The Family Fortunes of Beijing's New
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10 ★ FINANCIAL TIMES WEDNESDAY JULY 11 2012 ANALYSIS The family fortunes of Beijing’s new few China As the wealth of the ‘princelings’ grows, so too do fears that parts of the faltering economy are being run to profit a political elite. FT Reporters investigate the business activities of party leaders’ relatives isibly uncomfortable in his China International that focuses its ill-fitting military uniform, investments in the media industry. Mao Xinyu speaks in slow, One of the biggest and most suc- almost childlike sentences cessful homegrown private equity asV he describes the difficulties of funds in China, New Horizon Capital, being a direct descendant of Mao was founded by Winston Wen, son of Zedong. premier Wen Jiabao, who often pub- “I have a lot of pressure in my life licly rails against official corruption. because the Chinese people, the ordi- Mr Wen’s wife, Zhang Beili, is nary folk, put their deep love for deeply involved in the country’s dia- Chairman Mao on to me,” he says. mond and jewellery industry and is “They really don’t want me to lose known for extravagant tastes that face for my granddad,” he adds, while contrast sharply with Mr Wen’s public gesturing a chubby arm at the mind- image as a humble public servant. ers who hover over him, adjusting his Wu Bangguo, second in the party suit or telling him to sit up straight. hierarchy, has several relatives active As well as being the only surviving in investment management, property grandson of the dictator who ruled development and construction. His over one-fifth of humanity for nearly son-in-law, Feng Shaodong is chief ex- three decades, the 42-year-old is the ecutive of China Guangdong Nuclear youngest major general in the history Industry Investment, a fund manage- of the People’s Liberation Army. ment company set up in 2009 by a Despite having a learning disability giant, state-owned nuclear company. – according to people who know him He previously worked as head of Mer- well – he holds advanced degrees from rill Lynch’s investment banking arm some of China’s leading military and in China, where former colleagues civilian institutions, and is deputy and competitors say he almost single- head of the war theory and strategic handedly won the mandate to under- studies department of the PLA acad- write the 2006 Hong Kong offering of emy of military sciences, an impor- Industrial and Commercial Bank of tant sinecure. China in the world’s biggest initial Gen Mao has publicly acknowledged public offering at the time. his many achievements are thanks largely to his background, but he does Golden pedigree not enjoy a large personal fortune, Like Mr Feng, many princelings have according to people familiar with the been recruited to work for western matter, and has criticised rampant banks or other multinationals, which corruption among the progeny of recognise the advantages of fostering other powerful Communist families. close relationships with senior leaders “Look at our family – among all those through their relatives. descendants of the chairman can you “The longer you stay in China the find anyone who is an official or does more you realise that everything is business? You can’t even find one,” he controlled by a couple of hundred said in an interview with state media powerful families,” says one veteran in March. foreign diplomat who specialises in In reality, it is the very fact that he elite Chinese politics. “You also real- and his family are not known to have ise that most major foreign companies are trying to hire the sons and daugh- ters of Chinese officials so they can ‘In the 1990s leaders at get access and do business.” least tried to moderate Some of the princelings, many of whom are educated at leading univer- their princelings as sities in China and the west, are highly capable in their own right. they got rich but now Some even complain they are discrim- there is no restraint’ inated against because of their power- ful family backgrounds and because everybody assumes all their achieve- amassed great wealth that is perhaps from people with power,” says Yang few years ago she was a practising Chinese economy in an environment Mao Zedong: the chairman’s grandson ments are based on nepotism rather the most striking difference between Jisheng, a veteran party member, lawyer who, friends and business where there is no separation of pow- is critical of today’s elite Mary Evans than talent. Gen Mao and other “princelings”, as journalist for state media organisa- associates say, used her husband’s ers, no independent judiciary or However, the chief executives of the offspring of senior party officials tions and author. “Say your father is position to accumulate a fortune. His media and the government sits astride three multinationals with decades of are known. The other recognised the provincial governor, one word official salary as a senior party leader everything,” says Professor Andrew Even without official disclosures, experience operating in China told the descendants of the chairman all hold from you might mean government was no more than $20,000 a year. Nathan of Columbia University, co-ed- the downfall of Mr Bo has given the Financial Times that engaging rela- relatively minor positions in govern- approval for my real estate deal fol- As a rising political star, Mr Bo ben- itor of The Tiananmen Papers, a col- Chinese a glimpse of how their rulers tives of senior officials as consultants ment or military-related institutes lowed by several hundred million efited from the fact that his father lection of leaked secret documents have enriched themselves and aware- or as joint venture partners was and think-tanks. [renminbi], so what’s the big deal if I was Bo Yibo, a revolutionary general detailing top-level decision-making ness is growing of just how privileged standard practice – and, in fact, vital Gen Mao’s implicit criticism of his give you Rmb100m [$15.7m] back?” who fought alongside Mao and was during the student protests. “The law the political elite really is. in many industries. They said these peers highlights a phenomenon party While Gen Mao has clearly bene- one of the “eight immortal” party is controlled by the Communist party An investigation into the activities princelings usually preferred to hold insiders say has become much worse fited from his lineage, in princeling elders who ran China from behind the so whoever controls the party can use of other political families reveals a stakes in joint ventures through a in the past decade, and has been circles he is mostly seen as an embar- scenes in the 1980s and 1990s. the law for whatever they want – web of vast and tangled dealings simi- holding company in Hong Kong or the forced into the spotlight with the rassing joke, and has nothing like the Meanwhile, Bo Xilai’s 24-year-old these people are far above the law.” lar to that controlled by the Bo fam- Caribbean, where Chinese anti- downfall this year of Bo Xilai, previ- kind of wealth accrued by Mr Bo’s son, Bo Guagua, studied at elite west- ily. Virtually every member of the corruption investigators cannot find ously ranked 25th in the ruling party disgraced family. ern institutions including Harrow, Crisis of legitimacy party’s nine-member politburo stand- them. hierarchy. In a system that still calls According to public records, the Oxford and Harvard, drives expensive The personal lives, business dealings ing committee, the elite group that Consulting fees are often paid in itself communist but thrives on cut- extended Bo family controls share- sports cars and is believed still to be and assets of senior officials and their rules the country, has relatives places such as Dubai or Hong Kong, throat capitalism, a group of powerful holdings in listed Chinese companies living in the US with the help of a relatives are considered state secrets. involved in businesses that rely heav- and agreements are frequently writ- political families and their hangers-on worth well over $100m, and people family fortune, according to friends. The internet and media censorship ily on state approvals and support. ten on red paper because photocopies have become fabulously wealthy close to the family say their actual No formal charges of corruption regime goes to great lengths to block “In the 1990s most senior leaders at or scans show up black, making it while ignoring the rules and laws fortune is much larger. have been levelled against anyone in all related information. least tried to moderate their prince- harder for them to be circulated they set for the rest of society. But in April, in the most spectacu- the family, and senior advisers to the In a sign of increasing concern lings as they got rich but now there is widely, these people said. In some Their enormous fortunes are becom- lar political purge since the 1989 leadership say they believe the case about public views of the political almost no restraint and it has got out cases, these relatives are introduced ing impossible to hide in the era of Tiananmen Square massacre, Mr Bo against Mr Bo and his wife will not elite, the party held annual press con- of control,” says a leading Chinese as highly paid consultants at the end social media, contributing to a sense was removed from his positions and dwell on how they grew so rich. This ferences between 2006 and 2010 to re- financier with close ties to the party of the negotiation process, and their among an increasingly informed pub- placed under investigation for unspec- is mainly because the party is con- announce plans to require senior cad- leadership.