[Book] China: From Permanent Revolution to Counter-Revolution

Postscript

Financial interests of CCP leaders

In 2015 some 11.5 million documents which belonged to the Panamanian law firm of Mossack Fonseca were leaked by an anonymous source. The leaked documents did not, generally, show any illegal activities but they did reveal the private wealth and business connections of many who would have preferred their details to have remained secret. Further investigations by the New York Times and others gave more insight into the the personal wealth of top Chinese leaders. Control of the communications industry and state censorship ensures information such as this is not available in China unless the Party tops want it in the public domain.

The Standing Committee of the Politburo, the top decision making body of the CCP, consists of seven people; Xi Jinping, Li Keqiang, Zhang Dejiang, Yu Zhengsheng, Liu Yunshan, Wang Qishan and Zhang Gaoli. Aggregation of personal wealth is, of course quite possible within a deformed workers’ state, but there are limits. It is difficult to accept that a Party top with a personal fortune of over US$100 million (which is largely invested in private property and commodity production) is of the same class as a miner earning US$5,000 a year. These top Party leaders are greedy. They amass huge personal fortunes but still take full benefit in terms of the perks provided by the state as part of their jobs; luxury accommodation, chauffer driven limousines and so on.  

Xi Jinping, current President of China and General Secretary of the Party (2013 - ) is said to be worth about US$100 million personally. A New York Times investigation alleges the family of the new President and “anti-corruption hero”, has interests including investments in companies with total assets of US$376 million; an 18% indirect stake in a rare-earths company with US$1.73 billion in assets; and a US$20.2 million holding in a publicly traded technology company. Xi’s brother-in-law Deng Jiagui, has been named in the Panama papers as linked to offshore deals that hid billions of dollars.

Li Keqiang, was the man behind the report China 2030: Building a Harmonious and Creative High Income Society, co-written with the World Bank (www.worldbank.org) - a blueprint to fully open the Chinese economy to global capital, allowing the US and other imperialisms unrestricted entry into China. Also included is the privatisation of most remaining state enterprises, a process likely to destroy millions of jobs. Li will be in charge of implementing this onslaught against the working class. He has managed to keep details of his personal wealth well hidden.

 Zhang Dejiang is known for his “laissez-faire” economic policy and iron-fisted approach to workers and peasants. While he was in charge in Guangdong province in the 1990s and early 2000s he ordered the violent suppression of several mass rural protests, including the fatal shooting of 20 farmers in Shanwei in 2005. He was also linked to the plundering of Shenzhen Airlines when he allowed a little known businessman to it take over. By 2009, Shenzhen Airlines was bankrupt, owing some $16 billion, but huge sums were believed to have been salted overseas.

Yu Zhengsheng has proclaimed that it would be no problem to make public his assets, because “I don’t have much property.” In fact, he is notorious for corruption scandals involving property and businesses. Without naming him, China’s leading financial magazine Caijin, reported in 2011 that a businesswoman built an empire of 20 companies through a network of corruption involving hundreds of officials. Her entry point to the CCP was Yu, when he was the Hubei province Party secretary in 2001. The same magazine reported in 2007 that two Beijing-based private companies bought 91.6% of the shares in Shandong province’s largest state-owned power company, the Shandong Luneng Group, which had assets of 73.8 billion yuan, for just 3.73 billion yuan. One of the key figures behind the dubious deal was Yu. After Yu was appointed Shanghai Party secretary in 2007, his administration demolished countless residents’ homes to clear land for projects such as the Shanghai World Expo, Disneyland and the Beijing-Shanghai high-speed railway, which provided huge profits for developers and big businesses. It is said that the Yu family pocketed countless millions in bribes.

Liu Yunshan is head of the Propaganda Department and has enforced President Hu’s program of building a “harmonious society” by tightening censorship: “to be harmonised,” means to be blocked from the Internet. In 2003, Liu championed the transformation of the Beijing News into China’s first joint-stock company, spearheading a wave of media restructuring. Liu’s son, Liu Lefei was until recently the president and CEO of CITIC Private Equity and is reported to have personally raised over US$5 billion. He has used his father’s political influence to amass a fortune and has been listed by Fortune magazine as one of the “25 Most Powerful Businesspeople in Asia”. His daughter-in-law, Jia Liqing, was named in the Panama papers, but Yunshan is well placed to ensure this news does not reach the Chinese public.

