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.