The communist party leadership has launched a probe into the alleged family wealth of Wen Jiabao at the premier's request, according to sources.
In a letter submitted to the Politburo Standing Committee, the party's top decision-making body of which the premier is also a member, Wen asked for a formal inquiry into claims made by The New York Times.
A report on October 26 alleged his family had amassed at least US$2.7 billion of assets during his premiership. The Standing Committee had agreed to his request, the sources said.
It is unclear what the inquiry is likely to dig up, or when the results will be published, if at all.
The probe is expected to focus on the family's alleged shares in Ping An, one of the mainland's largest insurance companies.
The Times report, citing regulatory filings and corporate documents, said that in 2007 Wen's family had a US$2.2 billion stake in Ping An.
It also alleged Wen's 90-year-old mother had US$120 million of shares in the company.
According to the sources, several conservative party elders known to dislike the premier's more liberal stance have urged him to provide detailed explanations on all the major allegations in the Times report, especially on the Ping An holdings.
Businesswoman Duan Weihong, whose company Taihong was described by the Times as the investment vehicle for the Wen family, told the newspaper she used the names of Wen's relatives to register the ownership of the Ping An shares.
The party elders argued that this process, which would require registering their official ID numbers and obtaining their signatures, raised immediate questions about how Duan could obtain such personal details without consent from the Wen family.
Wen's wife and his son have been plagued by corruption allegations for years.
But the family issued a statement, through two lawyers, for the first time on October 27, hitting back at the Times allegations about their "hidden riches" and threatening legal action.
It is unclear whether the family will publish further clarifications or go to the courts.
It is also understood the party elders were "unhappy" about the fact that major overseas Chinese websites - which usually swoop on negative news about the mainland's top leaders - have carried a barrage of articles supporting Wen, quoting sources close to his family.
According to their reports, Wen had seized the opportunity to demand that a long-overdue "sunshine law" - which would require a public declaration of family assets by senior leaders - be finally put into effect.
He also said he would be happy to make public his family's assets.
This would appear to be more than just an attempt by the image-conscious outgoing premier to defend his name, analysts say.
They say it shows he is keen to use the inquiry as one last chance to push forward the long-stalled "sunshine law". Professor Zhu Lijia, of the Chinese Academy of Governance, said: "It is a ground-breaking step towards greater government openness and transparency."
He added that if approved, the "sunshine law" could become a milestone in the party's uphill battle against endemic corruption. But Professor He Weifang , a law expert at Peking University, remains sceptical about the feasibility of Wen's reported proposal.
He asked: "How can we know for sure that such an internal inquiry into one of the top state leaders, who is still in office, is credible and convincing?
"Even if Wen wants to disclose his assets, I don't think other senior leaders, who may also have 'hidden wealth' of their own, will allow him to go ahead, considering the explosive social repercussions."