Wang Qishang is a member of the so-called “Princelings Party”, consisting of those who have risen to power because they are related to previous important figures in the Party. He is the son-in-law of a former Politburo Standing Committee member, Yao Yiling. Wang has long advocated accelerating the opening up of China as a giant cheap labour platform. He was a leading figure supporting the privatisations of the 1990s that destroyed tens of millions of jobs. The Bush administration’s Treasury Secretary Henry Paulson praised Wang in Time magazine in 2009: “He is the man China’s leaders look to for an understanding of the markets and the global economy. As a result, China has been supportive of US actions to stabilise our capital markets and has not given in to those who advocate reversing economic reform to insulate China from the world.”

Zhang Gaoli represents the interests of Party members employed in the state owned giants including those being made ready for privatisation, and so could be expected to differ from Xi in the approach to be taken and the speed to be adopted. However, that does not mean Zhang is in favour of moving China in a socialist direction. Quite the contrary. Zhang’s daughter is married to the son of Li Xianyi, who owns one of the largest glass manufacturing businesses in mainland China. Zhang has extensive business interests in Hong Kong where his other daughter is married to Lee Shing Put, director of 17 companies. When Zhang was Party secretary of Shenzhen he used his influence in adjoining Hong Kong to help the family of Jiang Zemin (paramount leader of China from 1989-2002) buy land and establish a US$8 billion telecom company, to be run by Jiang’s eldest son who has recently been named the head of the new Shanghai Technical University. His son-in-law, Lee Shing Put was named in the Panama papers.

Jiang Zemin used his political power as President (1993-2002) to embezzle government resources on a huge scale. Together with then Premier Zhu Rongji (1998-2003), he endorsed the plan for the privatization of state enterprises. The funds for state enterprises allocated by the central government became loans to help form joint ventures with foreign corporations. This process, it is claimed, allowed government officials to pocket personal gains in the millions of US$, and also gave them the means of laundering the money abroad.

According to the book Anything for Power: The Real Story of China’s Jiang Zemin, based on sources in Shanghai familiar with Jiang and published by The Epoch Times, after Jiang was appointed Party head in 1993, he and his son (Jiang Mianheng) embarked on a path of personal aggrandisement. The process began in 1994, when the pair purchased the state enterprise Shanghai Joint Venture, which was valued at several hundred million yuan by the Shanghai Stock Exchange, for only a few percent of its worth. Nominally a state enterprise, in reality it became the private property of Jiang’s family. The book claims that the selling-off of state enterprises at far below their real values allowed the Jiang family to take control of China Netcom Telecommunications Limited, Shanghai Automobile Industry, Shanghai Information Network, and Shanghai Airport Corporation.

Alvin Jiang,  Zemin’s grandson and Jiang Mianheng’s son, appears to have the family knack of landing lucrative deals.  Alvin is a third generation “princeling” whose Chinese given name is Zhicheng, which means, “with ambition, you can achieve”. It is claimed that Alvin is the government link person for Boyu, a private equity firm that has achieved the kind of successes that other firms can only dream of, in particular  Boyu’s 2011 purchase of a controlling stake in Sunrise Duty Free - which runs all the duty-free stores at Shanghai and Beijing’s international airports. That deal, it is believed, was evidence that Jiang Zemin’s grandson could gain access to a strictly controlled state sector and convert those assets into a highly profitable investment (thomsonreuters.com/14/03/CHINA-PRINCELING.pdf].

The President of China from 2003-2013 was Wen Jiaboa. The same New York Times investigation found that the close family of Wen Jiabao had wealth amounting to around US$2.7 billion. His son Winston Wen was co-founder of New Horizon Capital and raised $3.2 billion funds, and is the best known of China’s private equity princelings. In 2012, Wen became chairman of state-owned China Satellite Communications Company.

The personal wealth of Hu Jintao, General Secretary (2003-2013), is more modest being only US$400,000 (possibly saved from his US$11,000 annual salary). His son has been much more successful, in 2008 Hu Haifeng was promoted by the Party to lead Tsinghua Holdings, a large conglomerate that controls over 30 companies including Nuctech (a nuclear technology company that is one of the world’s top providers of security scanning equipment, supplying about 50 nations - in late 2006, despite protests of corruption, the company won a contract to install advanced scanners at all 147 of China’s airports to detect potentially dangerous liquids). Hu Haiqing, his daughter, is married to Daniel Mao, former chief executive of Sina.com, one of China’s largest web portals. In 2003, Mr Mao’s wealth was estimated to be as much as US$60 million.

