A nation within a nation: a major threat to US posed by corrupted members of China’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 Hainan 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 Beijing 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.