A nation within a nation: a major threat to US posed by corrupted members of ’s Politburo Standing Committee (PSC) and their international corporations

Recently Guo Wengui, an exiled Chinese billionaire, has drawn media’s attentions at home and from abroad123. Mr. Guo, also known as Miles Kowk, alleged that Wang Qishan, a member of China’s Politburo Standing Committee (PSC) and one of the most powerful men in China, is corrupted and has embezzled billions of dollars, transferred the money abroad and put them into the hands of his family members and vassals. Mr.Guo claimed that he has been wrongly persecuted by Mr. Wang and Mr. Wang wants him dead because he holds sensitive information about Mr. Wang. The irony is that Mr. Wang himself is the leader of Communist party’s Central Commission for Discipline Inspection, which is in charge of catching corrupted officials in China. The scheme, according to Mr.Guo, is as follows: HNA Group, an international corporation controlled by Mr. Wang, takes loans from Chinese state-owned banks and buys up assets abroad. Then HNA transfers its assets including cash to private and unrelated companies or funds owned or controlled by Chen Feng, HNA’s CEO and Guan Jun, a mysterious major shareholder, who allegedly owns at least 30% of HNA Group4. According to Mr.Guo, HNA doesn’t have to pay off the debt owed to the state-owned banks. The debt could become bad debt and be bought by state-owned asset management companies controlled by Mr. Wang and then sold to companies controlled or owned by Mr. Chen or Guan Jun at dirt cheap price.

Although Chen Feng, HNA’s CEO, has ties with Mr. Wang, it is Guan Jun that links Mr. Wang to HNA Group. Mr. Guo claims that Guan Jun, the mysterious major shareholder of HNA Group, is Mr. Wang’s illegitimate son and he has the DNA reports that proves his claims.

HNA Group was founded in 1993 and as of 2012, when Mr. Wang took the position of discipline chief, HNA Group’s asset was $58 billion, an increase of 38000 times within just 20 years5. Interestingly enough the increase of HNA’s asset is correlated with Mr. Wang’s political ladder climbing. HNA’s asset accumulation took off from year 2003 when Mr. Wang was named the head of province, where HNA Group started its business6. Today HNA Group’s asset portfolio has accumulated to a mind-boggling figure of 145 billion dollars.

In July, 2017, under the pressure of Mr. Guo’s allegations, Guan Jun transferred his shares of HNA to Hainan Cihang Charity Foundation set up by HNA in New York. However just after Guan Jun did the transfer, Eric Schneiderman, the New York Attorney General sent a letter to HNA and asked why it hadn’t registered the foundation as a charity7.

According to Mr. Guo he has been cooperating with US government and together they will build a money laundering case against HNA Group and take it to court. If Guan Jun is indeed Mr. Wang’s illegitimate son we have to ask why Mr. Wang gives billions of dollars of asset to his son. It is clear that HNA represents Mr.

1 https://www.nytimes.com/2017/05/09/business/hna-group-hainan-airlines-china-deals.html?mcubz=0 2 https://www.nytimes.com/2017/05/30/world/asia/china-guo-wengui.html?mcubz=0 3 https://www.ft.com/content/8acfe40e-410b-11e7-9d56-25f963e998b2 4 https://www.nytimes.com/2017/07/24/business/dealbook/chinas-hna-discloses-shift-of-ownership-stake-to- foundation.html?mcubz=0 5 http://www.chinadaily.com.cn/business/chinadata/2013-01/09/content_16244440.htm 6 http://www.sinoceanic.no/sitefiles/16/docs/AHNGroup-PresentationtoGTB.pdf 7 https://www.bloomberg.com/news/articles/2017-07-27/hna-s-nyc-nonprofit-owner-told-by-state-to-register-as-charity 1 | P a g e

Wang’s interests but not China’s national interests. No doubt the purpose of the money is first and foremost to serve Mr. Wang’s son and family members but is it just for his son to enjoy a luxurious life style? The answer to this question should be of grave concern to US because, as Mr. Guo has pointed out, people like Guan Jun and corporations like HNA Group could be a major threat to the security and national interests of US.

Threats posed by international corporations controlled by corrupted members of PSC and their family members To figure out the threats faced by US we have to understand what kind of people Mr. Wang, Guan Jun and Chen Feng are. These people are not just ordinary people---they are people with great ambitions, they are people who are obsessed with power and they are very, very intelligent people. Money to them is not just money; money can be converted into power and by converting untraceable and unmonitored money into power controlled by their illegitimate children and/or other family members, they can and they will build a nation of their own within a nation, that is, US.

