The word on Chinese princelings

On Dec. 26, the Wall Street Journal and Bloomberg both published exposés on the intersections between business and politics in the Chinese government. Bloomberg's article focused on the offspring of the Eight Immortals. The Immortals refers to a group of top officials close to China's former paramount leader Deng Xiaoping, whose children are an elite sub-section of princelings -- the sons and daughters of current and former high-ranking Communist Party officials. The Journal's article explored how some of China's wealthiest businesspeople used politics to expand their empires.

Together, they run to almost 8,000 words, and that's not including the visual analysis of China's rich that the Wall Street Journal published the same day, the graphic that Bloomberg included on mapping the connections between a section of Chinese aristocracy or their companion story on a princeling who's a U.S. citizen and who voted for Obama. They're all worth a read, but if you want the abbreviated version, here's what you should know:

Princelings and their networks dominate the economy.

Bloomberg "traced the fortunes of 103 people, the Immortals' direct descendants and their spouses" and found that "twenty-six of the heirs ran or held top positions in state-owned companies that dominate the economy." Three princelings alone "headed or still run state-owned companies with combined assets of about $1.6 trillion in 2011. That is equivalent to more than a fifth of China's annual economic output," Bloomberg found.

This includes the family of current chairman of the Communist Party Xi Jinping, who's extended family "amassed a fortune, including investments in companies with total assets of $376 million and Hong Kong real estate worth $55.6 million," (which Bloomberg reported on in June) and lesser known names, like Wang Jun. Wang, the 71-year-old son of Immortal general Wang Zhen, "is considered the godfather of golf in China. He's also chairman of a Hong Kong-listed company that jointly controls a pawnshop operator and of a firm providing back-office technology services to Chinese police, customs and banks."  

As princelings move into business, private tycoons are entering the political sphere.

The Journal found that among the wealthiest people in China, those that "served in the legislature increased their wealth more quickly than the average member of the list. Seventy-five people who appeared on the rich list from 2007 to 2012 served in China's legislature during that period. Their fortunes grew by 81 percent, on average, during that period, according to Hurun [a consultancy that tracks China's wealthiest people]. The 324 list members with no national political positions over that period saw their wealth grow by 47 percent, on average, according to an analysis the firm ran for the Journal."

They cite the example of Chen Siqiang, the chief executive and controlling shareholder of New Oriental Energy & Chemical, a fertilizer company based in Henan.

In late 2010, the company, whose shares were then listed in the U.S. on the Nasdaq Stock Market, faced a cash squeeze, according to a filing made to the Securities and Exchange Commission at that time. In the filing, Mr. Chen asserted: "I will also use my political influence as a member of the National Committee of CPPCC to coordinate with government agencies and financial institutions to enforce government support."

About three months later, New Oriental announced that the government in its home region had arranged $3.3 million in new loans. Nasdaq delisted New Oriental in 2011 after its capital fell below required thresholds.

This is old news.

Little that the Journal and Bloomberg reported in these articles is new; or rather, the articles both serve to confirm long held impressions on the ties between politics and business in China. That doesn't make the reporting any less superb. Ever since the downfall of disgraced Chongqing Party Chief Bo Xilai in March, the ability of foreign reporters to uncover details and anecdotes about dealings among the elite has improved greatly. 

Part of the reason for this is that several major Chinese news stories in the last year caught the world's attention, and allowed foreign correspondents in China the column inches and the budgets to explore. These include everything from Bo's downfall, to the May escape of blind dissident Chen Guangcheng, to the once-in-a-decade power transfer in November.

Additionally, there seems to be a consensus in the United States that China deserves to be understood. Ever since Bo's downfall, Chinese with high level political access seem to be more open to speaking with foreign media. And Bloomberg, the multi-billion dollar behemoth with probably the world's best financial databases, has been doing an excellent job of sending its reporters to follow the money.

China is not on the brink of revolution.

The Bloomberg article compares princelings and their cohorts in present-day China to the robber barons of 19th century United States (and Russia's post-communist oligarchs, though I think that's a stretch). The increase in corruption/dissatisfaction with the princely class means that Chinese will continue to work/fight within the system to improve their lot/improve the system. This does not mean that they are planning to take the streets. 


How the face of the Syrian regime betrayed Assad over Twitter

Christmas, it seems, came early for Western governments looking to strike a blow about Syrian President Bashar al-Assad's regime. Following reports that former Syrian spokesman Jihad Makdissi had fled to Washington, a well-known activist released private Twitter messages that show Makdissi had been in contact for months with the opposition.

"Do you think that I am blind to the heroic actions of the Syrian people?" Makdissi wrote to Rami Jarrah, an activist who has worked to disseminate Syrian citizen journalism, on July 21. "The main problem that prevents me or I can say most Syrian diplomats from openly joining the movement are the opposition ‘representatives'."

Makdissi, a former diplomat at the Syrian embassy in London and a member of the country's Christian minority, had been the face of the Syrian regime to the English-speaking world. In early December, he abruptly disappeared from public view amidst reports that he had defected or, according to the Syrian government's narrative, taken a three-month administrative leave. On Dec. 24, the Guardian's Martin Chulov reported that Makdissi had indeed defected and was in Washington, where he was debriefing U.S. intelligence officials about the thinking within President Bashar al-Assad's regime as it attempts to crush the 21-month revolt.

The messages released by Jarrah show two conversations: His first conversation with Makdissi on July 7, and then a running dialogue that stretches from July 20 to July 22. Jarrah introduced himself as someone who had been arrested for attending peaceful demonstrations, and subsequently beaten and falsely told by Syrian intelligence agencies that his wife had been raped. Makdissi refused to endorse Jarrah's version of events in that first conversation, but his rhetoric was a far cry from the regime's hardline rhetoric.

"We are not perfect Rami but we need to have faith in new Syria," he wrote. "We need all to Support the political process."

By July 21, however, Makdissi was even more receptive to Jarrah's suggestions that he abandon the government. Between the two conversations, the regime had been shaken by a July 18 bombing in Damascus that had killed a number of figures in the regime's inner circle, including Assad's brother-in-law Assef Shawkat, Defense Minister Dawoud Rajiha, and intelligence chief Hisham Ikhtiyar.

"When I see that I am not able to help stop the bloodshed from my position I will leave," Makdissi wrote on July 21. He followed that up with a message on July 22, saying that he would take Jarrah's suggestions "into consideration."

A recurring theme of the conversations is both Makdissi and Jarrah's frustration with the Syrian National Council, then the primary coalition of opposition groups. Makdissi assailed the opposition's "childish political behavior," and said that leaving his post would not mean joining their ranks.

The $1 million question is whether Makdissi solely corresponded with activists such as Jarrah back in July - or whether he also reached out to anti-Assad governments at the time. Makdissi visited New York in October for the opening of the U.N. General Assembly - while much of this tale remains murky, the trip could have presented him with a chance to reach out to the diplomats and intelligence officials who now seem to be benefiting from his defection.