Wen Jiabo |
By David Barboza, The New York Times, October 25, 2012
BEIJING — The
mother of China’s prime minister was a schoolteacher in
northern China. His father was ordered to tend pigs in one of Mao’s political
campaigns. And during childhood, “my family was extremely poor,” the prime
minister, Wen Jiabao, said in a speech last year.
But now 90, the
prime minister’s mother, Yang Zhiyun, not only left poverty behind — she became
outright rich, at least on paper, according to corporate and regulatory
records. Just one investment in her name, in a large Chinese financial services
company, had a value of $120 million five years ago, the records show.
The details of how Ms. Yang, a widow, accumulated such wealth are not
known, or even if she was aware of the holdings in her name. But it happened
after her son was elevated to China’s ruling elite, first in 1998 as vice prime
minister and then five years later as prime minister.
Many relatives of Wen Jiabao, 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 that the prime minister’s relatives, some of
whom have a knack for aggressive deal-making, including his wife, have
controlled assets worth at least $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. Untangling their financial holdings provides
an unusually detailed look at how politically connected people have profited from
being at the intersection of government and business as state influence and
private wealth converge in China’s fast-growing economy.
Unlike most new businesses in China, the family’s ventures sometimes
received financial backing from state-owned companies, including China Mobile,
one of the country’s biggest phone operators, the documents show. At other
times, the ventures won support from some of Asia’s richest tycoons. The Times
found that Mr. Wen’s relatives accumulated shares in banks, jewelers, tourist
resorts, telecommunications companies and infrastructure projects, sometimes by
using offshore entities.
The holdings include a villa development project in Beijing; a tire
factory in northern China; a company that helped build some of Beijing’s Olympic
stadiums, including the iconic “Bird’s Nest”; and Ping An Insurance, one of the
world’s biggest financial services companies.
As prime minister in an economy that remains heavily state-driven, Mr.
Wen, who is best known for his simple ways and common touch, more importantly
has broad authority over the major industries where his relatives have made
their fortunes. Chinese companies cannot list their shares on a stock exchange
without approval from agencies overseen by Mr. Wen, for example. He also has the
power to influence investments in strategic sectors like energy and
telecommunications.
Because the Chinese government rarely makes its deliberations public,
it is not known what role — if any — Mr. Wen, who is 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 prime minister’s younger brother, for example, has a company that
was awarded more than $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 Mr. Wen ordered tougher regulations on medical
waste disposal in 2003 after the SARS outbreak.
In 2004, after the State Council, a government body Mr. Wen presides
over, exempted Ping An Insurance and other companies from rules that limited
their scope, Ping An went on to raise $1.8 billion in an initial public
offering of stock. Partnerships controlled by Mr. Wen’s relatives — along with
their friends and colleagues — made a fortune by investing in the company
before the public offering.
In 2007, the last
year the stock holdings were disclosed in public documents, those partnerships
held as much as $2.2 billion worth of Ping An stock, according to an accounting
of the investments by The Times that was verified by outside auditors. Ping
An’s overall market value is now nearly $60 billion.
Ping An said in a statement that the company did “not know the
background of the entities behind our shareholders.” The statement said, “Ping
An has no means to know the intentions behind shareholders when they buy and
sell our shares.”
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 that permitting the families of Communist Party
leaders to profit from the country’s long economic boom has been important to
ensuring elite support for market-oriented reforms.
Even so, the business dealings of Mr. Wen’s relatives have sometimes
been hidden in ways that suggest the relatives are eager to avoid public
scrutiny, the records filed with Chinese regulatory authorities show. Their
ownership stakes are often veiled by an intricate web of holdings as many as five
steps removed from the investments, according to the review.
In the case of Mr. Wen’s mother, The Times calculated her stake in
Ping An — valued at $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 name recorded on his mother’s shares was
Taihong, a holding company registered in Tianjin, the prime minister’s
hometown.
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. When Bloomberg News reported in June that the
extended family of Vice President Xi Jinping, set to become China’s next
president, had amassed hundreds of millions of dollars in assets, the Chinese
government blocked access inside the country to the Bloomberg Web site.
“In the senior leadership, there’s no family that doesn’t have these
problems,” said a former government colleague of Wen Jiabao who has known him
for more than 20 years and who spoke on the condition of anonymity. “His
enemies are intentionally trying to smear him by letting this leak out.”