1. Threats to US financial security: US dollar, interest rate, exchange rate, oil price

As mentioned above, HNA Group’s asset is now worth $145 billion and this is just one such corporation we know of. With financial leverage of, say 10 times, it can control $1.45 trillion, unthinkable financial power in hands of Mr. Wang and CEO Chen Feng’s with decades of banking industry background, which may pose major threats to US financial security. HNA owns nearly 10% of stake in Deutsche Bank8 .It is suspected that HNA has been using Deutsche Bank for money laundering. The HNA’s stake in Deutsche Bank is currently under investigation by ECB. This is an example of gaining financial power by buying stakes in big banks and we all know that big banks are essential to a nation’s financial security.

Mr. Wang and Chen Feng and Guan Jun are very intelligent financial manipulators. If HNA decides to move capital out of US, even with no intentions to interfere with US’ exchange rate policy, the capital outflow could depreciate US dollar significantly, thereby interrupting Fed’s strategy and US import and export policy.

With the help of American bankers and investors (HNA has ties with major American banks and investors like George Soros9) HNA may be able to, with its financial power, manipulate interest rate through aggressively buying or selling US government debt, which could potentially affect the health of US economy. The same thing could be said of US stock market.

HNA could also influence US oil policy through manipulating oil future markets. For instance, if HNA wants a higher oil price it can do it by buying up crude oil futures in the future market. According to Mr. Guo, Guan Jun holds bank accounts that are used to buy crude oil from Iran, essentially funding its nuclear weapon project. If that’s true it is in violation of US sanctions against Iran. The funds could also be used to fund terrorism if it suits Mr. Wang and Guan Jun’s needs.

HNA may not intend to do any of the things mentioned above but HNA is not an ordinary company: it represents Mr. Wang and his family’s interests and their interests only. It doesn’t follow policy that governs normal business; it plays a totally different game. Therefore when Mr. Wang’s interest conflicts with US interests, HNA will do Mr. Wang and Guan Jun’s bidding. What makes it worse is that because Mr. Wang, Chen

8 https://www.ft.com/content/5e214a3c-2fb9-11e7-9555-23ef563ecf9a 9 https://www.economist.com/news/business/21720674-its-investments-range-hilton-worldwide-deutsche-bank-chinas- hna-group-goes-global 2 | P a g e

Feng and Guan Jun are intelligent financial manipulator they can do things without being monitored. They have the power to move capital in and out of US without being noticed by government agencies and build a powerful financial nation within US.

2. Influence US politics and US government officials

Pursuing political power is always an objective for people like Mr. Wang and Guan Jun. On January 17, 2017, SkyBridge, an investment firm founded by Anthony Scaramucci, Trump’s former White House Communications Director, announced a majority stake sale to HNA. The deal is now under regulatory review10. This is the proof that HNA and the people behind it attempts to influence US policy by using financial power to do favors to government officials. The other example is the so called “VOA (stands for Voice of America, a broadcaster funded by US government) incident” where the live broadcast of the interview with Mr. Guo was cut short prematurely. The interview was supposed to talk about Mr. Wang’s corruptions. It is suspected that under the pressure from Chinese government (or certain powerful figures like Mr. Wang), top officials at VOA gave the order to stop the live interview11.

3. Buying media companies to further strengthen its power

Media is power and to control media is to control power. In March 2017, HNA acquired 80% stake of Lianban Caixun Cultural Media, which runs the website of Caijing Magazine, one of the most popular and influential Chinese business magazines12. The founder of Caijing Magazine is Hu Shuli, who reportedly has ties with Mr. Wang13. The website of Caijing magazine is called Caixin, the first media that published a report on Mr.Guo describing him as a” power hunter” and accusing him of various crimes. It is well known that Chinese media are controlled by government and are not independent. Media can be used to control people’s minds so they are very powerful tools and Mr. Wang knows it very well because although he is not in charge of the department that manages Chinese media he uses Ms. Hu as his own media channel, which makes him more powerful. In fact Mr. Wang wants to do the same in US. In March 2017 Reuters reported that HNA was in talk to buy a controlling stake in Forbes. Since then Forbes has published eight articles14 on Mr.Guo, almost all of them using the word “fugitive” to address Mr.Guo (just for comparison, The New York Times and Financial Times use the word “tycoon”) and all articles are biased compared to The New York Times and Financial Times’ reports on Mr.Guo. This is another example where Mr. Wang converts money into power, that is, utilizing financial power to gain media power.

4.The ultimate threats: the ability to turn any Chinese with interests in China (including Chinese immigrants, Chinese Americans and Chinese visitors) or people from other Countries with interests in China to an agent serving Mr. Wang and Guan Jun.

