An investigation into Chinese vaping tycoon Chu Lam Yiu sent Hong Kong-listed shares in Huabao International Holdings tumbling by over 65 per cent, as President Xi Jinping rejuvenates his crackdown on corruption.
Chu, one of China’s richest self-made women with a majority stake in the tobacco flavouring and fragrance company, is being investigated by authorities for “unspecified suspected disciplinary violations,” according to a Hong Kong stock exchange filing.
The company said in a statement it was informed of the investigation by its subsidiary Huabao Flavours & Fragrances. “Up to the date of this announcement, the company has not been provided with any details of the nature of the suspected violations of Ms Chu that is currently being investigated. The business operation of the group remains normal,” the company said.
It added that the subsidiary received a case filing notice from the Leiyang City Supervisory Committee, indicating that the probe 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 her mid-20s in 1996, produces flavours and fragrances used by tobacco manufacturers, including for the e-cigarette or vaping market, as well as food companies.
The company’s growth has catapulted Chu to rank among China’s richest people. According to the Hurun Report, which tracks the net worth of China’s richest entrepreneurs, Chu had amassed a fortune of $7.6bn as of last year, ranking 122. That compares with $2.7bn in 2012 when she ranked 46th.
Like many high-profile Chinese businesspeople, she has also served on various industry and government advisory committees.
The probe into Chu comes as China’s long-running anti-corruption campaign gathers momentum as Xi seeks to secure a historic third term.
Investigations into at least 27 high-level officials and executives have been announced since the beginning of the fourth quarter last year, according to notices issued by the Communist party’s Central Commission for Discipline Inspection. Among them are former officials at the central bank, the People’s Bank of China, as well as state-owned Chinese banks, oil groups and insurers.
The investigation into Chu also follows expectations that China’s tobacco industry will probably be hit by tougher regulation and oversight as part of Xi’s “common prosperity” drive.
The series of policy and regulatory crackdowns on business, culture and vice over the past year has erased billions of dollars from the value of Chinese companies — and the personal wealth of many of its tycoons.
Investors were previously upbeat on China’s potential as the world’s biggest vaping market. But the outlook has been clouded by Chinese state media reports on the widespread sale of e-cigarettes to minors, while officials consider introducing higher levies on the sector.
Additional reporting by Maiqi Ding and Sun Yu in Beijing