A Death in the Lucky Holiday Hotel (35 page)

An official Chinese media report in May 2012 said Xu’s electric-appliance company was facing the challenges of rising costs and low profit margins. The government revoked his automobile production license in 2005. His soccer enterprise was hit with scandals and sponsorship dried up. There were constant stories about Xu’s failure to pay his players and Shide Group was billions of yuan in debt. In 2011, he was also forced to give up his CEO position at Shide Group, though he remained president.

His diminishing fortune probably drove Xu closer to Bo’s circle. More than anyone else, he pinned his hopes on Bo’s ascension to the Politburo Standing Committee, which carried huge political and economic power. Based on an account from an official with the Central Commission for Discipline Inspection, Xu and another of Bo’s business friends carried boxes of cash to Beijing to lobby other Politburo members and bribe the media to support Bo’s political bid.

In February 2012 Xu was believed to have spent two weeks in Australia, watching the Bo Xilai scandal unfold. Late that month, Bo allegedly got ahold of him, called him a coward, and urged him to return. With Bo’s reassurance, Xu assumed that the coast was clear and came back to China.

Like Bo, Xu had grossly miscalculated the political situation. Premier Wen Jiabao delivered his scathing criticism of Bo’ s policy in Chongqing on March 14, 2012, and an official in Chongqing said that within an hour about seventy municipal leaders were under escort to Beijing for an important briefing about Bo’s pending political demise. Xu disappeared that night. A source at the Public Security Ministry said Xu had attempted to flee the country for the second time on March 16, but was intercepted by immigration and customs officers.
Over the next week, I combed the Chinese official media for clues relating to Xu’s whereabouts but came up with nothing.

At the end of March, a financial magazine affiliated with Xinhua confirmed Xu’s arrest. The report said Xu was “under the control of the Central Commission for Discipline Inspection” for his alleged involvement in economic crimes. At the same time, the commission sent a team to Dalian to investigate Xu’s business activities. Even though the article did not provide any details, the public knew that Xu’s detention was related to Bo.

Dalian Shide Football Club lost miserably in a game in Nanjing city on March 30, and after the game a reporter asked the players about Xu. They shook their heads but said nothing.

Xu’s company, the Shide Group, issued an internal circular on March 31, acknowledging that company officials had not heard from Xu since March 14 and that no government agency would officially say what had happened. According to the circular, the company had submitted a written report to the Dalian municipal government about Xu’s disappearance and his brother had stepped up to temporarily take over Xu’s responsibilities as board president. The company pledged to abide by party policies and keep the business running as usual. The internal circular was first posted on the Internet portal Sina but was soon deleted.

After Xu’s arrest was gradually made public, more information has come to light. Xu allegedly paid the tuition and living expenses of Bo Guagua, the son of Bo Xilai, and covered most of Gu Kailai’s overseas travel expenses. In addition, Xu had shelled out millions of yuan for actresses and models to sleep with Bo. In one incident, when a news anchor in Dalian became pregnant after having an affair with Bo, Xu paid her 10 million yuan to keep quiet. One official media report said Xu was facing charges of match-fixing and violation of China’s financial regulations—one accusation was that in 2009, he had mortgaged a plot of land that did not belong to his company to obtain a loan of 150 million yuan (US $24 million), from a local bank.

During the trial of Chongqing’s former police chief, Wang Lijun, on September 9, 2012, Xu was named in the official transcript:

       
In April 2009, one of Wang’s immediate family members was transferred to a working position in Beijing. Not having a residence in Beijing, the family member of Wang received two apartments in Beijing bought by Xu Ming at a price of 2.85 million yuan [US $449,583]. The apartments were registered under the name of Wang’s father-in-law. After the deal, Wang gave his thanks to Xu in person. In July of the same year, Wang, at the request of Xu, instructed law enforcement departments in Chongqing to release three people who were under detention.