We know that family means everything to a person and if a person’s family is in danger he or she would do anything to save their families. That’s exactly how people like Mr. Wang control other people. Countless Chinese political dissidents would tell you how their families are threatened by police in China. Just by

10 http://money.cnn.com/2017/07/25/investing/anthony-scaramucci-skybridge-hna-cfius/index.html 11 https://www.cnbc.com/2017/06/09/interview-with-guo-wengui-throws-voice-of-america-into-turmoil.html 12 http://www.chinadaily.com.cn/business/2017-03/08/content_28471206.htm 13 https://www.economist.com/news/china/21723136-what-does-its-feisty-coverage-tell-us-about-chinese-politics- chinese-magazine-fights-battle 14 https://www.google.ca/search?q=forbes+guo+wengui&oq=forbes+guo+&gs_l=psy- ab.3.0.0l2j0i22i30k1j0i22i10i30k1.8721.245929.0.247503.16.15.1.0.0.0.160.1416.11j4.15.0....0...1.1.64.psy- ab..0.16.1407...0i67k1j0i131k1j0i131i67k1.EIt_2bN8QkY 3 | P a g e

threatening is not enough. Offering money or financial support would close the deal. People rarely can resist this carrot and stick strategy. Although Mr. Wang is the discipline chief (that is, disciplining members of Communist Party) he also has power over police forces because most police are members of Communist Party. An agent could provide information about Chinese dissidents who live in US to China. For instance, a popular website (Boxun.com) for Chinese dissidents may have sent to China IP addresses and other information of those who visit the website, according to Mr. Guo. Moreover, in US any one can start an ISP (Internet Service Provider) business, if you can get permits from government agency and have enough money. Potentially an agent can start an ISP company and start collecting intelligence. In fact in Canada there is an ISP ran by Chinese mainly serving Chinese speaking people.

5. Obtain sensitive technology through acquisition of American technology companies

HNA tried to acquire Global Eagle Entertainment but the deal was shot down by Committee on Foreign Investment in the United States (CFIUS) due to “unresolved national security” concerns15. Global Eagle Entertainment specializes in in-flight entertainment and connectivity (IFEC) services. Mr. Wang may use the technology to serve his own purpose in US. The worst nightmare for Americans could be that Mr. Wang‘s agents in US may have gained the ability to assassin any target in US. In one of the recent videos, Mr. Guo described a bizarre incident where his yacht lost control in the middle of river and almost ran into another ship that carries natural gas. Later they found out that the boat lost control only when Mr. Guo’s cellphone was near the yacht’s center control system, which suggests that it could be a foul play or an attempt to kill Mr. Guo and his family because Mr. Guo’s cell phones have been hacked ever since he started to reveal the information about Mr. Wang. And that’s not all. A few days after the incident when Mr. Guo and his family were traveling on the yacht, they found that the yacht was spied by a modified drone on two separate occasions. It may require military-grade expertise to pinpoint the yacht and operate the drones with such high accuracy and precision. These incidents are now under police investigation. If it turns out to be true that it is an attempt to kill Mr.Guo and his family this would be the worst nightmare for Americans because this means that Mr. Wang and Guan Jun ‘s agents can kill anyone in US if they desire. No one will be safe anymore, even in US. It’s the ultimate terrorism.

6. Plan B for Mr. Wang and Guan Jun

More and more officials in China’s Communist Party start to realize that one day the regime has to face its destiny, that is, the day of reckoning by the people of China. So they have to be ready and they have to have a backup plan for it. That’s one of the reasons why Guan Jun wants to use HNA to build a nation within a nation: once the political crisis in China begins and civil war is triggered, they could always regain control of power using the financial power they have got in US to fund an army and they can do it safely in US without even being noticed. Another scenario could be that China becomes democratic and people like Guan Jun can fund their puppets to once again get back into the game. Either way it will conflict with US interests in Asia because people like Guan Jun doesn’t share the same values and beliefs with US.

As we can see that HNA and Mr. Wang and Guan Jun can pose very serious and very real threats to Americans so we have to take actions to cooperate with Mr. Guo to neutralize these threats.

15 https://www.reuters.com/article/us-usa-immigration-trump/new-york-vows-to-sue-trump-over-immigrant-children- protections-idUSKCN1BF271

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What’s in it for US to help Mr. Guo Helping Mr. Guo will not only help US get rid of the threats posed by the corrupted Chinese top officials but also will benefit US in various ways:

1. The money HNA has moved into US could be from criminal activities (for instance, embezzlement and fraud) and it could be used for criminal activities (refer to the threats mentioned above). If this is proved to true in court US government can confiscate the dirty money which could be worth of billions of dollars.

