Inside China’s Kleptocracy

Since ascending to power at the 18^th Party Congress, Xi has made fighting corruption one of his key policies. However, even though he has repeatedly reminded officials to reign in their family members’ business and political activities, it is clear that Xi Jinping’s older sister Qi Qiaoqiao and her husband, Deng Jiagui, have amassed great wealth in the past decade.

According to reports by the New York Times, Qi and her husband Deng Jiagui established Qinchuan Dadi Investment (a Beijing holding company) in 2007, when Xi first ascended to the Politburo Standing Committee. It seems likely that his new political influence granted the couple gained easy access to strategic economic sectors under state control, such as the mining and rare earth industries. Qinchuan Dadi Investment’s original $2.7 million investment had ballooned to $156 million by 2011. Between 2012-2014, as President Xi’s anti-corruption campaign reached the highest levels of the CCP, Qi and her husband sold their investments in ten companies. This move was viewed as a means to reduce political liabilities for Xi Jinping amidst his anti-corruption campaign.

Deng Jiagui has also been linked to multiple offshore accounts in the British Virgin Islands. According to the International Consortium of Investigative Journalists (ICIJ), Deng Jiagui acquired one offshore firm through Mossack Fonseca in 2004 and two more in 2009. It is unclear what the companies were used for, but at the time, Xi Jinping was one of nine men on the Politburo Standing Committee. By the time Xi was named general secretary of the Chinese Communist Party in 2012 and the country’s president in 2013, Deng’s BVI companies were dormant.

Other business activities in Xi’s family have raised questions about whether relatives of high-level politicians benefit from unfair advantages. For instance, under the chairmanship of Wu Long, Xi’s other brother-in-law, New Postcom Equipment Co. achieved early market success. In 2007, the same year Xi ascended to the Politburo Standing Committee, New Postcom secured a state contract to supply cellphone handsets to state-owned China Mobile, beating out bigger competitors such as Motorola. Building on this early success in gaining market share, New Postcom won a contract in 2012 to supply equipment for China Mobile’s expanded TD-LTE network.

Li Keqiang, the current Premier of the State Council, has been implicated through the alleged dealings of his wife Cheng Hong and his older sister Li Xiaoqing. While there is little direct information on Premier Li’s wife, the International Consortium of Investigative Journalists’ (ICIJ) database of offshore companies does include a “Cheng Hong,” who is a director and shareholder of GogoTime Holding, Ltd., an offshore company incorporated in the Cayman Islands in 2006. Wiser Associates, Ltd., the primary intermediary of GogoTime, also serves as the intermediary for EMarket Holding Group Corp., another offshore company discovered to be connected to former Premier Wen Jiabao’s family.

Another ICIJ filing lists Li Xiaoqing (the same name as Premier Li’s older sister) as a director and shareholder of PacCentury Resources, Ltd., a BVI company incorporated in January 2008. According to an ICIJ filing, a property in Folsom, California is also included as a listed address. Public real estate records for 2016 state that the property is currently valued at $528,020.

Zhang Dejiang is the third-ranked member of the Politburo Standing Committee and Chairman of the Standing Committee of the National People’s Congress. He is also deputy head of the National Security Commission and the top official responsible for Hong Kong and Macau affairs. Zhang is the son of Zhang Zhiyi, a former PLA major general, who served as deputy commander of the Artillery Force in the Guangzhou Military Region, and a protégé of Jiang Zemin.

Educated at Kim Il Sung University, Zhang first rose to prominence as Deputy Party Secretary of the Jilin, a province that borders North Korea. He later served as Party Secretary of Guangdong province, where he was criticized for censoring reports of the SARS outbreak that could have prevented the spread of the virus from Guangdong to Hong Kong. He was also criticized in Chinese media for his response to a high-speed train collision in China which left at least 39 people dead in 2011. According to Duowei News, the search-and-rescue operation was poorly executed, while Zhang and his team stayed at the five-star Shangri-la Hotel far from the disaster site.

Despite his past mistakes, it is possible that Zhang’s family fortunes are protected by his wife’s powerful ties to finance sector. Since 1983, his wife, Xin Shusen, has held a variety of senior executive positions at China Construction Bank (CCB), a state-owned bank with a market value of $162.8 billion. In addition, Zhang’s connections to China Construction Bank affords him access to financial centers around the world—the bank has offices in Hong Kong, Singapore, London, Frankfurt, Johannesburg, Tokyo, Seoul, New York, Ho Chi Minh City and Sydney. The bank itself does not have a clean record, with two past presidents imprisoned for accepting large bribes.

Yu Zhengsheng, the Chairman of the Chinese People’s Political Consultative Conference (CPPCC), comes from a prominent family with strong ties to the former Chinese leader Deng Xiaoping. In 1984, Yu took a leading role in the Welfare Fund for the Handicapped, which was founded by Deng Pufang, first son of Deng Xiaoping. In 1985, Yu was appointed the general manager of Kanghua Company, a company led by Deng Pufang, that was eventually shut down because of widespread public complaints of business-government collusion. In the same year, he became the Deputy Secretary of CPC Yantai Municipal Committee.

