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  • On this episode of China Uncensored,

  • When a giant Chinese corporation

  • goes bankrupt,

  • should the Chinese government bail it out,

  • or let it fail?

  • In the case of Anbang Insurance Group,

  • the decision was neither.

  • No, the government has their own

  • unique solution.

  • Welcome back to China Uncensored.

  • I'm Chris Chappell.

  • The Chinese Communist Party loves

  • to have its influence felt around the world.

  • That's one reason why over the last few years,

  • it's been encouraging Chinese companies

  • to buy up assets overseas.

  • It's even supported them with policies

  • like low interest rate loans

  • from Chinese state-owned banks.

  • For example,

  • the Chinese company Dalian Wanda

  • bought up AMC Theaters

  • which owns about one third

  • of American movie screens.

  • Shuanghui International bought Smithfield Foods

  • so they can literally bring home the bacon.

  • And Anbang Insurance Group

  • has spent 10 billion dollars

  • buying up hotels and resorts

  • including the Waldorf Astoria.

  • From which I have been banned for life.

  • But now Anbang Insurance Group

  • is facing a bit of a problem.

  • China Uncensored producer Matt Gnaizda reports.

  • Thanks, Chris.

  • For more than a century,

  • the Waldorf Astoria was one of

  • America's great hotels

  • a host to US presidents,

  • world leaders...

  • and weird tea parties.

  • But now,

  • this proud testament

  • to American history,

  • hospitality, and sophistication...

  • is run by the Chinese government.

  • Here's what happened:

  • In 2014, privately owned Chinese conglomerate

  • Anbang Insurance Group bought the Waldorf

  • for almost 2 billion dollars.

  • Anbang also bought billions more

  • in other American companies and hotel chains.

  • US investors were happy to work with Anbang.

  • Anbang was willing to pay big money

  • and who doesn't love getting big money?

  • In fact,

  • investors loved Anbang's big money so much,

  • they were willing to overlook Anbang's

  • other shady business operations.

  • But it turns out,

  • Anbang had pulled a Lehman Brothers of sorts.

  • That is,

  • they're a hundred-billion-dollar company

  • that made risky, highly leveraged investments.

  • And they went into quite a bit of debt

  • as part of their spending spree.

  • What could go wrong?

  • Apparently, a lot.

  • In late February,

  • Chinese authorities prosecuted Anbang's CEO

  • for economic crimes.

  • And Chinese regulators took control of the company.

  • It's only for a year.

  • But it could be more than a year,

  • if they feel like it.

  • This government takeover is

  • a very different approach

  • than the US took with Lehman Brothers in 2008.

  • The US just let Lehman Brothers fail,

  • its poor employees turned out into the streets

  • with nothing but their $5,000 suits.

  • According to Bloomberg,

  • Anbang was doing something similar

  • to what went on during the 2008

  • subprime mortgage crisis in the US.

  • For example, thanks to some financial alchemy,

  • Anbang had been posting pretty good growth

  • in its life insurance business.

  • And when I say pretty good,

  • I mean that from 2010 to 2016,

  • Anbang's annual life-insurance premium revenue

  • increased by 11 million percent.

  • If I had a nickel

  • and grew it at 11 million percent

  • I'd have enough to buy

  • one of those $5,000 suits.

  • Anyway, Anbang was taking

  • life insurance products,

  • repackaging them,

  • and selling them to investors

  • with the promise of high interest rates.

  • And who doesn't love earning high interest rates?

  • Pretty soon,

  • life insurance made up

  • 96 percent of Anbang's revenue.

  • And it was using all that extra revenue

  • to buy up cool playthings

  • like the Waldorf Astoria hotel.

  • But maybe that was a bad idea.

  • Because they almost collapsed

  • and now the Chinese government has taken over.

  • Now as much as this sucks for Anbang

  • and its CEO who's going jail

  • for a long time

  • there's a bigger issue.

  • It shows that China's government

  • is willing to use heavy-handed tactics

  • to take control of private companies.

  • An analyst from the Economist Intelligence Unit

  • says it's a warning shot to other companies

  • that are leveraging investor money

  • and complex financial products

  • to buy assets overseas.

  • Who will Chinese regulators go after next?

  • It could be conglomerates like HNA Group.

  • They own everything from real estate

  • to airline catering to luxury hotels.

  • It could be Dalian Wanda,

  • which owns movie theaters,

  • film studios, and luxury hotels.

  • Or it could be Fosun Group,

  • which owns Canada's Cirque du Soleil,

  • a British soccer club,

  • and you guessed it,

  • luxury hotels.

  • So what do they all have in common?

  • Besides a weird fetish for luxury hotels?

  • Their CEOs are all being investigated

  • by Chinese authorities.

  • So the Anbang takeover

  • could be a message to Chinese companies

  • to clean up their financial transactions

  • that have gotten a little too,

  • shall we say, “creative”—

  • in the Lehman Brothers sense.

  • Or else we'll arrest your CEO

  • and take over your company.

  • But this should also serve as a warning

  • to American investors:

  • When you do business with China,

  • things can get really complicated really fast.

  • One reason that Anbang made such a splash

  • when it first started investing overseas,

  • besides its seemingly endless billions of dollars,

  • was its high-level political connections.

  • Back in 2016,

  • the Financial Times called Anbang

  • one of China's most politically connected companies.

  • Turns out,

  • that might have been part of the problem.

  • After the CEO was first taken into custody last June,

  • the Epoch Times reported that he was

  • close to former leader Jiang Zemin's faction,

  • and helped his cronies launder money.

  • And the New York Times found that

  • Anbang's assets were mostly controlled

  • by a series of shell companies

  • owned by relatives of the CEO.

  • By the way,

  • that is not normal.

  • So to recap:

  • If you sell your company

  • to an opaque Chinese conglomerate

  • with deep pockets,

  • you might find that someday,

  • your company will be partly controlled

  • by the Chinese government.

  • Good thing Jared Kushner scrapped that deal

  • to sell his Fifth Avenue building to Anbang.

  • Back to you, Chris.

  • Thanks Matt.

  • Well, now that the Waldorf