The Back Story

The current talks are the latest development in China Renaissance’s more than year-long saga with Chinese authorities.

In September 2022, the group’s president, Cong Lin, was unexpectedly detained in relation to a corruption probe. Within months, Bao was detained as well.

At the time, China Renaissance said in a securities filing that it was “unable to contact” its chief executive. In a later statement, the firm disclosed that Bao was cooperating with an investigation being carried out by Chinese authorities. Those close to Bao said his own detention was likely linked to that of Lin and expressed hope that Bao would quickly return to public life.

That never happened. Bao’s whereabouts and legal standing remain unclear, as do Cong Lin’s.

Last week, China Renaissance provided an update with the announcement that Bao had resigned as chairman and CEO, citing “health reasons and to spend more time on his family affairs.” Co-founder Xie Yi Jing will take his place.

The firm has been stuck in limbo through Bao’s absence, unable to make formal decisions on critical matters such as a potential sale of the company. The new succession plan may now allow those talks to progress.

Bao’s Background

Prior to his disappearance, Bao was considered one of the most high-profile financiers in mainland China.

After early-career stints with Morgan Stanley and Credit Suisse, Bao founded China Renaissance in 2005. He gradually grew the business into one of the country’s leading boutique advisors, often beating out traditional Wall Street banks for sought-after mandates.

Bao was particularly well-connected within Chinese tech circles. “First-generation tech entrepreneurs,” he told the FT in 2018, had something extra that he was drawn to. “I thought, these guys could be the future of China.”

He built a reputation for exceptional levels of trust and, at times, simultaneously advised both sides of deals, including the merger of Meituan and Dianping—a tie-up whose consummation was reached after Bao locked both sides in a Beijing hotel room for a day. The agreement ultimately led to the combined business’ $53 billion IPO in 2018.

Other notable deals include the IPOs of JD.com and Kuashou, and secondary listings for Didi and Baidu. Bao was also the banker of choice for tech giants Alibaba and Tencent.

The Future of China Renaissance

Per Bloomberg, nearly a third of China Renaissance’s Hong Kong staff have either resigned or been laid off. Including staffers in Mainland China, more than 100 employees have departed over the past year.

The firm’s offerings include strategic advisory, equity research, sales & trading, private equity, and wealth management. Some divisions have been particularly hard hit: more than half of the advisory group has departed, leaving behind a team of less than 10 people.

New investments have also ground to a halt within the private equity business, which has been left unable to secure investment committee approval in the absence of committee chairman Bao.

A relatively new addition to China Renaissance, the principal investing arm grew to manage more than $8.8 billion by the end of 2020 and contributed nearly half the firm’s revenue. Through various dollar and yen-denominated funds, the firm’s primary strategy centered around a relatively small number of outsize equity investments into Chinese growth-stage startups, to which it often also provided operational and strategic support.

Heading Toward a Deal

The company’s stock has been suspended since Bao’s disappearance last year, with China Renaissance most recently trading at a market value of around $530 million (down from its 2021 peak of nearly $2.2 billion).

It’s unclear how much value remains, though the firm’s trading and securities licenses are an attractive asset. Bloomberg cited unnamed sources close to the matter who said the firm had received interest from “a Hong Kong-based financial group with a Middle East backer,” along with approaches from a handful of smaller Chinese brokerages. Discussions remain early, and no diligence has taken place.

Even beyond his personal legal uncertainty, China Renaissance’s current situation is likely to be a profoundly disappointing outcome for Bao. Speaking with the FT in 2018, he shared his vision for the firm:

"My whole dream is to build a world-class financial institution, because China should have one, given the importance of its economy. There’s a long way to go. The measure of that is when people think of a Chinese name along with the likes of Goldman Sachs, Blackstone, BlackRock . . . if a Chinese firm can have a seat at the table of high finance."