Paulo Roberto de Almeida
As China Official Rose, His Family’s Wealth Grew
By DAVID BARBOZA
The New York Times, April 23, 2012
DALIAN, China — Just a few weeks before his dramatic fall from power, Bo Xilai wrote an inscription in calligraphy, praising the Chongqing Water Assets Management Company, and urging support for its operations.
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Times Topic: Bo Xilai
What he did not say was that a foundation controlled by his younger brother, Bo Xicheng, had acquired a stake in a subsidiary of the water company.
Mr. Bo had done something similar in 2003, while serving as governor here in Liaoning Province. He said his province would make supporting the Dalian Daxian company, a conglomerate engaged primarily in electronics manufacturing, one of the most important tasks of the next five years. A few years earlier, another company controlled by the same younger brother was listed as the owner of nearly a million shares in Dalian Daxian, worth about $1.2 million.
It is not clear whether Mr. Bo knew of the indirect stakes in the companies, or whether his brother profited from his pronouncements. But now, in the aftermath of Mr. Bo’sdismissal, on suspicions of corruption and accusations that his wife arranged the killing of a British business associate, there are mounting questions about whether Mr. Bo, who was most recently the party chief in the city of Chongqing and a member of the Politburo, used his enormous political clout to enrich himself and his closest relatives.
For much of the last decade, while Bo Xilai was busy moving up the ranks of the Communist Party, and even striking populist themes aimed at improving the lot of the poor, his relatives were quietly amassing a fortune estimated at more than $160 million. His elder brother accumulated millions of dollars’ worth of shares in one of the country’s biggest state-owned conglomerates. His sister-in-law owns a significant stake in a printing company she started that was recently valued at $400 million. And even Mr. Bo’s 24-year-old son, now studying at Harvard, got into business in 2010, registering a technology company with $320,000 in start-up capital.
Bo Xilai’s downfall this spring has also cast a sharper spotlight on the hidden wealth and power accumulated by the Communist Party’s revolutionary families, and by the sons, daughters, wives and close relatives of the nation’s high-ranking leaders.
“This could really open a can of worms,” says Bo Zhiyue, a senior fellow at the National University of Singapore’s East Asian Institute. “The relatives of other party leaders are also doing lots of business deals, and people will begin to ask: What about them? Was the Bo family the only one doing this kind of thing?”
Mr. Bo was suspended from his Politburo position and his leadership of Chongqing, a large metropolis with province status, in recent weeks amid accusations that, among other things, he interfered with an investigation into the death of a Neil Heywood, a British businessman whose body was found in a Chongqing hotel room on Nov. 15. His death was initially attributed to alcohol poisoning. Mr. Bo’s wife, Gu Kailai, and Zhang Xiaojun, the family’s 32-year-old “orderly,” were named as the main suspects, with officials saying Ms. Gu and her son, Bo Guagua, had had a dispute with Mr. Heywood over “economic interests.”
The case has also raised questions about how the Bo family was able to afford to send their only son to study in England at Harrow and Oxford University, as well as now at Harvard, for graduate school.
State-run media reports have hinted at the possibility that the Bo family had been transferring illicit assets overseas. And soon after Mr. Bo was dismissed from his posts, Xu Ming, one of China’s wealthiest businessmen, with close ties to Mr. Bo and his family, was detained, possibly here in the city of Dalian, where Mr. Bo had once served as mayor.
None of the extended family members have been accused of illegality. But the circumstances surrounding Mr. Bo’s actions in support of companies where family members had an interest suggest that he may have used his influence to help increase their wealth.
Corporate records in Hong Kong and China show that the siblings of both Mr. Bo, who also served as commerce minister in the national government, and his wife have been exceptionally active for years in forming investment companies and setting up offshore entities. Moreover, sometimes Mr. Bo’s family members have held their stakes using an alias.
Two of Ms. Gu’s sisters — Gu Wangjiang and Gu Wangning — have earned millions of dollars in publishing, real estate and other ventures. Together they own about $120 million worth of shares in the TungKong Security Printing Company in eastern China. The TungKong Web site says the company has contracts with some of China’s biggest state-owned enterprises and government agencies, including the tax authorities and the Central Bank.
Gu Wangning also helped Bo Guagua establish a technology company in Beijing in 2010. The Guagua Technology Company’s supervisor is listed as Mr. Zhang, the Bo family aide accused along with Ms. Gu of being involved in Mr. Heywood’s death.
Two of Bo Xilai’s three brothers are well-established businessmen with close ties to state companies. His elder brother, Bo Xiyong, 64, has invested over the years, according to Hong Kong records, in a series of offshore investment vehicles like Advanced Technology and Economic Development, partly owned by a British Virgin Islands entity, and Far Eastern Industries. But little about the companies is publicly available.
Bo Xiyong is also vice chairman of China Everbright International, a division of the Everbright Group, a giant state-owned company. His annual salary is about $200,000 and his stake in the company during the past decade is about $10 million, based on shares he has sold and the value of his current stock options, according to public filings.
In addition, Bo Xiyong is a deputy of the Chinese People’s Political Consultative Conference, a government advisory body, and until recently he served as deputy chairman of HKC Holdings, a Hong Kong company controlled by the family of an Indonesian billionaire. In 2010, the big American private equity firm TPG invested about $25 million in HKC, which specializes in infrastructure and alternative energy projects in China and has won numerous state contracts.
Bo Xicheng, the younger brother with the foundation, has ties to several companies that operated in Dalian and Chongqing, the two cities where Bo Xilai served as a high-ranking official. His charitable foundation, the Beijing Xingda Educational Foundation, has on its board of directors the heads of two real estate developers, the Dalian Huanan Group and Chongqing Tianyou, as well as Weng Zhenjie, the chief executive of the Chongqing International Trust Company. Earlier this year, a Chongqing business tycoon, Zhang Mingyu, accused Bo Xilai’s police force of threatening him and protecting Mr. Weng, who Mr. Zhang said was a former business partner who had quarreled with him in Chongqing.
Among the advisers to the foundation, which has already raised more than $20 million, are two academics from the Chinese Academy of Social Sciences who publicly supported Bo Xilai’s “Chongqing model” of development.
The foundation owns a $2 million stake in Chongqing Water Group, a company now valued at about $5 billion.
Bo Xicheng has served as a director of several big state-owned companies, including Citic Securities, one of China’s largest investment houses. He is also the founder of a small company that makes fire extinguishers and other equipment, called Beijing Liuhean Firefighting Science and Technology, whose products are used in government agencies, luxury hotels, power plants and in Tiananmen Square in Beijing.
Less is known about Bo Xilai’s wife, Gu Kailai, except that she opened her own law firm, with offices in various countries, and also set up several consulting firms with foreign businessmen.
There is also a great deal of mystery about Mr. Bo’s son by his first marriage, Li Wangzhi. Like the children of so many high-ranking Chinese leaders, Mr. Li, 34, has worked in private equity and held a job at Citigroup. He invested in companies in Dalian, on his father’s turf, according to corporate filings.
He has been known alternatively as Brendan Li and Li Xiaobai.
Whether Bo Xilai was aware of all this family deal-making is unclear.
But it has become increasingly clear that the relatives of high-ranking leaders are in demand.
“They are sought after because they are considered conduits of power,” says Laurence Brahm, a former lawyer who has written books on China’s economy and political scene. “By virtue of the fact that they are a son or daughter of someone, when they visit the provinces they’ll get red carpet treatment from the leaders there. The businesspeople can tag along.”
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