The Times presented its findings to the Chinese government for
comment. The Foreign Ministry declined to respond to questions about the
investments, the prime minister or his relatives. Members of Mr. Wen’s family
also 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 prime minister’s mother
and other relatives, said the investments were actually her own. Ms. Duan, who
comes from the prime minister’s hometown and is a close friend of his wife,
said ownership of the shares was listed in the names of Mr. Wen’s relatives in
an effort to conceal the size of Ms. Duan’s own holdings.
“When I invested in Ping An I didn’t want to be written about,” Ms.
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 the
relatives of the prime minister as the listed shareholders — a process that
required registering their official ID numbers and obtaining their signatures.
Until presented with the names of the investors by The Times, she said, she had
no idea that they had selected the relatives of Wen Jiabao.
The review of the corporate and regulatory records, which covers 1992
to 2012, found no holdings in Mr. Wen’s name. And it was not possible to
determine from the documents whether he recused himself from any decisions that
might have affected his relatives’ holdings, or whether they received
preferential treatment on investments.
For much of his
tenure, Wen Jiabao has been at the center of rumors and conjecture about
efforts by his relatives to profit from his position. Yet until the review by
The Times, there has been no detailed accounting of the family’s riches.
His wife, Zhang Beili, is one of the country’s leading authorities on
jewelry and gemstones and is an accomplished businesswoman in her own right. By
managing state diamond companies that were later privatized, 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 Hong Kong’s richest man, Li Ka-shing, for $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 prime minister’s younger brother, Wen Jiahong, controls $200
million in assets, including wastewater treatment plants and recycling
businesses, the records show.
As prime minister, Mr. 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” because of his frequent outings to meet ordinary
people, especially in moments of crisis like natural disasters.
While it is unclear how much the prime minister knows about his
family’s wealth, State Department documents released by the WikiLeaks
organization in 2010 included a cable that suggested Mr. 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 an American
company in Shanghai told American diplomats, according to the 2007 cable.
China’s ‘Diamond Queen’
It is no secret in China’s elite circles that the prime minister’s
wife, Zhang Beili, is rich, and that she has helped control the nation’s
jewelry and gem trade. But her lucrative diamond businesses became an
off-the-charts success only as her husband moved into the country’s top
leadership ranks, the review of corporate and regulatory records by The Times
found.
A geologist with an expertise in gemstones, Ms. Zhang is largely
unknown among ordinary Chinese. She rarely travels with the prime minister or
appears with him, and there are few official photographs of the couple
together. And while people who have worked with her say she has a taste for
jade and fine diamonds, they say she usually dresses modestly, does not exude
glamour and prefers to wield influence behind the scenes, much like the
relatives of other senior leaders.
The State Department documents released by WikiLeaks included a
suggestion that Mr. Wen had once considered divorcing Ms. Zhang because she had
exploited their relationship in her diamond trades. Taiwanese television reported
in 2007 that Ms. Zhang had bought a pair of jade earrings worth about $275,000
at a Beijing trade show, though the source — a Taiwanese trader — later backed
off the claim and Chinese government censors moved swiftly to block coverage of
the subject in China, according to news reports at the time.
“Her business activities are known to everyone in the leadership,”
said one banker who worked with relatives of Wen Jiabao. The banker said it was
not unusual for her office to call upon businesspeople. “And if you get that
call, how can you say no?”
Zhang Beili first gained influence in the 1980s, while working as a
regulator at the Ministry of Geology. At the time, China’s jewelry market was
still in its infancy.
While her husband was serving in China’s main leadership compound,
known as Zhongnanhai, Ms. Zhang was setting industry standards in the jewelry
and gem trade. She helped create the National Gemstone Testing Center in
Beijing, and the Shanghai Diamond Exchange, two of the industry’s most powerful
institutions.
In a country where
the state has long dominated the marketplace, jewelry regulators often decided
which companies could set up diamond-processing factories, and which would gain
entry to the retail jewelry market. State regulators even formulated rules that
required diamond sellers to buy certificates of authenticity for any diamond
sold in China, from the government-run testing center in Beijing, which Ms.
Zhang managed.
As a result, when executives from Cartier or De Beers visited China
with hopes of selling diamonds and jewelry here, they often went to visit Ms.
Zhang, who became known as China’s “diamond queen.”
“She’s the most important person there,” said Gaetano Cavalieri,
president of the World Jewelry Confederation in Switzerland. “She was bridging
relations between partners — Chinese and foreign partners.”
