Home / Now the NSSF boss comes under NYTimes spotlight: comment by Greg Bright

Most publishers, certainly most I have met, think the New York Times is the best newspaper in the world. As the BBC is to the airwaves, the NYTimes is to print. When the NYTimes ‘investigates’ something, as with the BBC, it really is an investigation.

So, leaving aside the murky middle ground of online where both NYTimes and BBC have quality competitors, it is worthwhile to look at the NYTimes’ latest investigation in the link between Chinese government officials, their extended families and the families’ investments.

Dai Xianglong, president of the National Council for Social Security Fund, China’s $US150 billion pension fund which also serves to provide the infrastructure as defacto supervisor of China’s nascent pensions world, was governor of China’s central bank, the People’s Bank of China, between 1995 and 2002. After that he became mayor of Tianjin, a city of about 12 million people an hour’s fast train ride from Beijing, and then, in 2008 he took up his current position on behalf of the Communist Party of China. Between 1985 and 1995 he was vice governor of China’s largest retail bank, the Agricultural Bank of China, and general manager and vice president of the Bank of Communications. In 2001, he was also appointed as vice secretary of the central finance commission. He is a serious Chinese banking blueblood, if the Chinese had such things.

In its print and online editions of December 30, the NY Times reported that,when Dai was governor of the People’s Bank of China, “… a company his relatives helped control bought a big stake in Ping An Insurance that years later came to be worth billions of dollars. The insurer was drawing new investors ahead of a public stock offering after averting insolvency a few years earlier.”

You will recall that it was the NY Times which reported on October 25 that the family of the premier Wen Jiabao had acquired assets of at least $US2.5 billion, prompting the blocking of the NY Times websites from China. The Australian NY Times journalist who was based in China, Chris Buckley, who did not write the report, did not have his visa renewed when it expired last week, without explanation, the paper said separately. He has variously been described since as being “expelled” by other press around the world.

In its December 30 report, the NY Times said:

“With growing attention on the wealth amassed by families of the politically powerful in China, the investments of Mr Dai’s relatives illustrate that the riches extend beyond the families of the political elites to the families of regulators with control of the country’s most important business and financial levers. “Mr Dai, an economist, has since left his post with the central bank and now manages the country’s $150 billion social security fund, one of the world’s biggest investment funds.

“How much the relatives made in the deal is not known, but analysts say the activity raises further doubts about whether the capital markets are sufficiently regulated in China…

“The company that bought the Ping An stake was controlled by a group of investment firms, including two set up by Mr. Dai’s son-in-law, CheFeng, as well as other firms associated with MrChe’s relatives and business associates, the regulatory filings show.

“The company, Dinghe Venture Capital, got the shares for an extremely good price, the records show, paying a small fraction of what a large British bank had paid per share just two months earlier. The company paid $55 million for its Ping An shares on Dec. 26, 2002. By 2007, the last time the value of the investment was made public, the shares were worth $3.1 billion.

“In its investigation, The New York Times found no indication that Mr Dai had been aware of his relatives’ activities, or that any law had been broken. But the relatives appeared to have made a fortune by investing in financial services companies over which Mr Dai had regulatory authority.

“In another instance, in November 2002, Dinghe acquired a big stake in Haitong Securities, a brokerage firm that also fell under Mr Dai’s jurisdiction, according to the brokerage firm’s Shanghai prospectus.

“By 2007, just after Haitong’s public listing in Shanghai, those shares were worth about $1 billion, according to public filings. Later, between 2007 and 2010, Mr. Dai’s wife, KeYongzhen, was chairwoman on Haitong’s board of supervisors.

“A spokesman for Mr Dai and the National Social Security Fund did not return phone calls seeking comment. A spokeswoman for Mr Che, the son-in-law, denied by e-mail that he had ever held a stake in Ping An. The spokeswoman said another businessman had bought the Ping An shares and then, facing financial difficulties, sold them to a group that included Mr Che’s friends and relatives, but not Mr Che…

“The corporate records reviewed by The Times, however, show that Mr Che, his relatives and longtime business associates set up a complex web of companies that effectively gave him and the others control of Dinghe Venture Capital, which made the investments in Ping An and Haitong Securities. The records show that one of the companies later nominated Mr Che to serve on the Ping An board of supervisors. His term ran from 2006 to 2009…”

In every survey I have seen in mainstream Chinese-owned press in the past few years, the three main concerns of everyday Chinese are: corruption, the environment and social security and/or medical insurance – usually in that order. The incoming government has put corruption high on the agenda, publicly, to tackle in the next few years. And there have been several high-profile arrests.

So, what is the NY Times coverage all about? The significance of the December 30 report, the paper implied, was that influence – if not corruption – spreads beyond politicians and into the vast Chinese bureaucracy. Even without the involvement of the person at the centre of influence, such as Dai, extended families can prosper by association. The NY Times points out that it is not suggesting Dai, or anyone else, did anything illegal, nor that Dai even knew of the transactions of various family members.

This is an interesting development in the paper’s coverage of the China corruption issue. While it has been gradual, over the past 34 years since the “Open Door Policy”, the West has come to treat China on its own terms. The West now expects of China the same level of transparency and propriety in political and business dealings as it expects of its own ruling elite. But China is different. It is still, in theory at least, a Communist state. It has had a tumultuous history and has suffered terribly at the hands of the West in the past 150 years and at the hands of its own leaders, most recently the Manchu, before that.

Are the questions being asked of China – in the NY Times, the US Congress and elsewhere – analogous with the gunboat diplomacy of 100-odd years ago?

Towards the end of the 19^th century, several Western countries plus Japan and Russia, known collectively as “the Powers”, attempted to carve up China into spheres of influence. Their treaty ports and other concessions were able to operate under their own laws. This was after the two Opium Wars where Britain forced China to allow the trade in a drug which its own Manchu government wanted to outlaw. This was despite the Boxer Uprising of 1900 where ordinary country people rose up against the foreigners to, in the end, be slaughtered. This was before the Civil War starting around 1930, the brutal Japanese occupation from 1937-45 and the eventual declaration by Mao Zedong of the New China on the steps of the Beijing Hotel on October 1, 1949. This was before the great famine in the 1950s and the massive mistake of the Cultural Revolution in the 1960s.

Maybe this is drawing too long a bow. I can’t help but think, however, given the China miracle, lifting more people out of poverty at a greater rate than the world has ever seen, that they should be given more of a break. Or, at least, get a new PR firm.