Summary: The following text is an approximate translation of a 5 March 2018 RBK article by Russian Sinologist Leonid Kovachich concerning the rise and apparent fall of Chinese businessman Ye Jianming. Jianming, who heads energy concern CEFC China Energy (“CEFC”), was reportedly detained by Chinese authorities on 1 March 2018. Kovachich suggests that Jianming may be another casualty of President Xi Jinping’s purge against members of the Chinese military and secret services; indeed, available information indicates that CEFC may have owed some of its success to Jianming’s affiliation with Chinese military intelligence. Time will tell what impact, if any, his disappearance might have on Russian efforts to tap into the Chinese energy market. Only last November, Rosneft agreed to supply CEFC with approximately 61 million tonnes of oil over a five year period — a deal that the Financial Times described as “the most high-profile corporate link in the burgeoning relationship between Moscow and Beijing.” Whatever happens, Jianming’s example serves as a powerful reminder of the political risks inherent in Moscow’s “pivot east.” – Allen Maggard

Where has the head of Chinese corporation CEFC – which was supposed to have purchased a 14.16-percent share in Rosneft from Glencore and the Qatar Investment Fund for USD 9.1 billion – disappeared to? Russian and international media have been asking this question ever since 1 March, when the Chinese business magazine Caixin, citing anonymous sources, reported that CEFC head Ye Jianming had been “placed under investigation” and “taken away for questioning.” Several Chinese media outlets have reported that Xi Jinping personally gave the order for Jianming’s arrest. CEFC maintains that Jianming has not been detained, and asserts that the abovementioned media reports are without basis. However, this information has not yet been officially confirmed or refuted.

The fact is that Ye Jianming has disappeared, and this could have ramifications for CEFC’s purchase of shares in Rosneft. The terms of the transaction have already shifted: the deal was initially planned to close by the end of 2017. Rosneft has refrained from commenting on the matter, as has VTB, which was supposed to have financed this deal through a USD 5.1 billion line of credit. The question of what will now happen to the deal is, of course, important. But no less curious is the origin of the hitherto obscure CEFC came and its mysterious principal, Ye Jianming.

A New Player

The story of the rise of the young entrepreneur, born in 1979, is puzzling, especially in light of Chinese economic and political realities. In 2016, Fortune magazine included Ye Jianming in its “40 Under 40” list. The Chinese businessman came in second place, even overtaking future French President Emmanuel Macron. His private investment company – CEFC (founded in 2002) – came in 229th place in the 2016 Fortune Global 500 list with an annual revenue of approximately USD 42 million. The company has purchased assets around the world, including more than USD 1.5 billion’s worth of investments in the Czech Republic alone. CEFC acquired the Dostykgazterminal joint venture on the Chinese-Kazakh border in 2015, and purchased a 51-percent stake worth USD 680 million in KMG International – a subsidiary of the state-owned corporation Kazmunaygaz, which operates in 12 countries.

In Chad, CEFC obtained a 35-percent stake in oil-producing blocks belonging to Taiwan’s China Petroleum Company for USD 110 million. It obtained a 4-percent stake in a 40-year petroleum concession in Abu Dhabi for USD 900 million. CEFC expected to gain a 19-percent stake in American financial company Cowen Group, for which it offered USD 100 million. However, the US Committee on Foreign Investments did not give its approval to this deal.

Finally, the unclosed deal with Rosneft by no means marks CEFC’s first step into Russia. For example, CEFC invested USD 500 million in the IPO for Oleg Deripaska’s En+. At the same time, CEFC was practically unheard of in Russia until news broke of its intent to purchase a share in Rosneft. No one knew about CEFC in Europe either until the company began purchasing assets in the Czech Republic. Interestingly, CEFC only came to the attention of Chinese media in 2010, when one of the analysts of the CEFC-controlled NGO China Energy Fund Committee – former People’s Liberation Army (PLA) Colonel Dai Xu – came out in support of using force in territorial disputes with Vietnam and the Philippines over the South China Sea.

One gets the sense that CEFC emerged out of nowhere and immediately began massively expanding around the world. Moreover, CEFC displayed excellent financial results from the very beginning, and, most interestingly, did not attract much attention from controlling organs of the Chinese state. [It is] as if there is nothing unique about a growing private company emerging suddenly in a market monopolized by state-owned commodity giants. No less strange is that very little information about this company exists in open sources. The data on its founder is even more scarce and contradictory.

