HONG KONG — Its lenders are pushing for bankruptcy. Its chairman and co-founder has been quietly stripped of power. Nearly $10 billion of its money has been embezzled.
HNA Group, the vast Chinese conglomerate that threw tens of billions of dollars at trophy businesses around the world, is nearing the biggest corporate collapse in recent Chinese history. Its dismantling is an extraordinary turn of events for the company that began as a regional airline in China’s southern province of Hainan and grew to own large stakes in Hilton Hotels, Deutsche Bank, Virgin Australia and others. At its height, HNA employed 400,000 people around the world.
For China’s leadership, HNA is now a cautionary tale. Its story offers a glimpse of how Beijing treats its most powerful entrepreneurs. China has been taking a firmer grip on the economy, and regulators have recently circled in on another empire — that of China’s most famous billionaire, Jack Ma.
“It’s a sharp reminder to China’s private sector and big highflying companies and executives that you’re never more important than the Communist Party,” said Jude Blanchette, a China scholar at the Center for Strategic and International Studies in Washington. “The reining in of big corporations is not exactly central planning, but it’s certainly putting guardrails on corporate behavior to make sure that they are heading in the right direction.”
Pressure is mounting on companies whose behavior could pose a risk to China’s financial system. Xi Jinping, China’s top leader, told a meeting of the country’s senior Communist Party officials late last month that the government must foresee and anticipate risks even as it pursues growth. He urged officials to make plans to deal with “gray rhinoceros” events, referring to large and evident problems in the economy that are ignored until they become urgent threats. Chinese media had often referred to HNA as a gray rhino before its decline.
The party has strengthened its hand in private business in recent months and urged entrepreneurs to “identify politically, intellectually and emotionally” with its goals. It has also pledged to prevent what it called the “disorderly expansion of capital,” a reference to the type of lavish spending of borrowed money for which HNA had become known.
Among the party’s recent high-profile targets is the Chinese online shopping giant Alibaba Group. In December, the authorities launched an antitrust investigation into the company, which was co-founded by Mr. Ma. One month earlier, days before a planned initial public offering of Mr. Ma’s finance giant, Ant Group, regulators stepped in to stop it.
HNA was once the face of modern corporate China, a leader in the first wave of private Chinese companies with political backing to make large global acquisitions. Its propensity to load up on borrowed money to buy stakes in global household names was expensive and risky, seemingly daring regulators in…
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