Following up on my post on China, the FT today has an amazing investigation into the massive scale and tawdry manner of “princeling” looting.” It’s worth reading the article, and particularly looking at the graphic which links the money to members of the Politburo and other officials.
No formal charges of corruption have been levelled against anyone in the family, and senior advisers to the leadership say they believe the case against Mr Bo and his wife will not dwell on how they grew so rich. This is mainly because the party is concerned about drawing attention to wealth amassed by other leading families, revolving around a core of about 100 military and civilian households.
An investigation into the activities of other political families reveals a web of vast and tangled dealings similar to that controlled by the Bo family. Virtually every member of the party’s nine-member politburo standing committee, the elite group that rules the country, has relatives involved in businesses that rely heavily on state approvals and support…
“In the 1990s most senior leaders at least tried to moderate their princelings as they got rich but now there is almost no restraint and it has got out of control,” says a leading Chinese financier with close ties to the party leadership. “This is the single biggest test of the legitimacy of the party…”
“The longer you stay in China the more you realise that everything is controlled by a couple of hundred powerful families,” says one veteran foreign diplomat who specialises in elite Chinese politics. “You also realise that most major foreign companies are trying to hire the sons and daughters of Chinese officials so they can get access and do business.”
However, the chief executives of three multinationals with decades of experience operating in China told the Financial Times that engaging relatives of senior officials as consultants or as joint venture partners was standard practice – and, in fact, vital in many industries. They said these princelings usually preferred to hold stakes in joint ventures through a holding company in Hong Kong or the Caribbean, where Chinese anti-corruption investigators cannot find them.
Consulting fees are often paid in places such as Dubai or Hong Kong, and agreements are frequently written on red paper because photocopies or scans show up black, making it harder for them to be circulated widely, these people said. In some cases, these relatives are introduced as highly paid consultants at the end of the negotiation process, and their sudden appearance is usually taken as a sign that the deal will go ahead.
These chief executives and others said that, as China’s economy has grown and the opportunities for enrichment have multiplied, it has become much harder for foreign companies to recruit or gain access to the relatives of the most senior officials. “These days, a foreign bank would be lucky to get a kid whose father was a vice-minister,” said one senior executive at a western bank in China. “The big families want to go into private equity or do business themselves because that’s where the real money is.”
Sort of begs another question then: When the scale of the corruption is epic and brazen and the information is increasingly out there such that the FT is reporting on it, what happens next?