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

    Clinton, Kaine Project Optimism in First Joint Campaign Event

    Kaine, a moderate, has potential to attract voters repelled by Donald Trump and those who may have a hard time fully embracing Clinton

    Turkey Wants Pakistan to Close Down institutions, Businesses Linked to Gulen

    Thousands of Pakistani students are enrolled in Gulen's commercial network of around two dozen institutions operating in Pakistan for over two decades

    AU Passport A Work in Progress

    Who will get the passport and what the benefits are still need to be worked out

    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.
    In State of Emergency, Turkey’s Erdogan Focuses on Spiritual Movementi
    X
    July 22, 2016 11:49 AM
    The state of emergency that Turkish President Recep Tayyip Erdogan has declared is giving him even more power to expand a purge that has seen an estimated 60,000 people either arrested or suspended from their jobs. VOA Europe correspondent Luis Ramirez reports from Istanbul.
    Video

    Video In State of Emergency, Turkey’s Erdogan Focuses on Spiritual Movement

    The state of emergency that Turkish President Recep Tayyip Erdogan has declared is giving him even more power to expand a purge that has seen an estimated 60,000 people either arrested or suspended from their jobs. VOA Europe correspondent Luis Ramirez reports from Istanbul.
    Video

    Video Scientists in Poland Race to Save Honeybees

    Honeybees are in danger worldwide. Causes of what's known as colony collapse disorder range from pesticides and loss of habitat to infections. But scientists in Poland say they are on track to finding a cure for one of the diseases. VOA’s George Putic reports.
    Video

    Video Wall Already Runs Along Parts of US-Mexico Border

    The Republican Party’s presidential nominee, Donald Trump, gained the support of many voters by saying he would build a wall to keep undocumented immigrants and drugs from coming across the border from Mexico. Critics have called his idea impractical and offensive to Mexico, while supporters say such a bold approach is needed to control the border. VOA’s Greg Flakus has more from the border town of Nogales, Arizona.
    Video

    Video New HIV Tests Emphasize Rapid Results

    As the global fight against AIDS intensifies, activists have placed increasing importance on getting people to know their HIV status. Some companies are developing new HIV testing methods designed to be quick, easy and accurate. Thuso Khumalo looks at the latest methods, presented at the International AIDS conference in Durban, South Africa.
    Video

    Video African Youth with HIV Urge More Support

    HIV, the virus that causes AIDS, is the top killer of teens in sub-Saharan Africa. But many youths say their experience with the virus is unique and needs to be addressed differently than the adult epidemic. VOA South African Correspondent Anita Powell reports.
    Video

    Video Poor Residents in Cleveland Not Feeling High Hopes of Republican Convention

    With the Republican Party's National Convention underway in Cleveland, Ohio, delegates and visitors are gathered in the host city's downtown - waiting to hear from the party's presidential candidate, Donald Trump. But a few kilometers from the convention's venue, Cleveland's poorest residents are not convinced Trump or his policies will make a difference in their lives. VOA's Ramon Taylor spoke with some of these residents as well as some of the Republican delegates and filed this report.
    Video

    Video Pop-Up Art Comes to Your Living Room, Backyard and Elsewhere

    Around the world, independent artists and musicians wrestle with a common problem: where to exhibit or perform? Traditional spaces such as museums and galleries are reserved for bigger names, and renting a space is not feasible for many. Enter ArtsUp, which connects artists with venue owners. Whether it’s a living room, restaurant, office or even a boat, pop-up events are bringing music and art to unexpected places. Tina Trinh has more.
    Video

    Video With Yosemite as Backdrop, Obama Praises National Parks

    Last month, President Barack Obama and his family visited some of the most beautiful national parks in the U.S. Using the majestic backdrop of a towering waterfall in California's Yosemite National Park, Obama praised the national park system which celebrates its 100th anniversary this year. He talked about the importance of America’s “national treasures” and the need to protect them from climate change and other threats. VOA’s Julie Taboh reports.
    Video

    Video Counter-Islamic State Coalition Plots Next Steps

    As momentum shifts against Islamic State in Iraq, discussions are taking place about the next steps for driving the terrorist group from its final strongholds. Secretary of State John Kerry is hosting a counter-IS meeting at the State Department, a day after defense ministers from more than 30 countries reviewed and agreed upon a course of action. VOA Pentagon correspondent Carla Babb reports.
    Video

    Video Russia's Participation at Brazil Olympic Games Still In Question

    The International Olympic Committee has delayed a decision on whether to ban all Russian teams from competing in next month's Olympic Games in Brazil over allegations of an elaborate doping scheme. The World Anti-Doping Agency recently released an independent report alleging widespread doping by Russian athletes at the 2014 Winter Olympics in Sochi. So far, only Russian track and field athletes have been barred from the Summer Games in Brazil. VOA's Zlatica Hoke has more.
    Video

    Video Scotland’s Booming Whisky Industry Fears Brexit Hangover

    After Britain’s vote to leave the European Union, Scotland’s government wants to break away from the United Kingdom – fearing the nation’s exports are at risk. Among the biggest of these is whisky. Henry Ridgwell reports on a time of turmoil for those involved in the ancient art of distilling Scotland’s most famous product.
    Video

    Video Millennials Could Determine Who Wins Race to White House

    With only four months to go until Americans elect a new president, one group of voters is getting a lot more attention these days: those ages 18 to 35, a generation known as millennials. It’s a demographic that some analysts say could have the power to decide the 2016 election. But a lot depends on whether they actually turn out to vote. VOA’s Alexa Lamanna reports.

    Special Report

    Adrift The Invisible African Diaspora