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‘The credibility of the administration’s fight against corruption would increase dramatically if members of the party leader’s own family could also be included in investigations’

 

Publications by an international group of researchers associated with the German newspaper Süddeutsche Zeitung have put China’s leaders under pressure: the ‘Panama papers’, which were published by the paper and other dailies today (7 April), reveal that relatives of leading Chinese politicians have found ways of stashing away millions of dollars in offshore tax havens. A brother-in-law of party leader Xi Jinping is among those implicated.

We discussed the Panama Papers' potential impact on China's leadership with Sebastian Heilmann, Director of MERICS.

The ‘Panama papers’ mention at least eight relations of current or former members of the innermost circle of the Chinese leadership who have moved large amounts of money abroad through secret offshore structures. Do you find that surprising?

Well, we’ve known that havens of this kind exist for many years now, but most of this information came from agents who were personally involved and could not be verified independently. What was missing up to now was information about the sums of money that were transferred, the names of the specific firms concerned, and documents to provide clear insights into such dealings. Now this is all gradually coming to light.

Apart from that, we are dealing with a familiar phenomenon: ever since China started opening up economically in the 1980s, the country’s well-connected families have been getting richer and richer. The sums of money involved have grown much larger since a wave of stock-listings of state-run enterprises began around 15 years ago. Many families of leading cadres raked in incredible profits from these IPOs in which either their children or their relatives were involved. They pulled political strings to help those companies they had stakes in to raise capital on the stock markets.

In 2012, the New York Times reported on a case of insider trading in which Wen Jiabao’s family was involved while he was still prime minister. Members of his family had obtained shares in one of the largest insurance companies in China whose value increased to hundreds of millions once the company got listed. The Chinese government reacted by censoring these Reports.

The New York Times’ website has been blocked in China ever since then, even though there is no evidence that Wen Jiabao was involved in those dealings. If the prime minister or general secretary is criticised in China, however, this is perceived as an attack on the political system as a whole. And the system has to be protected at any price. That’s why the party leadershipis now trying to suppress the revelations from the ‘Panama papers’ within China.

The publications about the leaked material must be very embarrassing for Xi Jinping, the incumbent leader of the CCP. After all, he’s fighting corruption in the country quite vehemently. Do you expect him to take action against his own relatives?

There’s no doubt that Xi wants to put an end to mismanagement, bribery and shady deals such as offshore transactions. The credibility of the administration's fight against corruption would, of course, increase dramatically if members of the party leader’s own family could be subjected to public investigations. But at the same time, Xi’s anti-corruption campaign was set up precisely to consolidate his own power. That’s why it’s unlikely he’ll ever allow the authorities to investigate his own family, even if the Panama revelations do implicate his brother-in-law. We noticed that a lot of prominent political families have been trying to eradicate any traces of past deals by selling off their shares in companies or passing on ownership of them to other people they trust. Generally speaking, one can say that the children of prominent revolutionary veterans are only targeted in the anti-corruption campaign in exceptional cases.

Who exactly is included in the group of ‘prominent revolutionary veterans’? And why do they enjoy such privileges?

This group includes descendants of the political leaders who built up the People’s Republic of China as well as the families of leading military figures in who played a major role in the revolutionary war prior to 1949. All in all, we’re probably talking about around 20 to 25 extended families who play a special political role in China today for historical reasons. The children of these famous leaders attended special schools in Beijing in the 1950s and 1960s, where they formed networks that still exist today. The descendants of the veterans of the revolution view themselves as part of a political aristocracy. They feel that modern Chinese history and their families’ role in it give them the legitimacy to run the country. It’s interesting to see that this awareness of their status has been passed down all the way to the generation of the grandchildren. They take pride in their grandfathers’ legacy, they entertain active networks, and sometimes even share regular free time activities.

Where exactly does Xi Jinping think he belongs in this hierarchy?

He belongs to the group with the highest prominence and the greatest self-confidence: he is a child of one of the ‘founding fathers’ of the PRC. His father, Xi Zhongxun, was a guerrilla fighter in the 1930s and later became deputy prime minister when Mao came to power, so he belonged to the first generation of leaders.

What would happen if the party leadership were to take retaliatory steps against descendants of this ‘aristocracy’?

In the 1980s, then party-leader Hu Yaobang wanted to curb the shady economic activities of children of top party cadres to stop the spread of nepotism and corruption. But that was the beginning of the end of a man who was himself a model of integrity. The ‘old guard’ viewed his attempt to clean up the system as an attack on their own interests, and they moved quickly to force him out of office.

 

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