However, Hu’s top aide, Ling Jihua, vice chairman of the National Chinese People’s Political Consultative Conference and Director of the General Office of the Party Central Committee - a position comparable to the White House chief of staff, succeeded in amassing a fortune of US$13.4 billion.

Investigations of other top Party people reveal they are all an integral part of the new capitalist elite. These people are not “sharing” power with the capitalists they are the capitalists. The super rich are supported by a stratum of wealthy Party and state bureaucrats, their corporate partners (Weil, R. A House Divided: China after 30 Years of ‘Reforms’, Economic and Political Weekly, 43(52)61-69, Dec. 2008).

Zhou Yongkang was a member of the 17th Politburo Standing Committee. Zhou represented the section of the Party bureaucracy employed in heavy industry (especially mining, steel and oil) which is attempting to slow down the privatisation of industries remaining in the state sector, and had dared to organise opposition to President Xi. He was removed from the Politburo at the 18th Congress of the CCP in November 2012.

In a truly Stalinist manner his removal was accompanied by a purge of those he had placed in senior positions particularly in the oil and gas industry (BBC News, 11 June 2015). Next he was publicly disgraced by being charged with corruption. Given that most, if not all, state officials are corrupt to some degree and the higher up the bureaucratic ladder the more corrupt; corruption charges are a sure-fire and popular means of dealing with one’s political opponents. Zhou was convicted of accepting bribes, abuse of power and revealing state secrets; the last charge was a clear signal that more then just corruption had been involved. He was sentenced to life in prison.

The New York Times and other newspapers dug into the wealth held by Zhou Yongkang and his family. It turns out that Zhou had amassed a private fortune of about US$150 million, in China alone, with unknown millions salted away in overseas holdings.

However it was Zhou’s relatives - predominantly his eldest son - who had gained most. Zhou’s family hold or have controlling stakes in at least 37 companies many of which have major contracts to work jointly with the giant, state-owned, China National Petroleum Corporation (CNPC) which was headed by Zhou in the 1990s. As a top Party bureaucrat, Zhou had maintained a special relationship with CNPC which gave him substantial influence over a giant firm with annual revenue in excess of $400 billion. Mr. Zhou’s eldest son, Zhou Bin, 42, is the majority owner of a Beijing company that sells equipment to CNPC, and has stakes in up to 11 other companies that do business with CNPC. They also have substantial holdings in Sichuan Province, one of the country’s most populous provinces, where Zhou was Party chief from 1999 to 2002. Visit http://english.caixin.com/2014-07-29/100710458.html to get an idea of the extent of the Zhou family business links.

The corruption of the CCP is demonstrated by its astonishing tolerance to the bribes Party members are given by the business sector. Bribery is widespread, offered as payment of tuition fees at overseas schools for children, stocks and bonds allocated to family members, etc. Of course the example of the leaders is emulated throughout the Party. However, discretion is required. Wei Pengyuan, Deputy Chief of the National Energy Commission, generated a local scandal and drew public attention to himself and his lifestyle when he publicly threatened to kill his mistress. A police raid on his home followed and, in October 2014, found the equivalent of US$30 million in cash at a time when the average salary in China was less than US$5,000 (BBC News, 31 October 2014). Wei was subsequently charged with corruption, found guilty and jailed for life.

How local CCP leaders became major capitalists

In 2002 there were three, in 2005 ten, in 2014 over 150, and in 2016 China had some 568 US$ billionaires, overtaking the USA which had “only” 535 (BBC News, 25 Feb. 2106). Hu cites this as a success of the so-called ‘Princeling Party’, a grouping within the CCP consisting of the offspring of the older generation of leaders appointed to top political positions to protect the material interests of Party members (Hu, R. China’s Paradoxical Reforms, Global Business and Economics Review, 2011, 8(3)11-21). The familial ties linking Party tops to the super rich are very direct. In 2005, the richest of all was Larry Rong Zhijian - son of a former Vice President of the PRC - and leading “red capitalist” - Rong Yiren, who served in key state positions, most notably as the country’s vice president (1993-98) without being a member of the CCP, but who did a great deal to open China to the global market (Obituary, The Guardian, 18. Nov. 2005).