Xu’s name also appeared in both of Gu Kailai’s confessions, alleging he had helped plot Heywood’s murder by filing false charges that Heywood was a drug trafficker. These mentions herald tough sentencing for Xu in the coming year. Xu’s story is a reminder that many Chinese billionaires have followed a similar curve. The most recent was Huang Guangyu, who traveled to Beijing in 1990 from his rural village in Guangdong province. With 4,000 yuan (US $645) in his pocket, he started his Gome Electrical Appliances Holdings, which became China’s second-largest home appliance retailer. He was ranked as mainland China’s richest person by Hurun’s China Rich List from 2005 to 2008, with assets reaching 4.3 billion yuan (nearly US $700 million). In 2008, when he was forty-one, a Beijing court sentenced Huang to fourteen years in prison for illegal business dealings, insider trading, and corporate bribery, charging that Huang directly bribed or instigated others to bribe five government officials with 4.5 million yuan (US $725,000) in cash and properties from 2006 to 2008 in exchange for corporate benefits.

Huang’s sentencing led to the downfall of a group of senior officials at the economic crime investigation bureau of the Ministry of Public Security, the State Administration of Taxation’s inspection bureau, and the economic investigation division of the Beijing municipal public security bureau. The assistant minister of public security was also investigated for accepting bribes from Huang.

Before Xu’s detention, several of his friends expressed their concerns to him. One day in 2000, Xu had a business meeting with a
colleague in his office. Over the course of the conference, Xu’s phone rang. It was from a deputy district chief in Dalian, who asked if Xu was willing to talk to Bo Xilai in an attempt to secure him a promotion. The colleague, who overheard part of the conversation, quit a few months later. “I knew that Xu Ming would get into trouble someday,” he told
Southern Weekend
. “He was tied too closely with the interests of certain leaders.” The colleague warned him, but Xu ignored his words.

The misfortunes of Xu and other prominent Chinese businessmen highlight the close and yet precarious relations between Chinese government officials and businessmen. In China, businessmen rely heavily on government officials. It is not uncommon for a millionaire to bow to the needs of a tiny government agency director, who might control the local policies and resources, and could make the businessman’s wealth evaporate overnight. During a recent visit to central China, I learned that the owner of a local supermarket chain had offended a senior official at the municipal People’s Congress by refusing to donate money to one of the official’s pet projects. A year later, the businessman was notified that the shopping center, where his flagship store was located, would be demolished to make way for an office building. The notice came right after he had renewed a ten-year lease and invested heavily in the store. Even though the city government would compensate him for part of his costs, the loss of the prime location effectively destroyed his business.

Because politics and businesses are so intertwined, many business-people in China are more politically astute than scholars. Many who visit New York would invite me out for dinner to discuss politics. During our conversations, I’ve noticed, they are very well informed and have a deep understanding of intricate political issues. When I inquire about the types of political connections they have in China, most of the big businesspeople are friends with the provincial party chief, the governor, the mayor, or Politburo members.

The attraction seems to be mutual. Officials are increasingly dependent on businesspeople to underwrite their own family expenses. Officials realize that unless they can find a way to convert
their power into cash, they will end up with nothing after they retire. In the 1980s and 1990s, bribes from businesses came in the form of a red envelope with several hundred yuan of cash or a gift card or unlimited access to a certain bank account. That has evolved into diverse methods of bribery, where a wealthy businessperson is treated like an official’s private treasurer or underground office manager. He quietly pays for big purchases made by the official’s family members. Some officials, such as Bo Xilai, even ask their business partners to purchase houses or pay their children’s tuition abroad. In some cases, a businessperson will make an official or his family member a silent investor in an enterprise. The deal is a win-win situation—the official obtains a certain percentage of the company for nothing and without the knowledge of the public or the party, and the businessperson gets the necessary political protection or a certain government contract.

In the 1980s, the Communist Party forbade children of senior leaders to engage in business. But now it is rare to find officials whose children are not using their parents’ connections to do business. This happens at all levels of the government. Sometimes, a businessperson becomes an official’s secret lobbyist, bribing senior leaders on behalf of the official for promotions and pays the media to write positive stories. As a consequence, corruption permeates every level of the party and the government. If an official attempts to stay clean, he or she would be considered a rule breaker who could soon be purged.

