Chinese Premier visits Mayo farm to view livestock

The Chinese Premier greets Chairman of the Oireachtas Foreign Affairs Committee, Pat Breen, at Shannon Airport (Pic: Fine Gael)

Sunday 17 May 2015

HONG KONG — His son landed contracts to sell equipment to state oil fields and thousands of filling stations across China. His son’s mother-in-law held stakes in pipelines and natural gas pumps from Sichuan Province in the west to the southern isle of Hainan. And his sister-in-law, working from one of Beijing’s most prestigious office buildings, invested in mines, property and energy projects.

In thousands of pages of corporate documents describing these ventures, the name that never appears is his own: Zhou Yongkang, the formidable Chinese Communist Party leader who served as China’s top security official and the de facto boss of its oil industry.

But President Xi Jinping has targeted Mr. Zhou in an extraordinary corruption inquiry, a first for a Chinese party leader of Mr. Zhou’s rank, and put his family’s extensive business interests in the cross hairs.

Even by the cutthroat standards of Chinese politics, it is a bold maneuver. The finances of the families of senior leaders are among the deepest and most politically delicate secrets in China. The party has for years followed a tacit rule that relatives of the elite could prosper from the country’s economic opening, which rewarded loyalty and helped avert rifts in the leadership.

Whether to wipe out Mr. Zhou’s influence or to send an unmistakable signal to the entire party elite, Mr. Xi appears to be rewriting the rules. He has widened the inquiry into Mr. Zhou to include his wife, a son, a brother, a sister-in-law, a daughter-in-law and the son’s father-in-law, all of whom have been taken away by the authorities in recent months, according to relatives and witnesses.

Zhan Minli, one of the few members of the clan who remain free, said her granddaughter — who is also Mr. Zhou’s granddaughter — has been left in the care of a kindergarten in Beijing because the rest of the family is in custody. “It is too cruel for a 5-year-old child,” she said in an interview in her home in Southern California. “The government needs to answer to the people as well as the leadership itself,” she added.

Officially, the Chinese leadership has said nothing about the corruption investigation into Mr. Zhou or the detention of his immediate relatives, and Mr. Xi’s ultimate intentions about how to handle the case remain a matter of speculation.

Some political analysts argue that a leader of Mr. Zhou’s status would not face an inquiry of this kind unless Mr. Xi regarded him as a direct threat to his power. In other words, Mr. Zhou is the loser in a political struggle. His family’s financial dealings lost their immunity only because Mr. Zhou fell from favor, not because elite business dealings were being criminalized.

But another school of thought is that Mr. Xi considers the enormous agglomeration of wealth by spouses, children and siblings of top-ranking officials a threat to China’s stability by encouraging mercenary corruption and harming the party’s public standing. Those people say he has pushed the Zhou investigation beyond traditional bounds to signal that the rules have changed and that top leaders will be held responsible for their family’s business activities, even though Mr. Xi’s own family members have been among those who have grown rich.

If that is so, the case has the potential to alter the political compact of China’s boom years. For many elite clans, like Mr. Zhou’s, acquiring stakes in lucrative enterprises that did business in the realm that the family patriarch supervised was not effectively banned — and sometimes not even well disguised.

An investigation by The New York Times of the assets held by Mr. Zhou’s relatives highlights the considerable sums involved and illustrates how deeply invested members of the party establishment are in industries where political connections are important.

Three of Mr. Zhou’s relatives — a sister-in-law, a son and Ms. Zhan, the son’s mother-in-law — hold or have controlled stakes in at least 37 companies scattered across a dozen provinces, from Audi dealerships to property firms, according to corporate documents filed with the government. Seventeen focus on investments in energy, mostly in ventures with the state-owned oil giant China National Petroleum Corporation, which Mr. Zhou headed in the 1990s. Nine center on Sichuan Province, where Mr. Zhou served as party chief from 1999 to 2002.

“Because of his connections to energy, land and the internal security system, in effect the family had kind of carte blanche to go into anything they wanted,” said Andrew Wedeman, a professor of political science at Georgia State University who studies corruption in China.

In all, the holdings examined by The Times are worth at least one billion renminbi, or about $160 million, though that estimate is based on a limited assessment of each company’s value and does not include real estate or overseas assets, which are more difficult to identify and assess.

Even so, these assets make Mr. Zhou the third member of the nine-man Politburo Standing Committee that ruled China from 2007 to 2012 to have family members with documented wealth exceeding $150 million.