As early as 1992, people who worked with Ms. Zhang said, she had begun
to blur the line between regulator and businesswoman. As head of the
state-owned China Mineral and Gem Corporation, she began investing the state
company’s money in start-ups. And by the time her husband was named vice
premier, in 1998, she was busy setting up business ventures with friends and
relatives.
The state company she ran invested in a group of affiliated diamond
companies, according to public records. Many of them were run by Ms. Zhang’s
relatives — or colleagues who had worked with her at the National Gemstone
Testing Center.
In 1993, for instance, the state company Ms. Zhang ran helped found
Beijing Diamond, a big jewelry retailer. A year later, one of her younger
brothers, Zhang Jianming, and two of her government colleagues personally
acquired 80 percent of the company, according to shareholder registers. Beijing
Diamond invested in Shenzhen Diamond, which was controlled by her
brother-in-law, Wen Jiahong, the prime minister’s younger brother.
Among the successful undertakings was Sino-Diamond, a venture financed
by the state-owned China Mineral and Gem Corporation, which she headed. The
company had business ties with a state-owned company managed by another
brother, Zhang Jiankun, who worked as an official in Jiaxing, Ms. Zhang’s hometown,
in Zhejiang Province.
In the summer of 1999, after securing agreements to import diamonds
from Russia and South Africa, Sino-Diamond went public, raising $50 million on
the Shanghai Stock Exchange. The offering netted Ms. Zhang’s family about $8 million,
according to corporate filings.
Although she was never listed as a shareholder, former colleagues and
business partners say Ms. Zhang’s early diamond partnerships were the nucleus
of a larger portfolio of companies she would later help her family and
colleagues gain a stake in.
The Times found no indication that Wen Jiabao used his political clout
to influence the diamond companies his relatives invested in. But former
business partners said that the family’s success in diamonds, and beyond, was
often bolstered with financial backing from wealthy businessmen who sought to
curry favor with the prime minister’s family.
“After Wen became prime minister, his wife sold off some of her
diamond investments and moved into new things,” said a Chinese executive who
did business with the family. He asked not to be named because of fear of
government retaliation. Corporate records show that beginning in the late
1990s, a series of rich businessmen took turns buying up large stakes in the
diamond companies, often from relatives of Mr. Wen, and then helped them
reinvest in other lucrative ventures, like real estate and finance.
According to corporate records and interviews, the businessmen often
supplied accountants and office space to investment partnerships partly
controlled by the relatives.
“When they formed companies,” said one businessman who set up a
company with members of the Wen family, “Ms. Zhang stayed in the background.
That’s how it worked.”
Late one evening
early this year, the prime minister’s only son, Wen Yunsong, was in the cigar
lounge at Xiu, an upscale bar and lounge at the Park Hyatt in Beijing. He was
having cocktails as Beijing’s nouveau riche gathered around, clutching designer
bags and wearing expensive business suits, according to two guests who were
present.
In China, the children of senior leaders are widely believed to be in
a class of their own. Known as “princelings,” they often hold Ivy League
degrees, get V.I.P. treatment, and are even offered preferred pricing on shares
in hot stock offerings.
They are also known as people who can get things done in China’s
heavily regulated marketplace, where the state controls access. And in recent
years, few princelings have been as bold as the younger Mr. Wen, who goes by
the English name Winston and is about 40 years old.
A Times review of Winston Wen’s investments, and interviews with
people who have known him for years, show that his deal-making has been
extensive and lucrative, even by the standards of his princeling peers.
State-run giants like China Mobile have formed start-ups with him. In
recent years, Winston Wen has been in talks with Hollywood studios about a
financing deal.
Concerned that China does not have an elite boarding school for
Chinese students, he recently hired the headmasters of Choate and Hotchkiss in
Connecticut to oversee the creation of a $150 million private school now being
built in the Beijing suburbs.
Winston Wen and his wife, moreover, have stakes in the technology
industry and an electric company, as well as an indirect stake in Union Mobile
Pay, the government-backed online payment platform — all while living in the
prime minister’s residence, in central Beijing, according to corporate records
and people familiar with the family’s investments.
“He’s not shy about using his influence to get things done,” said one
venture capitalist who regularly meets with Winston Wen.
The younger Mr. Wen declined to comment. But in a telephone interview,
his wife, Yang Xiaomeng, said her husband had been unfairly criticized for his
business dealings.
“Everything that has been written about him has been wrong,” she said.
“He’s really not doing that much business anymore.”
