China continues to clean up its big bosses: the two leaders of the HNA group were arrested on Friday, September 25. Chairman Chen Feng and Group General Manager Tan Xiangdong Detained “In accordance with the law for alleged crimes”, the company said in a statement released the evening, without further details. The group added that its activity remained “Stable” and had “Not affected” by these arrests.
The HNA group, formed around the airline company Hainan Airlines at the end of the 1990s, became known from 2015 by increasing investments in companies around the world, becoming in particular the largest shareholder of Deutsche Bank or Hilton hotels, before being called to order by the Chinese authorities, worried about its enormous debt.
Completed by the Covid-19 epidemic, which swept through the tourism sector, its core business, HNA has been officially bankrupt since January 2021. The company is now controlled by a working group headed by an administrator appointed by Hainan Province, Gu Gang. Its role: to organize the dismantling of the group. At the beginning of February, Hainan Airlines and two other subsidiaries of HNA revealed that 10 billion dollars (8.5 billion euros) of funds had been embezzled by the shareholders. The situation of HNA, a group with a devouring ambition, drowned by its debts, is reminiscent of the crisis currently facing the real estate giant Evergrande, which has also sought to diversify and is today on one’s last legs.
“Gray rhinoceros”
Founded in the 1990s, Hainan Airlines quickly grew to become China’s largest private airline, transporting the first members of the Chinese middle class to the tropical island of Hainan, and soon to other international destinations. Thanks to investors like the American George Soros, the company began a long process of diversification at the turn of the 2000s.
In 2010, Chen Feng, co-founder of the company, announced the goal of making HNA one of the world’s top 100 companies. Taking advantage of particularly low interest rates in China, and wanting to compensate for a sharp fall in the Chinese currency in 2015, the company embarked on a series of resounding acquisitions, in sectors as varied as hospitality, logistics, finance, oil storage or cloud computing (“Cloud computing”). HNA was not the only one in this frenzy of acquisitions: the real estate developer Wanda, the insurer Anbang or the conglomerate Fosun, owner of Club Med, also blew up the counter of Chinese investments abroad.
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