News / Asia

US Investigation Spotlights China's Princelings

US Investigation Spotlights China's Princelingsi
X
September 19, 2013 8:19 PM
The U.S. Securities and Exchange Commission (SEC) is investigating JP Morgan’s Hong Kong office for hiring the children of high-level Chinese officials. Observers say the hiring of these so-called “princelings” is to open business opportunities in mainland China. But could the practice, which dates back almost two decades, also be considered bribery? Yinan Wang and Yi Chen look at the practice in a report voiced by Colin Lovett.
The U.S. Securities and Exchange Commission (SEC) is investigating JP Morgan’s Hong Kong office for hiring the children of high-level Chinese officials.  Observers say the hiring of these so-called “princelings” is to open business opportunities in mainland China.  But could the practice, which dates back almost two decades, also be considered bribery? 

The SEC has investigated at least seven cases of bribery of Chinese officials, involving major American firms, since 2010.

This SEC investigation is reportedly centered on two children of top Chinese officials who were hired by JP Morgan’s Hong Kong office.  The New York Times reports that in 2007, the bank hired Zhang Xixi, the daughter of Zhang Shuguang , a senior official at the China Railway Group who is now on trial in Beijing for allegedly accepting millions in bribes.

Then in 2010, it hired Tang Xiaoning, the son of China Everbright Group Chairman Tang Shuangning.  Both companies are state-run enterprises. After they were hired, became JP Morgan clients.

Gordon Chang, author of The Coming Collapse of China, says that these hirings have come to be known as "Elephant Hunting."

“What’s going on here is that there are elephants out there. They’re very important state officials. They have children and those children have gone to very good business schools around the world and if you want to hunt these elephants, if you want these big [contracts], you’re gonna go into the jungle, and that’s exactly what’s been going on here," said Chang.

Chang says this practice is universal in China, where people rely on guanxi, which literally means “connections” or “relationships,” and carries a sense of mutual obligation between the two parties.

Analysts say it is more common to see money, travel, and entertainment used to bribe officials rather than jobs for their children.

But some of the hiring cases involve massive salaries. UBS hired the son of Li Ruihuan, a former member of the elite standing committee of China’s Politburo, for a reported compensation package of $10 million.
 
A 1977 U.S. anti-corruption law prohibits U.S. companies from providing things of value to a foreign official to secure or retain business. While financial institutions are eager to hire princelings, they often don’t stay for long.

“If the children of China’s leaders stay in the U.S., one thing is that the U.S. is a mature market so there is no opportunity to break out," said Ming Xia, a political science professor at City University of New York. "Another aspect is if they hold a position in the U.S. for a long time, on the whole it is a middle-level management job, which doesn’t bring sudden huge profits."

Even though the decades-old practice of hiring princelings has been on the decline recently, the SEC decision to investigate is bringing new attention to the issue.

Ming Xia believes the investigation may reflect U.S. worries about China’s crony capitalist model.

“To some level the U.S. is aware, especially at the strategic level, that China’s model of capitalism can pose a huge threat to the global investment, business, and capital flows environments, capable of causing some kind of corrosion to the U.S. and Western way of life," he said.

The SEC investigation is ongoing and there has been no official word on its status.

This report was produced in collaboration with the VOA Mandarin service

You May Like

Cambodia Seeks Official UN Maps for Vietnam Border

Notice of request comes as 2 countries open border talks Tuesday after a clash last month More

From South Africa to Vietnam, Cyclists Deliver Message Against Rhino Horns

Appalled by poaching they saw firsthand, sisters embark on tour to raise awareness in countries where rhino horn products are in demand More

Uber Wants Johannesburg Police Protection

Request follows recent protests outside ride-hailing service's Johannesburg office More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
New Implant Could Help Restore Movement to Paralyzed Limbsi
|| 0:00:00
...    
🔇
X
Maia Pujara
July 07, 2015 10:01 PM
A half-million people suffer spinal cord injuries each year because of car accidents, serious falls and diseases, according to the World Health Organization. Researchers are now working on a soft but strong spinal cord implant that could one day restore movement in paralyzed individuals. VOA’s Maia Pujara reports.
Video

Video New Implant Could Help Restore Movement to Paralyzed Limbs

A half-million people suffer spinal cord injuries each year because of car accidents, serious falls and diseases, according to the World Health Organization. Researchers are now working on a soft but strong spinal cord implant that could one day restore movement in paralyzed individuals. VOA’s Maia Pujara reports.
Video

Video Getting it Done Beyond a Nuclear Deal

If a nuclear deal is reached between Iran and world powers in Vienna, it will be a highly technical road map to be used to monitor nuclear activity in Iran for years to come to ensure Tehran does not make nuclear weapons. Equally as complicated will be dismantling international sanctions that were originally intended to be ironclad. VOA’s Heather Murdock talks to experts about the key challenges any deal will present.
Video

Video Rice Farmers Frustrated As Drought Grips Thailand

A severe drought in Thailand is limiting the growing season of the country’s important rice crop. Farmers are blaming the government for not doing more to protect a key export. Steve Sandford reports from Chiang Mai, Thailand.
Video

Video Making Music, Fleeing Bombs: New Film on Sudan’s Internal Refugees

In 2012, Sudanese filmmaker Hajooj Kuka went to make a documentary among civil war refugees in Sudan’s Blue Nile and Nuba Mountains region. What he found surprised him: music was helping to save people from bombing raids by their own government. VOA’s Carolyn Weaver has more.
Video

Video 'From This Day Forward' Reveals Difficult Journey of Transgender Parent

In her documentary, "From This Day Forward", filmmaker Sharon Shattuck reveals the personal journey of her transgender father, as he told his family that he always felt he was a woman inside and decided to live as one. VOA’s Penelope Poulou has more.
Video

Video Floodwaters Threaten Iconic American Home

The Farnsworth House in the Midwest State of Illinois is one of the most iconic homes in America. Thousands of tourists visit the site every year. Its location near a river inspired the design of the house, but, as VOA’s Kane Farabaugh reports, that very location is now threatening the existence of this National Historic Landmark.
Video

Video Olympics Construction Scars Sacred Korean Mountain

Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Xenophobia Victims in South Africa Flee Violence, Then Return

Many Malawians fled South Africa early this year after xenophobic attacks on African immigrants. But many quickly found life was no better at home and have returned to South Africa – often illegally and without jobs, and facing the tough task of having to start over. Lameck Masina and Anita Powell file from Johannesburg.
Video

Video Family of American Marine Calls for Release From Iranian Prison

As the crowd of journalists covering the Iran talks swells, so too do the opportunities for media coverage.  Hoping to catch the attention of high-level diplomats, the family of American-Iranian marine Amir Hekmati is in Vienna, pleading for his release from an Iranian prison after nearly 4 years.  VOA’s Heather Murdock reports from Vienna.
Video

Video UK Holds Terror Drill as MPs Mull Tunisia Response

After pledging a tough response to last Friday’s terror attack in Tunisia, which came just days before the 10th anniversary of the bomb attacks on London’s transport network, British security services are shifting their focus to overseas counter-terror operations. VOA's Henry Ridgwell has more.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.

VOA Blogs