Untangling the Wen family's web of riches
The premier's relatives control US$2.7 billion in assets, much of it hidden behind a complex network of holdings, business records show
The mother of Premier Wen Jiabao was a schoolteacher in northern Tianjin. His father was ordered to tend pigs in one of Mao Zedong's political campaigns. And during childhood, "my family was extremely poor", Wen said in a speech last year.
But now 90, the premier's mother, Yang Zhiyun , not only left poverty behind - she became outright rich, at least on paper, according to corporate and regulatory records.
The details of how Yang, a widow, accumulated such wealth are not known. But it happened after her son was elevated to the ruling elite, first in 1998 as vice-premier and then five years later as premier.
Many of Wen's family, including his son, daughter, younger brother and brother-in-law, have become extraordinarily wealthy during his leadership, an investigation by The New York Times shows. A review of corporate and regulatory records indicates the premier's relatives, some of whom have a knack for aggressive deal-making, including his wife, have controlled assets worth at least US$2.7 billion.
In many cases, the names of the relatives have been hidden behind layers of partnerships and investment vehicles involving friends, work colleagues and business partners. Unlike most new businesses in China, the family's ventures sometimes received financial backing from state-owned companies, including China Mobile. At other times, the ventures won support from some of Asia's richest tycoons - including Hong Kong's Cheng Yu-tung. Wen's relatives accumulated shares in banks, jewellers, tourist resorts, telecoms companies and infrastructure projects, sometimes by using offshore entities.
The holdings include a villa development in Beijing; a tyre factory in northern China; a company that helped build some of Beijing's Olympic stadiums; and Ping An Insurance, one of the world's biggest financial services companies.
As premier in an economy that remains heavily state-driven, Wen has broad authority over the major industries where his relatives have made their fortunes. It is not known what role - if any - Wen, 70, has played in most policy or regulatory decisions. But in some cases, his relatives have sought to profit from opportunities made possible by those decisions.
The premier's younger brother has a company that was awarded more than US$30 million in government contracts and subsidies to handle wastewater treatment and medical waste disposal for some of China's biggest cities, according to estimates based on government records. The contracts were announced after Wen ordered tougher regulations on medical waste disposal in 2003 after the severe acute respiratory syndrome outbreak.
In 2004, after the State Council, which Wen presides over, exempted Ping An Insurance and other companies from rules that limited their scope, Ping An went on to raise US$1.8 billion in an IPO. Partnerships controlled by Wen's relatives - along with their friends and colleagues - made a fortune by investing in the company before the public offering.
One wealthy partner of the Wen relatives has been Cheng, who controls New World Development and is worth about US$15 billion, according to Forbes .
In the 1990s, New World was seeking a foothold on the mainland for its jewellery chain, Chow Tai Fook, which opened its first mainland store in 1998.
Cheng and his associates invested in a diamond venture backed by Wen's relatives and co-invested with them in an array of corporate entities, including Sino-Life, National Trust and Ping An, according to records and interviews with some of those involved. Those investments are now worth at least US$5 billion. Chow Tai Fook has also flourished. Today, the mainland accounts for 60 per cent of the chain's US$4.2 billion in annual revenue.
Cheng, 87, could not be reached for comment. Calls to New World Development were not returned.
While Communist Party regulations call for top officials to disclose their wealth and that of their immediate family members, no law or regulation prohibits relatives of even the most senior officials from becoming deal makers or major investors - a loophole that effectively allows them to trade on their family name. Some Chinese argue permitting the families of party leaders to profit from the country's economic boom has been important to ensuring elite support for market-oriented reforms.
Even so, the business dealings of Wen's relatives have sometimes been hidden in ways that suggest the relatives are eager to avoid public scrutiny. In the case of Wen's mother, The Times calculated her stake in Ping An - valued at US$120 million in 2007 - by examining public records and government-issued identity cards and by following the ownership trail to three Chinese investment entities.
The apparent efforts to conceal the wealth reflect the highly charged politics surrounding the country's ruling elite, many of whom are also enormously wealthy but reluctant to draw attention to their riches.
"In the senior leadership, there's no family that doesn't have these problems," said a former government colleague of Wen who has known him for more than 20 years. "His enemies are intentionally trying to smear him by letting this leak out."
The Times presented its findings to the government for comment. The Foreign Ministry declined to respond to questions about the investments, the premier or his relatives. Members of Wen's family declined to comment or did not respond to requests for comment.
Duan Weihong , a wealthy businesswoman whose company, Taihong, was the investment vehicle for the Ping An shares held by the premier's mother and other relatives, said the investments were actually her own. "When I invested in Ping An I didn't want to be written about," Duan said, "so I had my relatives find some other people to hold these shares for me."
But it was an "accident", she said, that her company chose relatives of the premier as listed shareholders. Until presented with the names of the investors, she said, she had no idea they had selected relatives of Wen.
The review of the corporate and regulatory records, which covers 1992 to 2012, found no holdings in Wen's name. And it was not possible to determine from the documents whether he recused himself from decisions that might have affected his relatives' holdings or whether they received preferential treatment. But for much of his tenure, Wen has been at the centre of rumours about efforts by his relatives to profit from his position.
His wife, Zhang Peili , is one of the country's leading authorities on jewellery and gemstones and is an accomplished businesswoman in her own right. By managing state diamond companies that were later privatised, The Times found, she helped her relatives parlay their minority stakes into a billion-dollar portfolio of insurance, technology and real estate ventures.
The couple's only son sold a technology company he started to the family of Asia's richest man, Li Ka-shing, for US$10 million and used another investment vehicle to establish New Horizon Capital, now one of China's biggest private equity firms, with partners like the government of Singapore, according to records and interviews with bankers.
The premier's younger brother, Wen Jiahong , controls US$200 million in assets, including wastewater treatment plants and recycling businesses, the records show.
As premier, Wen has staked out a position as a populist and a reformer, someone whom the state-run media has nicknamed "the People's Premier" and "Grandpa Wen".
While it is unclear how much the premier knows about his family's wealth, US State Department documents released by WikiLeaks in 2010 included a cable that suggested Wen was aware of his relatives' business dealings and unhappy about them.
"Wen is disgusted with his family's activities but is either unable or unwilling to curtail them," a Chinese-born executive working at a US company in Shanghai told American diplomats, according to the 2007 cable.
In the winter of that year, just before he began his second term as premier, Wen called for new measures to fight corruption, particularly among high-ranking officials. The speech was consistent with the premier's earlier drive to toughen disclosure rules for public servants and to require senior officials to reveal their family assets.
Even so, many of the holdings found by The Times would not need to be disclosed since they are not held in the name of the premier's immediate family - his wife, son and daughter. About 80 per cent of the US$2.7 billion in assets identified in The Times' investigation and verified by the outside auditors were held by, among others, the premier's mother, his younger brother, two brothers-in-law, a sister-in-law, daughter-in-law and the parents of his son's wife.
The premier's supporters say he has not personally benefited from his extended family's business dealings and may not even be knowledgeable about the extent of them. In March last year, the premier insisted he had "never pursued personal gain" in public office.
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