It is speculated that his ties to the Deng family have been instrumental to his rise—especially after his brother, Yu Qiangsheng, a former Chinese intelligence officer, defected to the United States and exposed the top Chinese spy in the U.S., Larry Wu-Tai Chin.

Yu Zhengsheng’s wife, Zhang Zhikai, was listed as the legal representative of China Great Wall Computer Shenzhen Co., Ltd. in 2002. The company, publicly listed in the Shenzhen Stock Exchange, is a subsidiary of China Electronics Corporation (CEC), one of the largest producers of telecom equipment in China. In 2015, CEC’s annual revenue was valued at CNY 72.9 billion.

Formerly the head of the Propaganda Department of the CCP and currently the First Ranked Secretary of the Secretariat, Liu Yunshan has been a prominent member of the national leadership of the Communist Party since 2002. His son, Liu Lefei, is considered one of China’s most powerful private equity managers and is currently the vice-chairman of CITIC Securities, which was put under the spotlight after three of its executives were investigated on suspicion of insider trading. He was also the CEO of state-owned China International Trust and Investment Corp. (CITIC) Private Equity Funds Management Co., Ltd. from 2008-2012. Under Liu Lefei’s leadership, CITIC Private Equity Funds Management Co. Ltd. was able to raise 9 billion yuan ($1.32 billion) for its first industrial investment fund, named CITIC Mianyang Private Equity Fund. The National Council for Social Security Fund, China’s state pension fund, was the single largest investor in the fund.

The powerful political ties of the Liu family are also evident through the marriage of Liu Lefei to Jia Liqing, the daughter of Jia Chunwang, China’s former minister of public security and chief prosecutor. Jia Liqing herself was executive of Ultra Time Investments Ltd., a company registered in the British Virgin Islands in 2009.

Wang Qishan, the Secretary of the Central Commission for Discipline Inspection and a member of the Politiburo Standing Committee, has been the public face of Xi Jinping’s anti-corruption campaign since 2013. However, in 2013, the Chinese Boxun News Network reported that Wang Qishan owns two properties in San Francisco through his wife Yao Mingshan and her sister Yao Mingwei. The two properties combined are worth $4.2 million. Radio Free Asia also posted in 2013 an aerial image of one of the mansions in one of Silicon Valley’s most exclusive neighborhoods. After examining Santa Clara County government records, Sina Daily News was able to report in the same year that the owner of the pictured house as Yao Mingduan, a name suspected to be a cover for Yao Mingshan.

Wang Qishan is not the first of the Chinese elite to invest in overseas property. It is estimated that Chinese buyers spent $30 billion on overseas real estate alone in 2012. However, President Xi Jinping’s crackdown on capital flight has led to a drastic increase in investigations and convictions. The Atlantic posted in 2013 that the Communist Party had announced plans to seize a villa in the French Riviera owned by Gu Kaili, the wife of former Politiburo member and recently sentenced life prisoner Bo Xilai. More recently, The New York Times reported in 2016 that Ling Wancheng, the wealthy brother of ousted former Communist Party leader Ling Jihua, has been living in a $2.5 million home in Loomis, California he bought earlier in 2013 to escape the Party’s investigation into his brother. Should Wang Qishan be found guilty of similar corruption crimes, his punishment will likely be equally severe, if not worse, due to his anti-corruption leadership position.

Zhang Gaoli, the Vice Premier of the People’s Republic of China, first made the headlines through his role as Party Secretary of Tianjin. According to the Epoch Times, the Tianjin government under Zhang Gaoli encouraged citizens to invest in private equity companies from 2010 to 2011— all of which were shell companies that disappeared without a trace in 2012. Shenghua Investment Holding Group Co., one of these PE firms, had earned nearly 1 billion yuan in multiple subsidiaries based in Tianjin until the company refused to pay the promised return at the end of 2011. The management personnel and company quickly disappeared soon after, with the blame falling on the Tianjin government. In 2012, victims of private equity fund scams demanded that Zhang Gaoli, as Tianjin’s Party Secretary, be held accountable for their financial losses. According Investment Asia, over 100 billion yuan, the equivalent of over $15 billion dollars, was stolen and over 1 million Chinese were affected. On September 3 and 4, one thousand victims protested in front of the Tianjin municipal government building and chanted “Zhang Gaoli, [Tianjin major] Cui Jindu, give back our money!”

More recently, it was discovered that the Hong Kong businessman Lee Shing Put is married to Zhang Xiaoyan, the adoptive daughter of Zhang Gaoli. At the time of Zhang Gaoli’s elevation to the Standing Committee, Lee was the director of 17 Hong Kong companies. He is listed in the Panama Papers as a shareholder of Sino Reliance Networks Corporation (now closed), Glory Top Investments and Zennon Capital Management— all companies incorporated in the British Virgin Islands with registered addresses in Hong Kong.