2. Today internet warfare has become a reality. Therefore collecting intelligence about china’s “hacker army” is the key to win the war for US. Apparently Mr. Wang may have ordered to use military-grade technology to hack Mr. Guo’s cellphones and social media accounts and attack US high tech companies. There was this bizarre incident where YouTube’s servers were attacked and forced to shut down just before Mr. Guo wanted to use YouTube to do a live broadcast to reveal evidence against Mr. Wang. It is suspected that this was a foul play by China’s cyber army. Thus it’s important for US to cooperate with Mr. Guo to understand China’s hacking capability.

3. The problem with North Korea and its nuclear weapons could be solved peacefully with a democratic China. A democratic China is in the best interests of both US and China. Therefore help transform china into a democratic nation peacefully and establish friendly ties with China would be very beneficial to US. A democratic China will be US best ally in Asia and secure US role in Asia. Mr. Guo can potentially be the most powerful man in China and he can make this happen.

Mr. Guo’s goal: A democratic China Mr. Guo’s goal is to protect his family which can only be achieved by transforming china into democracy. The reason is simple: the regime will never forgive him because he has betrayed them and they will use all resources to look for opportunity to kill him doesn’t matter where he is. It’s a question of when, not if. So the best solution for Mr. Guo would be a democratic China with judicial independence, independence of media and democracy. This way all oversea Chinese dissidents can go home so the threats to his family will be minimized. And more importantly he’s got the power to do it and he’s got the courage to do it but he needs help from US. It’s in the best interests of both nations to help Mr. Guo.

A democratic and cooperative China is in the best interests of both US and China As Dr. Zbigniew Brzezinski, former National Security Advisor, a master strategist and a respected voice on United States foreign policy, pointed out in his book: “An effective American policy for Eurasia has to have a Far Eastern anchor…a cooperative relationship with mainland China is imperative for American’s Eurasian geostrategy…For China, America across the Pacific should be a natural ally…”16. A democratic China will share the same values and beliefs with US and is in the best interest of US. If US help Mr.Guo to achieve his goal US will establish an unbroken bond with Mr. Guo, who shares the same values and beliefs with US and who with his popularity can shape China’s politics in the future. Therefore an unbroken bond with Mr. Guo means an unbroken bond with democratic China, the best ally for US in Eurasia.

16 The Grand Chessboard by Zbigniew Brzezinski, page 151. 5 | P a g e

Mr. Guo: potentially the most powerful man in China Many have underestimated Mr. Guo’s power. It’s understandable due to the language and culture barriers. However, just because you don’t understand it does mean it’s not important. Mr. Guo’s power initially came from two sources: 1, social media 2, insider information on powerful political figures in China.

The power struggles among powerful political figures have provided Mr. Guo with invaluable information about them. Everyone wants to use Mr.Guo as an outlet to release information that could hurt their rivals. The political power struggle in China has its own rules and information like plans to coup, corruptions, mistress scandals, murders, illegitimate children can be used, once become public, to remove political enemies. The information thus becomes the most powerful weapons once combined with the power of social media. By revealing information that’s lethal to Mr. Wang through social media like Twitter, YouTube and Facebook, Mr. Guo has caused great pain to his enemy and may once and for all finish Mr. Wang’s political life. This also has brought more people to follow Mr.Guo, reinforcing his power on social media: it’s a virtuous circle. The insider information also could lead to the expose of the money laundering schemes conducted by the international corporation controlled by corrupted powerful Chinese officials, which would benefit both US and China because the money can be confiscated under the law of court. If Mr. Guo is to be rewarded financially for this he could use it to buy more valuable information---another virtuous circle. The insider information and information gathered by Mr.Guo through the leads provided by the political figures could be spread through social media and over the China’s Great Wall of internet. The spreading of the powerful memes would trigger the anger of Chinese people and turn them into powerful forces against the regime and bring popularity to Mr.Guo. With popularity comes power. Many believe that if it wasn’t for China’s internet censorship, Mr.Guo would have been China’s most popular man and therefore China’s most powerful man!

