An investigation by Chinese vaping tycoon Chu Lam Yi has led to a 65 percent drop in Hong Kong’s stake in Huabao International Holdings as President Xi Jinping rejuvenates his crackdown on corruption.
Chu, one of the richest women to make her own, with a majority stake in the tobacco and fragrance company, is being investigated by authorities for “unspecified suspected disciplinary violations,” according to Hong Kong Stock Exchange documents.
The company said in a statement that it had been informed of the investigation by its subsidiary Huabao Flavors & Fragrances. “As of the date of this announcement, the company has not provided any details on the nature of Ms. Chu’s alleged violations, which are currently being investigated. The group’s business activity remains normal, “the company said.
He added that the subsidiary had received notice of a lawsuit from the Leiyang City Supervisory Committee, indicating that the investigation was being carried out by the Chinese Communist Party and the local government.
No further details were provided. The company declined to answer further questions.
Huabao, which Chu launched in the mid-1920s in 1996, produces flavors and fragrances used by tobacco manufacturers, including for the e-cigarette or vaping market, as well as food companies.
The company’s growth catapulted Chu to become one of the richest people in China. According to the Hurun report, which tracks the net worth of China’s richest entrepreneurs, Chu amassed a fortune of $ 7.6 billion last year, ranking 122nd. That compares to $ 2.7 billion in 2012, when it ranked 46th.
Like many high-ranking Chinese businessmen, she has also served on various industry and government advisory committees.
Chu’s investigation comes as China’s protracted anti-corruption campaign gains momentum as Xi seeks a historic third term.
Since the beginning of the fourth quarter of last year, investigations have been launched against at least 27 high-ranking officials and executives, according to reports issued by the Communist Party’s Central Discipline Control Commission. These include former employees of the central bank, the People’s Bank of China, as well as state-owned Chinese banks, oil groups and insurers.
The investigation against Chu also follows expectations that China’s tobacco industry is likely to be affected by tighter regulation and supervision as part of Xi’s quest for “common prosperity”.
A series of political and regulatory repressions against business, culture and vice over the past year have wiped out billions of dollars from the value of Chinese companies – and the personal wealth of many of its tycoons.
Previously, investors were optimistic about China’s potential as the world’s largest vaping market. But prospects are overshadowed by Chinese state media reports of widespread sales of e-cigarettes to minors as officials consider imposing higher taxes on the sector.
Additional reports from Maiqi Ding and Sun Yu in Beijing