In 2012, The Times reported that relatives of Wen Jiabao, then the prime minister, controlled investments worth at least $2.7 billion. And Bloomberg News linked hundreds of millions of dollars in assets to the extended family of Mr. Xi, who was China’s vice president and leader in waiting at the time. There is no indication that authorities have investigated the financial dealings of Mr. Wen’s or Mr. Xi’s relatives.

Long Ties to Oil Industry

The first hint of a move against Mr. Zhou came in late 2012, shortly after Mr. Xi formally became China’s top leader. Within three weeks of Mr. Xi’s elevation, and Mr. Zhou’s retirement, party investigators detained a senior official in Sichuan Province who had risen under Mr. Zhou’s wing. Since then, the authorities have detained and announced investigations into more than two dozen of Mr. Zhou’s former aides and colleagues, and their business allies, including seven men who worked as senior managers at China National Petroleum Corporation or its listed arm, PetroChina.

No evidence has emerged that proves Mr. Zhou, 71, was involved in the investments or did anything illegal. Nor is it clear that his relatives violated any Chinese laws or actively used their relationship with Mr. Zhou to secure deals. But Mr. Xi appears confident that he has enough evidence to eliminate Mr. Zhou’s influence.

The son of a beet farmer who caught eels as a sideline, Mr. Zhou rose to become one of the most feared politicians in China. He began his career as an oil field technician, spending more than a decade in the 1970s and early 1980s working his way up the administration overseeing the Liaohe Oil Field in northeastern China. He kept rising through the ranks until he became head of C.N.P.C., the nation’s largest energy company, which accounts for more than half of China’s oil production and three quarters of its gas production.

Mr. Zhou later became party chief of Sichuan, one of the country’s most populous provinces. In 2002, he was appointed minister of Public Security and, in 2007, he joined the Politburo Standing Committee, the party’s top echelon, and assumed control of the body overseeing the police, courts and intelligence agents.

But even as a domestic security chief, Mr. Zhou kept a proprietorial eye on the oil and gas sector, occasionally visiting C.N.P.C. facilities in China and abroad. Mr. Zhou’s last known public appearance was a visit in October to his alma mater, the China University of Petroleum in Beijing, where he exhorted students to abide by the university’s motto: “I will contribute oil for the motherland.”

Mr. Zhou’s relationship with C.N.P.C. gave him influence over a unique player in the Chinese economy, a giant firm with annual revenue in excess of $400 billion, operations from Sudan to Venezuela and tendrils in every corner of China. Enjoying near monopoly status in some regions and industries, the company is a magnet for politically connected people seeking money-making opportunities.

At least three of Mr. Zhou’s relatives profited from C.N.P.C.’s rise: his oldest son, Zhou Bin; Ms. Zhan; and his sister-in-law, Zhou Lingying, the wife of a younger brother.

Zhou Bin, 42, is majority owner of a Beijing company that sells equipment to Liaohe as well as to C.N.P.C. oil fields in at least three other provinces, corporate records show. His mother-in-law, Zhan Minli, 71, owns companies selling natural gas with C.N.P.C. in two provinces. And Zhou Lingying, 63, teamed up with C.N.P.C. to sell natural gas in another province and owns stakes in companies that also work with C.N.P.C. in western China, according to the documents.

All told, the three relatives hold or have recently held ownership stakes in at least 11 companies that have done business with C.N.P.C. or the other state-owned oil giant, Sinopec, company documents show. At least four of the companies are owned in part by C.N.P.C. subsidiaries.

In each case, the investments came long after Mr. Zhou left C.N.P.C. and had ascended to the Politburo.

An Office Suddenly Closes

A short walk south from C.N.P.C. headquarters in Beijing, the offices on the 21st floor of the gleaming New Poly Building are dark and locked. It was here that Zhou Lingying and her business partners, through their company, Beijing Hongfeng Investment Company, bought control of C.N.P.C. assets in Sichuan, the province Mr. Zhou ran until 2002.

Late last year, employees abruptly stopped coming to work after government officials showed up one day to examine the company’s records, a security guard said. A wilted potted plant remained as evidence of a sudden end to business. The offices are on the same floor as the China Investment Corp., the country’s $575 billion sovereign wealth fund.

Much of what can be traced of Ms. Zhou’s businesses leads to the New Poly Building. She owns stakes in at least seven companies with addresses there, investing in energy, mining and real estate projects across the country. They include a mining project in China’s far western Xinjiang region, property and energy investments in Sichuan and a struggling potash mine there acquired from C.N.P.C.

Zhou Lingying began her career as a shop girl at a general store, working her way up to become manager and later running a supply company before retiring at age 50 in 2001, according to a résumé included in corporate documents and residents in the Zhou family village of Xiqiantou in eastern China.