Winston Wen was educated in Beijing and then earned an engineering
degree from the Beijing Institute of Technology. He went abroad and earned a
master’s degree in engineering materials from the University of Windsor, in
Canada, and an M.B.A. from the Kellogg School of Business at Northwestern
University in Evanston, Ill., just outside Chicago.
When he returned to China in 2000, he helped set up three successful
technology companies in five years, according to people familiar with those
deals. Two of them were sold to Hong Kong businessmen, one to the family of Li
Ka-shing, one of the wealthiest men in Asia.
Winston Wen’s earliest venture, an Internet data services provider
called Unihub Global, was founded in 2000 with $2 million in start-up capital,
according to Hong Kong and Beijing corporate filings. Financing came from a
tight-knit group of relatives and his mother’s former colleagues from
government and the diamond trade, as well as an associate of Cheng Yu-tung,
patriarch of Hong Kong’s second-wealthiest family. The firm’s earliest
customers were state-owned brokerage houses and Ping An, in which the Wen
family has held a large financial stake.
He made an even bolder move in 2005, by pushing into private equity
when he formed New Horizon Capital with a group of Chinese-born classmates from
Northwestern. The firm quickly raised $100 million from investors, including
SBI Holdings, a division of the Japanese group SoftBank, and Temasek, the
Singapore government investment fund.
Under Mr. Wen, New
Horizon established itself as a leading private equity firm, investing in
biotech, solar, wind and construction equipment makers. Since it began
operations, the firm has returned about $430 million to investors, a fourfold
profit, according to SBI Holdings.
“Their first fund was dynamite,” said
Kathleen Ng, editor of Asia Private Equity Review, an industry publication in
Hong Kong. “And that allowed them to raise a lot more money.”
Today, New Horizon has more than $2.5 billion under management.
Some of Winston Wen’s deal-making, though, has attracted unwanted
attention for the prime minister.
In 2010, when New Horizon acquired a 9 percent stake in a company
called Sihuan Pharmaceuticals just two months before its public offering, the
Hong Kong Stock Exchange said the late-stage investment violated its rules and
forced the firm to return the stake. Still, New Horizon made a $46.5 million
profit on the sale.
Soon after, New Horizon announced that Winston Wen had handed over
day-to-day operations and taken up a position at the China Satellite Communications
Corporation, a state-owned company that has ties to the Chinese space program.
He has since been named chairman.
The Tycoons
In the late 1990s, Duan Weihong was managing an office building and
several other properties in Tianjin, the prime minister’s hometown in northern
China, through her property company, Taihong. She was in her 20s and had
studied at the Nanjing University of Science and Technology.
Around 2002, Ms. Duan went into business with several relatives of Wen
Jiabao, transforming her property company into an investment vehicle of the
same name. The company helped make Ms. Duan very wealthy.
It is not known whether Ms. Duan, now 43, is related to the prime
minister. In a series of interviews, she first said she did not know any members
of the Wen family, but later described herself as a friend of the family and
particularly close to Zhang Beili, the prime minister’s wife. As happened to a
handful of other Chinese entrepreneurs, Ms. Duan’s fortunes soared as she
teamed up with the relatives and their network of friends and colleagues,
though she described her relationship with them involving the shares in Ping An
as existing on paper only and having no financial component.
Ms. Duan and other wealthy businesspeople — among them, six billionaires
from across China — have been instrumental in getting multimillion-dollar
ventures off the ground and, at crucial times, helping members of the Wen
family set up investment vehicles to profit from them, according to investment
bankers who have worked with all parties.
Established in Tianjin, Taihong had spectacular returns. In 2002, the
company paid about $65 million to acquire a 3 percent stake in Ping An before
its initial public offering, according to corporate records and Ms. Duan’s
graduate school thesis. Five years later, those shares were worth $3.7 billion
The company’s Hong Kong affiliate, Great Ocean, also run by Ms. Duan,
later formed a joint venture with the Beijing government and acquired a huge
tract of land adjacent to Capital International Airport. Today, the site is
home to a sprawling cargo and logistics center. Last year, Great Ocean sold its
53 percent stake in the project to a Singapore company for nearly $400 million.
That deal and several other investments, in luxury hotels, Beijing
villa developments and the Hong Kong-listed BBMG, one of China’s largest
building materials companies, have been instrumental to Ms. Duan’s accumulation
of riches, according to The Times’s review of corporate records.