With their shared interests, businesspeople and government officials are tied together in one boat. If one side gets into trouble, the other one will go down with it. At the time of writing, Xu is still being detained in an undisclosed location. As the ruling elite is building a strong case against Bo, Xu’s testimony will no doubt play a big role. However, with so much attention focused on Bo, the world seems to have forgotten Xu Ming, the legendary billionaire who once headlined many business and financial publications. Xu’s situation illustrates a sad fact in China—once a businessperson loses the protection of power, he can be crushed like an ant. That was also the very reason Xu Ming clung so closely to Bo Xilai, but unfortunately, Xu was barking up the wrong tree.

I
N MID-OCTOBER, when an editor at the
New York Times
reached out to the Chinese government for comments relating to an upcoming article that investigated the financial assets held by Premier Wen’s family members, the officials declined. But Zhang Yesui, the Chinese ambassador in Washington, DC, and the Chinese consul general in New York City personally visited the
New York Times
headquarters, trying to block the publication of the article, penned by David Barboza, the
Times’
Shanghai business correspondent.

“Chinese officials raised six points in the conversation,” said a businessman close to Premier Wen. “They explained the cultural and political differences in both countries and demanded that the
Times
kill the article about the Chinese premier. The ambassador also threatened that publishing such a negative article about Premier Wen before the Party Congress could seriously damage Sino–US relations.”

Such arrogance and a lack of basic understanding of Western journalistic institutions on the part of Chinese officials only confirmed the importance of the article. On October 25, the
New York Times
published Barboza’s lengthy investigative report on its English- and Chinese-language websites. The article confirmed in considerable detail the rumors about Premier Wen Jiabao’s wife and son circulating on Chinese Weibo and in overseas Chinese media since 2011.

Many relatives of Wen Jiabao, including his son, daughter, younger brother, and brother-in-law, have become extraordinarily wealthy during his leadership, the
New York Times
investigation revealed. A review of corporate and regulatory records indicated the premier’s relatives—some of whom, including his wife, have a knack for aggressive deal-making—controlled assets worth at least US $2.7 billion. In many cases, Barboza found, the names of the relatives were hidden behind layers of partnerships and investment vehicles involving friends, work colleagues, and business partners.

Barboza’s untangling of the financial holdings provides an unusually detailed look at how politically connected people have profited
from being at the intersection of government and business as state influence and private wealth converge in China’s fast-growing economy.

The article alleged that Wen’s wife, Zhang Peili, had grown rich through her involvement in the diamond trade, while their son, Wen Yunsong, made large profits through private equity and other business deals. Barboza said he found no record of holdings in Premier Wen’s name and that it was not possible to tell from records whether he had assisted his relatives’ business dealings.

The story about Wen Jiabao was picked up by the foreign media around the world, but most Chinese were kept in the dark. The Chinese government blocked the
New York Times
websites in China three hours after the article was posted. The Chinese Foreign Ministry spokesperson castigated the
New York Times
as “harboring ulterior motives and blackening China,” while the state media attacked the
Times
with claims that “there has been an explosion in plagiarism and fabrication by its journalists.” Online discussions that contain the phrases “$2.7 billion” or “Wen Jiabao” were quashed, but bloggers cleverly skirted government censors by replacing Wen Jiabao’s name with
baobao
, the Chinese word for “baby.” One blogger even brought up Wen’s frequently quoted lines that “people should have the right to access information and supervise the government” to point out the brutal ironies of the situation.

For the general public, it was hard to reconcile the image of the pro-people premier, supposedly one of the cleanest in the Politburo, with that of a man who would allow his family to use his political status to amass $2.7 billion in assets. Although some discarded the report as pure fabrication to smear their beloved premier, many felt duped. “Wen Jiabao is a hypocrite,” wrote a Shanghai-based blogger with the user name of “tusingan.” A Beijing-based journalist agreed: “It’s been a well-known fact among the political community here that Wen’s family is wealthy,” she said. “Even former president Jiang Zemin reportedly teases Wen, calling him the wealthiest person in China. Yet, he howled the loudest during anticorruption campaigns. The article shows how pervasive corruption is. The Chinese proverb, ‘When a
man attains enlightenment, even his pets get to ascend to heaven’ sums up the situation well. Officials are now converting political power into money. The
New York Times
is doing a job that domestic media cannot do.”