But Ms. Zhou made a major new foray in December 2007, weeks after her brother-in-law was elevated to the Politburo Standing Committee, setting up her principal holding company, Beijing Honghan Investment Company, with her son, Zhou Feng. Records show at least four other companies linked to Mr. Zhou’s relatives sprang up about the same time.

Even as Mr. Zhou prepared to retire, his sister-in-law was still working to forge relationships with C.N.P.C., forming a venture with a subsidiary to sell natural gas and invest in gas filling stations in the family’s home city of Wuxi.

At a condominium development in Wuxi sprinkled with ponds and walking paths, Ms. Zhou and her husband Zhou Yuanqing lived in a fourth-floor duplex, where the authorities detained them in early December. Asked if the couple were still living in the apartment, one of the two security guards at the gate jested, “No, and they probably won’t be in ever again.”

Links Stretch to California

On the other side of the Pacific Ocean, Zhan Minli lives in an Orange County, Calif., retirement community of ranch-style homes and broad lawns. Short and silver haired, she opened the door to her house after reading written questions passed under her door about the companies she owned in China.

Ms. Zhan said the holdings in her name were actually controlled by Mr. Zhou’s son, Zhou Bin, who is married to her daughter, Huang Wan. She said it was customary in China to put assets in the name of one’s parents, and suggested that her son-in-law used her name because his own mother had died in a traffic accident.

Ms. Zhan said she and her husband were longtime United States passport holders despite Chinese documents that said they had retained Chinese citizenship. Property records show they have lived in the United States for nearly three decades, moving from Maryland to New Jersey and finally to Southern California, where their house has an estimated value of more than $700,000, according to the online real estate database Zillow.

Ms. Zhan’s home in Beijing looks to have been much more expensive. In 2010, a company document listed her residence in a luxury development in northeastern Beijing where units can sell for more than $11 million.

Her official business address was listed several miles away inside a dusty compound at the end of a dirt road. The building appears long abandoned, but for the red light on a surveillance camera peering from above the front entrance and the ferocious barking of a dog.

Several firms in deals with C.N.P.C. are registered at the address under Ms. Zhan’s name and that of a business partner, Mi Xiaodong, 43, identified by the Chinese business magazine Caixin as a college friend of and proxy for Mr. Zhou’s son. The companies have invested in gas projects on Hainan Island and in Hebei Province outside Beijing as well as in a housing development outside the capital. Ms. Zhan and Mr. Mi also owned a Beijing company, dissolved in February 2009, that held an oil drilling firm in northwestern China’s Shaanxi Province, where C.N.P.C. ran an oil field.

Ms. Zhan denied any wrongdoing or having much knowledge of these investments. “I’ve never seen the oil field we owned,” she said. “I don’t know how money laundering works.”

An Elusive Figure

Mr. Zhou’s son, Zhou Bin, is more elusive, though records show he is also plugged into the family business.

Zhou Bin studied English at an oil industry university in Sichuan, according to recent profiles of him in Chinese news media. He then moved to the United States, attending the University of Texas at Dallas and living in the state for much of the 1990s, according to school and property records.

Ms. Zhan described her son-in-law as “taciturn” and “plain-spoken,” a “good kid” who was introduced to her daughter by a mutual friend. When they started dating, Ms. Zhan said, she did not even know he was the son of Zhou Yongkang.

He remained a shadowy figure when he returned to China more than a decade ago, with few photos or media reports about him published even abroad despite his father’s prominence.

His name appears in the records of only one of the 37 companies examined by The Times, an energy investment firm in Beijing named Zhongxu Yangguang Energy Technology Company. His wife and his wife’s parents also feature in the company’s filings.

Though Ms. Zhan denied any knowledge of Zhongxu, company records show she owned 80 percent of it when it was set up a decade ago. Its assets climbed more than sixfold in the years after Zhou Yongkang joined the Politburo Standing Committee in 2007, to $27 million in 2012.

In 2009, Zhou Bin assumed control of the firm, taking Ms. Zhan’s stake. An audit that year showed the company was selling products to C.N.P.C. oil fields across the country. It also sold sales management systems to 8,000 C.N.P.C. filling stations.

Even Zhou Yongkang’s other brother, Zhou Yuanxing, a farmer turned liquor distributor, was placed under 24-hour police surveillance in Xiqiantou, a village of 400 people near the Yangtze River in Jiangsu Province, neighbors said. Among the Zhou family members, he at least is certain to escape prosecution. He died of bone cancer in February.

China'Watch'Canada

Sunday, May 17, 2015