The review also showed that over the past decade there have been
nearly three dozen individual shareholders of Taihong, many of whom are either
relatives of Wen Jiabao or former colleagues of his wife.
he other wealthy
entrepreneurs who have worked with the prime minister’s relatives declined to
comment for this article. Ms. Duan strongly denied having financial ties to the
prime minister or his relatives and said she was only trying to avoid publicity
by listing others as owning Ping An shares. “The money I invested in Ping An
was completely my own,” said Ms. Duan, who has served as a member of the Ping
An board of supervisors. “Everything I did was legal.”
Another wealthy partner of the Wen relatives has been Cheng Yu-tung,
who controls the Hong Kong conglomerate New World Development and is one of the
richest men in Asia, worth about $15 billion, according to Forbes.
In the 1990s, New World was seeking a foothold in mainland China for a
sister company that specializes in high-end retail jewelry. The retail chain,
Chow Tai Fook, opened its first store in China in 1998.
Mr. Cheng and his associates invested in a diamond venture backed by
the relatives of Mr. Wen 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 by Mr. Cheng are
now worth at least $5 billion, according to the corporate filings. Chow Tai
Fook, the jewelry chain, has also flourished. Today, China accounts for 60
percent of the chain’s $4.2 billion in annual revenue.
Mr. Cheng, 87, could not be reached for comment. Calls to New World
Development were not returned.
Fallout for Premier
In the winter of 2007, just before he began his second term as prime
minister, Wen Jiabao called for new measures to fight corruption, particularly
among high-ranking officials.
“Leaders at all levels of government should take the lead in the
antigraft drive,” he told a gathering of high-level party members in Beijing.
“They should strictly ensure that their family members, friends and close
subordinates do not abuse government influence.”
The speech was consistent with the prime minister’s earlier drive to
toughen disclosure rules for public servants, and to require senior officials
to reveal their family assets.
Whether Mr. Wen has made such disclosures for his own family is
unclear, since the Communist Party does not release such information. Even so,
many of the holdings found by The Times would not need to be disclosed under
the rules since they are not held in the name of the prime minister’s immediate
family — his wife, son and daughter.
About 80 percent of the $2.7 billion in assets identified in The
Times’s investigation and verified by the outside auditors were held by, among
others, the prime minister’s mother, his younger brother, two brothers-in-law,
a sister-in-law, daughter-in-law and the parents of his son’s wife, none of
whom is subject to party disclosure rules. The total value of the relatives’
stake in Ping An is based on calculations by The Times that were confirmed by
the auditors. The total includes shares held by the relatives that were sold
between 2004 and 2006, and the value of the remaining shares in late 2007, the
last time the holdings were publicly disclosed.
Legal experts said that determining the precise value of holdings in
China could be difficult because there might be undisclosed side agreements
about the true beneficiaries.
“Complex corporate structures are not necessarily insidious,” said
Curtis J. Milhaupt, a Columbia University Law School professor who has studied
China’s corporate group structures. “But in a system like China’s, where
corporate ownership and political power are closely intertwined, shell
companies magnify questions about who owns what and where the money came from.”
Among the investors in the Wen family ventures are longtime business
associates, former colleagues and college classmates, including Yu Jianming,
who attended Northwestern with Winston Wen, and Zhang Yuhong, a longtime
colleague of Wen Jiahong, the prime minister’s younger brother. The associates
did not return telephone calls seeking comment.
Revelations about the Wen family’s wealth could weaken him
politically.
Next month, at the 18th Party Congress in Beijing, the Communist Party
is expected to announce a new generation of leaders. But the selection process
has already been marred by one of the worst political scandals in decades, the
downfall of Bo Xilai, the Chongqing party boss, who was vying for a top
position.
In Beijing, Wen Jiabao is expected to step down as prime minister
because he has reached retirement age. Political analysts say that even after
leaving office he could remain a strong backstage political force. But
documents showing that his relatives amassed a fortune during his tenure could
diminish his standing, the analysts said.
“This will affect whatever residual power Wen has,” said Minxin Pei,
an expert on Chinese leadership and a professor of government at Claremont
McKenna College in California.
The prime minister’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.
Last March, the prime minister hinted that he was at least aware of
the persistent rumors about his relatives. During a nationally televised news
conference in Beijing, he insisted that he had “never pursued personal gain” in
public office.
“I have the courage to face the people and to face history,” he said
in an emotional session. “There are people who will appreciate what I have
done, but there are also people who will criticize me. Ultimately, history will
have the final say.”
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