[Super Rich] Chinese Billionaires Choosing 'Fake Divorce' to Sell Stocks

At Least 8 Owners of Chinese Listed Companies Divorced This Year
Stock Split Scale Reaches 5.18 Trillion Won
Analysis Suggests Sham Divorces to Sell Shares Amid Shared Prosperity Pressure
Financial Authorities Strengthen Stock Sale Regulations

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The division of assets due to divorces among Chinese billionaires is delivering a shock to an already sluggish stock market, prompting financial authorities to tighten regulations. Especially as President Xi Jinping's "common prosperity" policy leads to a wave of wealthy individuals leaving China, authorities suspect a high possibility of sham divorces and are increasing regulatory measures.

According to Bloomberg on the 16th, at least eight major owners of Chinese listed companies have ended their marriages this year, and during the asset division process, a total of $3.9 billion (approximately 5.18 trillion KRW) worth of shares were split with their spouses.

This includes Zhou Hongyi, chairman and founder of Chinese cybersecurity firm 360 Security Technology (formerly Qihoo 360). After divorcing in April, he paid his ex-wife Hu Huan a divorce settlement worth 6.25% of company shares, valued at $1.231 billion (approximately 1.63 trillion KRW).

Zhou Hongyi is the chairman of 360 Security Technology.

While some billionaires may choose divorce due to estrangement, Chinese financial authorities believe that cases of sham divorces aimed at circumventing regulations to sell shares are increasing. Under current rules, executives or shareholders holding more than 5% of a Chinese listed company’s shares can only sell 2% of their shares within 90 days. However, if a major shareholder divorces and divides assets, both the individual and their spouse can each sell 2%, totaling 4% within the same period. In fact, among the eight billionaires who divorced this year, half announced plans to dispose of shares within weeks or months after the divorce. China is currently expected to face an accelerating economic downturn due to real estate crises and other factors, with foreign investors also withdrawing, making the stock market outlook bleak.

Accordingly, the China Securities Regulatory Commission (CSRC) recently restricted the combined stock sale limit for divorcing couples to no more than 2%, aiming to block regulatory circumvention.

Gary Ng, Senior Economist at Natixis SA’s Hong Kong branch, said, "There is increasing pressure from the top to support the (sluggish) stock market," adding, "Closing regulatory loopholes related to divorce is one of many measures we have seen recently."

The market also believes that sham divorces among billionaires are not uncommon. President Xi Jinping is strengthening the common prosperity stance that tightens control over the wealthy in his third term, and with the lifting of COVID-19 lockdowns at the end of last year, more wealthy individuals are considering overseas migration. Analysts also point to rising US-China tensions and growing negative outlooks on the Chinese economy as contributing factors. In fact, among the eight Chinese billionaires who divorced this year identified by Bloomberg, three have spouses holding foreign citizenship or permanent residency. Hu Huan, ex-wife of Zhou Hongyi of 360 Security Technology who divorced earlier this year, also holds Singapore permanent residency.

This content was produced with the assistance of AI translation services.