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
Princelings and their
networks dominate the economy.
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
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
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.