Event Recap: Corruption in China on the Eve of the 19th Party Congress

May 22, 2017
Michael Forsythe

For The New York Times' Michael Forsythe, who led a Critical Issues Confronting China seminar titled Corruption in China on the Eve of the 19th Party Congress, it is fascinating to witness the center of the Chinese universe moving from Beijing to Manhattan, as Chinese business tycoons with disputable reputations take luxury residences in New York. Wu Xiaohui, Chairman and CEO of the Anbang Insurance Group, which bought the Waldorf Astoria, the landmark hotel on Park Avenue, in 2014 for $1.95 billion, is one of them. Another one is currently in the news: Chinese billionaire Guo Wen-gui, residing in his $67 million penthouse on Fifth Avenue, blasts out corruption allegations of “nuclear bomb” grade against the top echelon of the Chinese Communist leadership through an interview with the Voice of America.

These are like an earthquake reverberating across the Pacific Ocean, foreshadowing the 19th Party Congress later this fall, just as the 2012 18th Party Congress was overshadowed by reports about the disgraced Chongqing Party Secretary Bo Xilai and his family members. Even though some of Guo Wen-gui’s allegations are unfounded or can be misleading, what is clear to Forsythe is that Xi Jinping's anti-corruption campaign targets certain people. Guo has declared war on Wang Qishan, the head of the Central Commission for Discipline Inspection and the front leader of this campaign. Forsythe took Guo’s allegations as a clear sign of a weakness of the Chinese system that China is not governed by the rule of law, but by the rule of certain people who have lots of secrets.

Some of Guo’s allegations are verifiable, others are yet to be debunked. How to winnow grain from the chaff? Forsythe shared with the audience his experiences and research techniques from his investigative reporting career, and encouraged young graduate students to dig out evidence and get to the bottom of these things, possibly with the financial help of some kind of fellowships.

Forsythe began his journalist career shortly after receiving his master’s degree from Harvard’s Regional Studies - East Asia (RSEA) program in 1999. What happened in the ensuing decade and a half was like a magnet that kept him pulled into China. Almost all western media coverage of China before 2012 was on economic news centered around the theme “going abroad (走出去).” Since April 2012, when Chongqing’s Police Chief Wang Lijun defected to the American Consulate in Chengdu, a nearby city to Chongqing, and triggered the dramatic downfall of Bo Xilai in the following year, western journalists began to focus on political stories in China. If Bo’s case was so outrageous, what about other members of the Chinese Politburo Committee?

An examination of the top people, such as Zhou Yongkang and He Guoqiang, reveals a very similar profile. They rose to top tier leadership positions from their local bases where they had been patriarchs. Their sons and other relatives all set up companies in the places where they could enjoy the influence of their patriarchs and/or became heads of large SOEs. Their family background made them well-positioned to access information sources and logistical channels and to benefit from any policy changes, thereby amassing staggering amounts of wealth.
      
Against this backdrop, David Barboza, another New York Times correspondent, published a definitive account in the fall of 2012 of how the family members of Prime Minister Wen Jiabao acquired stunning amounts of wealth over relatively short periods of time. Even this extensive account revealed only the tip of the iceberg, according to Forsythe, because The New York Times, holding a high journalistic standard, cannot publish any rumors or suspicion without verifiable facts. Any numbers without backup proof have to be left out of the publication. When Bloomberg News couldn’t take the heat from the Chinese authorities generated by his investigative reporting of top Chinese leaders, Forsythe transferred to The New York Times and became a colleague of Barboza’s.  

To encourage similar type of investigative reporting by future unabashed journalists, Forsythe compared the Chinese system of records with that of America. China has a better corporate record system than the U.S. Even private Chinese companies have to file with the State Industry and Commerce Ministry (工商局), whereas non-public companies in the U.S. don’t have to publicly disclose their ownership. These Chinese records, including historical shareholdings, are all available to the public for free. This is where Barboza got hold of lots of indicative information about the holdings of Wen’s family members. Hong Kong has a similar depository of commercial records, also available with a small charge.

On the other hand, the Chinese don’t have good records of property ownership, unlike the U.S. With American property records, it is quite easy to find out which properties are owned by the relatives of top Chinese leaders and how much they paid. Xi’s sister in-law and his niece and many others all own luxury properties in the U.S. To find out who are the relatives of these top leaders, family tombstones can provide indelible evidence of their relationships, since the Chinese have such great respect for their ancestors so that their family trees are all carved on tombstones.

Forsythe does not shun investigating American princelings either, such as the Trump family. But he pointed out a difference between the two cultures. In the U.S., American businesses don’t want to be perceived as having relations with any princelings, whereas Chinese companies consider their relations with princelings as a plus for their businesses, bolstering their security and outreach network. With Guo Wengui speaking publicly to the Voice of America, Chinese crony capitalism and corruption are going global this year.