Because in China there is no significant divide between Party and state there are few, if any, effective checks and/or balances on top officials so corruption is absolutely rampant. It is true that the government makes a lot of noise about its policy of “killing the chicken to frighten the monkey” and occasionally demotes, imprisons or even executes an official as a warning to others, but the money to be made is so fantastic and the chances of being caught so small that these measures are generally ineffective. An accidentally leaked People’s Bank of China report revealed that between 16-18,000 CCP officials who had fled China in the last 20 years, took a total of about US$160 billion with them, indicating the wealth that is flowing into the hands of Party members.

Many Party members began to acquire their wealth when they gained control of a successful TVE. The ownership of these nominally collective enterprises was gradually consolidated in the hands of their managers or local Party officials, often the same person (Hart-Landsberg, M., and Burkett, P., China and Socialism, Monthly Review, 56(3) 2004). In towns, many Party and government officials were able to translate their managerial positions into ownership of privatised small and medium SOEs, either by sleight of hand or paying peanuts for a going concern. Party cadres, generally, found the property sector a particularly fertile ground for amassing quick riches. Permission for construction projects valued at billions of dollars depended on the say-so of local Party tops who, not surprisingly, soon acquired extensive property holdings. On 12 September 2014, CNBC News claimed the number of dollar millionaires in China had reached more than 1 million. Many of these, if not the majority, are CCP members who use the loophole of a lack of central land records to salt away their ill-gotten gains from bribery and corruption, buying the leases of prime city-centre apartments under pseudonyms (Chong-En Bai, et al.,  Crony Capitalism with Chinese Characteristics Tsinghua University, School of Economics and Management, May 2014)..

A good example of how crony capitalism and the end of central planning combined to enable the meteoric rise of those with good Party connections is Liu Yongxing. In the early 2000s, the China Aluminium Corporation (Chinalco, an SOE), had a 98% share of the aluminium market in China. The central government gave Chinalco exclusive rights over all national bauxite deposits. Yet, by 2008, the market share of Chinalco had dropped to less than 50%, due to the entry of large private firms into the aluminium market.

Liu Yongxing, the moving spirit of the East Hope Group understood the Achilles heel of Chinalco; that its exclusive right to purchase Chinese bauxite was given by central government and not the local governments that had actual physical control over the minerals. With the end of central planning, the East Hope Group went to the local government of Sanmenxia, a mid-size city in Henan Province with large deposits of bauxite, and effected a deal with the local Party secretary who had strong links with Li Keqiang, Chinese Premier. The East Hope Group started to produce aluminium in 2005 and today Liu claims to be worth US$5 billion (Chong-En Bai, et al., Crony Capitalism with Chinese Characteristics, Tsinghua University, School of Economics and Management, May 2014).

The restoration of capitalism slowed and accelerated as the different groups within the CCP leadership argued out their differences. Added unevenness occurred in the process due to the specific conditions in the different regions of this enormous country and in the different sectors of the economy. China has a long history of dispersed power, with considerable provincial, county and even city autonomy. In fact, an integral part of the transition to capitalism was encouragement and greater decentralization of state powers (Jae Ho Chung and Tao-Chiu Lam, China’s “City System” in Flux, The China Quarterly, No 180 (2004), pp945–64). To accelerate the process, the revenues  of local governments throughout China were made dependant on local business taxes and taxes on sales. The promotion of Party cadres came to depend on their ability to deliver economic growth, employment and foreign investment (Ibid). Many local Party members served as brokers and deal-makers between the public and private sectors, others greased the wheels through black-market deals, bribes and informal networking. It was only natural that these came to have stakes in the ownership of private businesses or took posts as advisors on company boards or senior management positions in private companies.

It is clear that that in China even that section of the bureaucracy which is “defending” state industry against privatisation is not doing so in the interests of the working class but to protect its own interests. Like the rest of the highest levels of the bureaucracy Zhou Yongkang was a corrupt capitalist, but wanted to proceed to capitalism by a different route to President Xi. The struggle between Zhou and Xi was not over whether or not to maintain capitalist development in China it was over which route to take. One can say the struggle between the groups within the CCP has parallels to the struggle in the UK between that section of the bourgeoisie that wishes to be outside the EU and that section which wishes to continue within the EU.