hundreds of billions of dollars, linked to Tomorrow Group. That is the holding company behind Xiao’s sprawling business empire, which he built over two decades thanks in part to his high-level political connections.

In seizing control of two securities firms and a futures company in 2020, China’s securities regulator accused the businesses of providing misleading information about their shareholders and controller. In July 2021, regulators extended the seizure of the nine companies by another year to “further promote risk disposal work and defuse financial risks.” The Tomorrow Group conglomerate also had interests in state-dominated industries, including banking, insurance, coal, cement, property and rare-earth minerals.

Apart from the takeover announcements, Chinese authorities have said little about Xiao’s case. For years, there was no official word about his whereabouts after he was snatched in 2017 from his apartment at the Four Seasons Hotel in Hong Kong in a wheelchair by half a dozen unidentified men. It was not until 2020 that Tomorrow Group confirmed that Xiao was on the mainland and cooperating with the government’s efforts to restructure the conglomerate.

The Tomorrow Group did not respond to an emailed request for comment Monday.

The secrecy surrounding Xiao’s case may be related in part to the sensitivity of the information that he probably holds. Xiao was well positioned to know about the secret wealth of China’s top officials, having assiduously courted the political elite, including the family of the country’s current leader, Xi Jinping.

Xiao’s disappearance occurred as fears were growing about Chinese encroachment into Hong Kong in violation of the “one country, two systems” framework that was meant to guarantee a high degree of autonomy to the territory as well as freedom from mainland Chinese interference. Coming just one year after five Hong Kong booksellers vanished and then reappeared in police custody in China, his case added to anger and anxiety over Beijing’s reach in the territory, which later culminated in the wave of anti-government protests that shook the city in 2019.

Since then, Beijing has moved swiftly to assert control over the former British colony, enacting a sweeping National Security Law in 2020 that has all but stifled dissent in the city. Last week, Xi made a rare appearance in Hong Kong to mark the 25th anniversary of its handover from British rule, proclaiming in a speech that “political power must be in the hands of patriots.”

Xiao was not the only tycoon to find himself in the government’s crosshairs as part of Xi’s campaign against corruption. Others include Ye Jianming, an oil tycoon who sought connections in Washington, and Wu Xiaohui, whose insurance company bought the Waldorf Astoria Hotel in New York City. Lai Xiaomin, the former chairman of a financial firm, was executed last year.

More recently, Xi has sought to rein in the country’s powerful tech titans, including Jack Ma, the charismatic founder of the e-commerce firm Alibaba, who has largely disappeared from public view after he criticized banking regulators in late 2019.

Hailing from a poor farming village in eastern China, Xiao was a child prodigy who at 14 won admission to the prestigious Peking University in Beijing. He was president of the university’s official student union when pro-democracy protests broke out in Tiananmen Square in 1989. While many of his classmates participated in the unrest that eventually led to the government’s bloody crackdown, Xiao remained loyal to the government. His good standing later helped him secure funding from the state-backed university for some of his early business ventures.

His wealth grew rapidly, in part because of his success in cultivating relationships with government officials. Much of his business dealings were obscured through a complex web of shell or dummy corporations, which have been used in China to hide the ownership stakes of public officials. Corporate records reviewed by The New York Times in 2014 showed that he helped to facilitate deals with Xi’s older sister as well as with the son-in-law of Jia Qinglin, a former member of China’s powerful Politburo Standing Committee.

Over time, Xiao built a fortune worth as much as $5.8 billion. At one point, he owned stakes in more than 30 Chinese financial institutions, including Ping An, one of China’s largest insurers, as well as Harbin Bank, Huaxia Bank and Industrial Bank.

But eventually, Tomorrow Group became so big that it threatened the stability of China’s financial system. In 2019, Chinese authorities stepped in to take over Baoshang Bank, a lender once controlled by Tomorrow Group, after it emerged that the bank was on the brink of bankruptcy. It was the first time in two decades that the government had taken over a bank.

Before his disappearance in 2017, there were signs that Xiao had begun to sense the changing political winds. He set up residence in Canada and gained Canadian citizenship. He also obtained an Antiguan diplomatic passport. He began spending much of his time working in Hong Kong, where he lived in a serviced apartment at the Four Seasons and was attended to by a coterie of female bodyguards.

And when Xi’s sister and brother-in-law sold their stake in 2013 in a joint venture with a major Chinese bank, the buyer was a Chinese company co-founded by Xiao.