Mr. Guo’s strategy Now we have seen the power Mr.Guo has got in his hands. But how would he use it? He has prepared the plan for over 3 years and he’s got help from insiders from top officials in China. There is no way we can know his plan but we can do an educated guess. What we do know now is that Mr. Guo is creating conflicts among powerful political figures in China (prisoner’s dilemma).He is planning to first remove corrupted members of PSC or other powerful figures who have persecuted him, the same people who pose the biggest and immediate threats to his family and his plan. He would do it through releasing evidence against the corrupted top officials. Then he would help Mr.Xi Jingping, the current president of China, to gain full political power. According to Mr.Guo, Mr. Xi may not have gained full political power yet. So phase one would be to concentrate the power to Mr. Xi and hopefully Xi would realize that the transition to a democratic China with two political parties and basic media independence and judicial independence is the only way out. If this doesn’t work Mr.Guo would use Taiwan and Hong Kong as bridge fronts to coerce Xi to follow the plan. And if that doesn’t work out, the alternative plan is to spread Mr. Guo’s message to millions of Chinese and use them as the ultimate power to force Xi to make the transition happen.

Whatever Mr. Guo’ plan is we have to realize that as Mr. Guo implements his plan his power gets bigger and stronger every day. The reason is simple: it’s a virtuous circle. More conflicts among powerful political figures will provide Guo with more valuable information, which in turn brings him more attention on social media. The information also leads to exposing money laundering schemes, that is, more money for Guo as a whistleblower, which in turn can be used to buy more valuable information. And once the messages are spread to China, more and more people in China will start believing in Mr. Guo and will be ready to fight for Mr. Guo and may turn into an army for him.

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How to help Mr. Guo? First and for most, do not trade Mr. Guo for short term interests offered by China. That would be very short- sighted. The long term benefits for US by helping Mr. Guo will be incalculable as argued above.

US have to protect Mr.Guo and make it clear that any attempt to harm Mr.Guo is an act of war and will be dealt with accordingly. US have to make this position known to China, especially to the PSC members. Fail to deliver the message clearly would be a huge mistake because China will underestimate US ‘s resolution to protect Mr. Guo and will be under the wrong impression that US doesn’t take Mr.Guo seriously. And they will try to kill Mr.Guo.

The legal fight in US will be critical to Mr. Guo’s plan. Mr. Guo needs help from US to expose the international corporation’s money laundering plan and bring people behind it to justice.

Don’t force Guo to do things he doesn’t want to. It’s unwise to force Guo to trade China’s national interests for protection. The reason is simple: it would put Mr.Guo in a position against China instead of the corrupted top officials and his enemies would have excuses to eliminate him. Don’t give them the chance to do that.

Cooperate fully with Mr. Guo. Have faith in him because he’s got a plan and he knows how to execute the plan. What US need to do is to follow his cues as long as it doesn’t hurt US interests.

What if we are wrong? It’s highly unlikely that we could be wrong given the leads and evidence provided by Mr. Guo so far. Even if we are wrong, the probability of which is extremely small, we have got nothing to lose.

The risk of inaction: a window of opportunity US can’t afford to lose One thing we have to understand is that people like Mr .Guo is an extremely low probability event, maybe one in a hundred years. No one has done what Mr. Guo has been doing: one man versus a whole regime. He barely escaped the arrest by the police controlled by Mr. Wang before he fled to US. He is a very successful businessman, investor and billionaire. He understands laws and has profound understanding of financial knowledge. More importantly he knows how the Chinese political system works because in China that is a necessary skill set for a businessman to be successful. He once worked with members from Communist party’s Central Commission for Discipline Inspection, before Mr. Wang is charge of the department, and the police to take down a corrupted deputy major of Beijing, who tried to take Mr.Guo ‘s estate properties worth billions of dollars for free. He also had ties with top officials from Ministry of State Security of China. So there is no doubt that he knows how to play the game. However just knowing the game is not enough: you have to be a man with charisma. Few people possess as various talents as Mr.Guo does. His eloquence, his sense of style and his sense of humor all work together to make him a charming personality on social media, which brings him incredible power. He loves US and believes in the same values cherished by every American and he loves his family very much. Above all he is a brave man. He would do anything to save his family and he has proved that he can take tremendous pressure without breaking down mentally.

In short Mr. Guo is absolutely an outlier. His emergence is pure luck, an opportunity that may not come for decades. Fail to protect and help Mr. Guo will be the biggest mistake US could make. If we just sit there and watch the whole thing develop, just like watching a TV episode, we will miss the opportunity to defuse the threats from the corrupted top Chinese officials and give up the benefits for helping Mr. Guo. We will lose the chance to establish friendly tie with Mr. Guo and transform China into democracy. And other free countries are watching closely. If we make mistakes, and force Mr. Guo to seek protection and help from other free countries,

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like UK or Germany, we may lose the status of being the leader of the free world. What we have to understand is that to help Mr. Guo is to help US.

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