Monday, May 21, 2012

China: How the Princelings Make Money

From the NYT via Reason's Hit&Run blog:
China's Red Nobility and the Non-Rule of Law

The scandal involving Chinese Politburo Princeling Bo Xilai is shaking up the autocratic elite coaltion that runs China. Bo and his wife are accused of abusing their political position to massively enrich themselves and their family. Bo's wife is also being investigated for murdering a British expat with whom she had business dealings. Her crime was reported by a former ally of Bo, Chongqing police chief Wang Lijun, who was so afraid of retribution that he even sought protection at the U.S. consulate.

As numerous reports make clear, Bo is far from being the only member of the Red Nobility to use political power to enrich themselves. Last week, the New York Times reported on how the children of Politburo members extract wealth from businesses eager to operate in China:
For example, Wen Yunsong, the son of Prime Minister Wen Jiabao, heads a state-owned company that boasts that it will soon be Asia’s largest satellite communications operator. President Hu Jintao’s son, Hu Haifeng, once managed a state-controlled firm that held a monopoly on security scanners used in China’s airports, shipping ports and subway stations. And in 2006, Feng Shaodong, the son-in-law of Wu Bangguo, the party’s second-ranking official, helped Merrill Lynch win a deal to arrange the $22 billion public listing of the giant state-run bank I.C.B.C., in what became the world’s largest initial public stock offering.

Much of the income earned by families of senior leaders may be entirely legal. But it is all but impossible to distinguish between legitimate and ill-gotten gains because there is no public disclosure of the wealth of officials and their relatives. Conflict-of-interest laws are weak or nonexistent. And the business dealings of the political elite are heavily censored in the state-controlled news media.

The spoils system, for all the efforts to keep a lid on it, poses a fundamental challenge to the legitimacy of the Communist Party. As the state’s business has become increasingly intertwined with a class of families sometimes called the Red Nobility, analysts say the potential exists for a backlash against an increasingly entrenched elite. They also point to the risk that national policies may be subverted by leaders and former leaders, many of whom exert influence long after their retirement, acting to protect their own interests....

“This is one of the most difficult challenges China faces,” said Mr. [Minxin] Pei, [an expert on China’s leadership and professor of government at Claremont McKenna College in California]. “Whenever they want to implement reform, their children might say, ‘Dad, what about my business?’"...MORE