Lai Xiaomin, the former president of China Huarong, one of the nation’s largest asset management companies, was charged with embezzling nearly 1.8 billion yuan. Photo: Handout

The death sentence given to financier Lai Xiaomin has sent shockwaves through China as Beijing signals a tough new lethal clampdown on top-level white-collar crime.

There was shock at the record amount of money a Communist Party cadre could siphon from public funds and surprise at the severity of the sentence handed down by the party’s disciplinary watchdog and courts, which are usually perceived as being lenient toward corrupt senior officials.

Lai, a former president of China Huarong Asset Management Co, Ltd, the largest such company of its kind in China, was found to have embezzled almost 1.8 billion yuan (US$260 million) during his 10-year stint at the company, which mainly deals with distressed debt and nonperforming loans from state-owned lenders.

Lai, a ministerial-level cadre, was labeled the “most corrupted official” and the “biggest tiger ever netted” in Chinese President Xi Jinping’s campaign to cleanse the party of corruption. Tens of thousands of senior officials and executives at big state-owned enterprises have fallen on corruption charges in recent years.

Xi’s critics say the anti-graft drive has sometimes served to purge political foes and wear down resistance to his rule. Yet it appears Lai could hardly profess his innocence after he was indicted by Tianjin’s Intermediate Procuratorate last September.

Investigators dispatched by the Central Commission for Discipline Inspection, the party’s graft-buster vested with wide-ranging powers, reputedly found heaps of cash and other valuables totaling nearly 1.8 billion yuan at his palatial villas and swish condos across Beijing, Shanghai as well as the southern tropical resort city of Sanya on Hainan island.

Lai was said to have misappropriated more public funds than all the officials that ran afoul of the party and state watchdogs since Communist China was founded in 1949.

Lai’s prosecutors revealed that when he was stripped of his post and detained to assist in the investigation in 2018, he was in the middle of transferring another 100 million yuan to private accounts said to be opened with Swiss banks as well as brokers in Hong Kong and Singapore.

Huarong is listed on the Hong Kong bourse and manages about 1 trillion yuan worth of assets. 

Some of those who bribed Lai were the chiefs of small commercial banks who sought to curry favor with him so their bad loans could be sold to Huarong at a high price. Normally, non-performing loans are sold to asset management firms at a steep discount of their face value.

Lai’s case is heard in a court in Tianjin. As a ministerial-level senior executive of a state-owned company, Lai had been jailed in the maximum-security Qincheng Prison near Beijing. Photo: Xinhua

Before Lai, the corruption record was held by Zhang Zhongsheng, the deputy mayor of a poverty-stricken prefecture-level city in the central province of Shanxi. He amassed more than 1 billion yuan while the residents in his city were eking out a living with a meager per capita income of roughly 1,000 yuan a month.

Zhang was swiftly tried and executed. Until a 2015 reform, embezzlement involving large sums of money was categorized as a capital offense under China’s criminal law.

There had been a widespread clamor for harsh punishment against Lai among indignant Chinese netizens, some of whom thought the party could commute his sentence and eventually let him get away with just a rap on the knuckles.

This is due to the precedent set by another high-profile graft case involving Zhao Zhengyong, the former party chief of the populous central province of Shaanxi, who lined his pockets with more than 700 million yuan taken from government coffers. 

Zhao was given a life sentence and is now serving his term at the maximum-security Qincheng Prison in suburban Beijing, typically reserved for senior officials and state leaders who fall from grace.

It is rumored that Zhao is held in a comfortable big cell at Qincheng that is more like a condo and not shared with other inmates. 

The National People’s Congress, China’s parliament, passed a motion in 2015 to amend the nation’s penal code to exclude white-collar offenses such as embezzlement and financial fraud from crimes punishable by death. 

But in a contradictory move, the Supreme People’s Court and Procuratorate also issued guidelines on the sentencing of senior officials and SOE executives charged for graft, recommending capital sentences in grave cases.

Until Lai’s sentencing, no death penalties had been given to corrupt officials since the 18th Party Congress in 2012, the year Xi came into power. 

It is believed that this time the huge media commotion triggered by Lai’s case may have forced the party to give judges the edict to fit the punishment to his crime.

Otherwise, the perception among the masses would run even deeper that corrupt ministerial-level officials were always punished lightly and released early, despite Xi’s mantra about zero-tolerance and maximum deterrence. 

State broadcaster China Central Television revealed in a feature program about the case aired in August 2020 that Lai stashed cash and valuables away in a “vault house” in an upmarket housing estate in downtown Beijing, not far from Zhongnanhai, the compound housing the party’s top leadership.

Lai called the place where he hoarded the trove of his ill-gotten gains and gifts like gold, antiques, prepaid shopping cards and coupons and sports cars “the supermarket.” 

Before Lai’s downfall, Huarong was one of China’s most lucrative financial conglomerates, whose net profit reached 20 billion yuan in 2017. Photo: Handout

Hu Xijin, chief editor of the nationalistic tabloid Global Times, asked on his Weibo account how the party’s supposedly robust oversight and disciplining of officials had all failed to deter Lai before he embezzled a record-setting amount of what he termed “filthy lucre.”

Observers now wonder if anyone down the line from Lai at Huarong or among its clients will be implicated next.

Lai’s years at Huarong saw the appointment and promotion of several former subordinates to senior positions within the company, as well as at market watchdogs like the China Banking and Insurance Regulatory Commission and the Chinese Ministry of Finance, the controlling shareholder of Huarong.

Heads could also possibly roll at the state-owned Assets Supervision and Administration Commission, which oversees all SOEs including Huarong.