China’s private enterprises under President Xi Jinping appear to be holding the short end of the stick. The government’s earnest deleveraging campaign has hit the sector disproportionately hard, and a never-ending trade war with the U.S. has hurt manufacturing, the core of China’s entrepreneurial spirit.
That’s only part of the story. Private businesses aren’t merely innocent lambs waiting on Beijing’s chopping board for slaughter. Waves of corporate scandals this year – escalating in their unsavory nature – are scaring investors.
Future Land Development Holdings Ltd. has just dealt the latest blow. Its billionaire chairman Wang Zhenhua, the 37th richest man in China, is being held in criminal custody in Shanghai for “personal reasons,” the company disclosed in a filing. On Wednesday, the police said they had detained two individuals for suspected molestation of a minor. Damage to listed entities controlled by Wang was immediate and furious. His Hong Kong-listed Future Land dropped 15% at the open on Thursday, adding to a 24% slump a day earlier; Future Land’s dollar bonds sank to a record low.