A Boatman’s Son

Because of Ye Jianming’s phenomenal ascent and the similarity of his surname, rumors have circulated that he is the grandson of PLA Marshall Ye Jianying (1897–1986), who was a prominent military officer under Mao. However, these rumors have been refuted by Ye Jianming himself and by Chinese media. As it turns out, he is [reportedly] only the son of a boatman from Fujian Province. He completed middle school [and] served in the army. Some say that after leaving the army, he moved to Hong Kong and there established a trading company. According to other sources, Ye Jianming initially worked as a forest ranger in his native province, then traded away his fire-fighting equipment and caught the wave of privatization to become the owner of a piston factory in his home city. But in any event, the question remains: how did this son of a boatman earn his first capital?

CEFC turned into an important company in 2006, when Ye Jianming purchased oil trader Xiamen Huahang, which previously belonged to businessman Lai Changxing, who was sentenced to life imprisonment for smuggling in May 2012. Lai’s company was confiscated by the Fujian Province government, which then sold it to Ye Jianming. In a 2016 interview with Fortune magazine, Ye explained that state-owned banks and well-to-do investors from Hong Kong and Fujian Province provided him with the money for the acquisition. But the businessmen did not elucidate how a little-known 27-year-old was able to not only convince investors of the deal’s prospects but also to obtain credits from state banks that provide loans to even large private companies with great reluctance, preferring instead to finance state-owned enterprises

An Undercover Agent?

A possible explanation may be found in CEFC’s annual report to investors for 2012. According to a brief biographical section included in this document, Ye Jianming served between 2003 and 2005 as the Deputy General Secretary of the China Association for International Friendly Contacts (CAIFC). This structure falls under the control of the Liaison Department of the PLA General Political Department – the highest military command organ in the county. Officially, CAIFC’s task is to propagandize Beijing’s achievement in the development of “Socialism with Chinese Characteristics.” In fact, CAIFC functions as an intelligence service on behalf of the PLA General Political Department. At first, this structure was aimed mainly at Hong Kong and Taiwan. Its agents infiltrated commercial and military structures in order to carry out clandestine political-ideological work.

Ye Jianming’s connection with CAIFC can be traced beyond the abovementioned report. In 2015, a consortium known as Carrier Capital invested USD 277 million in Hong Kong media group Mei Ah Entertainment. Carrier Capital was controlled by Ye Jianming and Ye Jingzi, the latter of whom appears to be the daughter of longtime CAIFC head Ye Xuanning. Even CEFC’s logo resembles CAIFC’s emblem.

Compare and contrast: CEFC and CAIFC’s logos, similar but different

If we assume that the head of CEFC Ye Jianming is connected with Chinese political intelligence, then much becomes clear. For example, [it explains] why his biography is so vague; it is clear what he did in Hong Kong; it is not so surprising that the young entrepreneur was given the green light.

And it can hardly be considered a coincidence that all of CEFC’s major deals with other countries were announced either shortly before or soon after meetings between the leaders of the states and the Chinese president. Almost immediately after the first-ever visit by a Chinese head of state to the Czech Republic in March 2016, CEFC announced the purchase of its Czech assets for USD 1.5 billion. And the deal to purchase shares in Rosneft was announced just days after President Vladimir Putin visited Beijing in September 2017.

But another thing is surprising: why not only in Africa, but also in the Czech Republic, Kazakhstan, and, ultimately, in Russia would a company with such an unclear history be so easily accepted? Possibly, a fortunate combination of the interests of the company’s partners with the task of spreading Chinese influence. For example, CEFC’s [acquisition of] the Czech assets fits into the Chinese 16+1 initiative, which was put forward in 2012. The essence of this initiative consists of the activation of cooperation between China with 11 member-states of the European Union in Eastern Europe and five Balkan countries in the areas of investment, transport, finance, science, education, and culture.

The Kazakh projects fit into the framework of another Chinese initiative – “One Belt, One Road” (OBOR) Even in the New Year’s address to CEFC’s employees, Ye Jianming called for greater involvement in OBOR’s realization.

The purchase of shares in Rosneft also fits into the context of relations between Russia and China. It turns out that cooperation with CEFC seems to have been profitable for everyone. At a certain stage, this played into the company’s hands. Ye Jianming, for example, was so successful in gaining the trust of Czech President Miloš Zeman that the latter appointed him as his economic advisor.

Even if Ye Jianming was arrested, the intrigue may drag on for a long time. Practice shows that investigations into the relation between big businessmen and corrupt officials can go last for months before being publicized. For example, in January 2017 billionaire Xiao Jianhua disappeared from the Four Seasons Hotel in Hong Kong. According to the testimony of witnesses, Jianhua was allegedly seized by state security personnel and brought back to mainland China. The fate of the businessman remains unknown to this day.

In the case of Ye Jianming, one can only guess what prevented his successful career. But we can see that Xi Jinping is engaged in purging not only the Chinese political elite, but also the military and special services. Perhaps the situation with Ye Jianming is part of this very process.