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  • Sep 18, 2014
  • Updated: 4:57am

How Xi Jinping can prove China is not a kleptocracy

PUBLISHED : Tuesday, 03 July, 2012, 12:00am
UPDATED : Tuesday, 03 July, 2012, 12:00am

Last Friday the Bloomberg news agency published a 4,000-word investigation into the family business interests of Xi Jinping, heir apparent to China's presidency.

From rare earth minerals and energy investments, through telecommunications and power equipment, to infrastructure construction and property development in Beijing, Dalian and Shenzhen, Bloomberg detailed a multibillion-yuan business empire built up by Xi's siblings, his in-laws and their children.

Although the news agency stressed that its reporters had not traced any holdings directly to Xi, his folk-singer wife or student daughter, the article was still deemed sufficiently embarrassing for the authorities to block access to Bloomberg's website on the mainland.

Yet if Xi's relatives have been making the most of their exalted political connections to line their pockets, it would surprise no one. The families of other senior Communist Party leaders have established business empires that are just as extensive, and in some cases considerably larger.

In 2005, President Hu Jintao's son-in-law, a former chief executive of internet giant Sina.com, was listed by the Hurun Report as one of the mainland's wealthiest men.

And according to a secret US diplomatic cable sent in September 2007 and subsequently posted on the WikiLeaks website, the wife of Premier Wen Jiabao is a power in China's diamond trading business.

Wen's wife and children, the cable continues, 'all have a reputation as people who can get things done' and who are 'amenable to receiving exorbitant 'consulting fees''.

Another cable sent in July 2009 says it is well known how the family of former premier Li Peng exert control over the electricity generation sector, while associates of Politburo standing committee member Zhou Yongkang dominate the country's oil industry.

The cable goes on to describe how the family of late revolutionary leader Chen Yun control substantial interests in the banking sector, while Chinese People's Political Consultative Conference chairman Jia Qinglin commands an extensive power base among Beijing's real estate developers. Other senior leaders boast close ties to developers elsewhere and to the heads of major corporations in other key economic sectors.

There's a pattern here. In all these accounts, the families of senior party leaders make their money in sectors regarded by Beijing as strategic and that are tightly controlled by the state.

Property development is a favourite, with companies controlled by officials' relations managing to acquire prime plots of building land from their local government owners.

Serving monopolistic state-owned giants is another, with leaders' relatives successfully landing lucrative contracts to supply expensive equipment to state-controlled telecommunications or power companies.

Now, it's possible that all these assorted relations won their deals and made their fortunes solely through the brilliance of their business acumen, and not by trading on their political connections. Talent, after all, can run in the family.

But to the rest of the world, this network of family businesses looks remarkably like a crony-kleptocracy, in which the relatives of senior leaders use their influence to obtain cheap funds from the state-controlled banking sector; funds which they then use to set up companies to extract handsome rents from the state sector and from China's people at large. Happily, Xi should soon be in the perfect position to prove this impression wrong. As president he will be ideally placed to liberalise the banking sector, break up state monopolies, and open protected sectors of the economy to free and transparent competition.

Then if a foreign news agency runs a story about the business interests of a senior official's relatives, there will be no need to block access to its website. Everyone will know they made their fortunes by talent alone.

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