When a high-profile, billion dollar deal for a stake in a Chinese insurer was inked in early December, officials at the country's biggest policy bank were asking one question seemly unrelated to the transaction:
Who is Xiao Jianhua?
The answer to that question eventually sank China Development Bank's (CDB) planned HK$ 44 billion loan to help Thailand's Charoen Pokphand Group (CP) buy 15.57 percent of Ping An Insurance.
The mysterious Xiao, a mainland Chinese financier, gave CP part of the cash for the first payment in the deal by tapping three municipal commercial banks in northern China with whom he enjoys close ties.
However, a rule made by the China Insurance Regulatory Commission (CIRC) in effect since 2010 bars the use of bank loans and other non-proprietary capital to acquire a stake in an insurance company. The rules also say neither an individual nor an institution can serve as a trustee holder of an equity stake in a Chinese insurance company.
Xiao's maneuvering put in question the legality of the deal and prompted CDB to cancel the loan in December. After the policy bank's decision was published by Caixin on January 8, the stock prices of Ping An dropped by 3.73 percent on the Shanghai Stock Exchange and 4 percent on the Hong Kong bourse.
CDB's move left CP with no choice but to scramble for new financing, raising worries that it would not have enough time to salvage the deal under the February 1 deadline set by CIRC. However, CP said it could get enough funds from branches in 15 countries.
Meanwhile, the seller, London-based bank HSBC, issued only a short statement at the request of the Hong Kong Stock Exchange on January 10 that said it had nothing to add to its December announcement that a deal with CP had been reached.