Hardly a ripple in China over JPMorgan
Prevailing attitude to US investigation is hiring ‘princelings’ to gain influence happens all the time
A man walks past JPMorgan Chase’s international headquarters on Park Avenue in New York. The news that JPMorgan Chase is being investigated by the US Securities and Exchange Commission over its hiring policy in China has not been widely reported in China. Photograph: Reuters/Andrew Burton
Reports that US authorities have opened an investigation into whether JPMorgan Chase hired the children of powerful Chinese officials to help it win business in China is the latest episode of increased scrutiny of family connections in the country.
Investment banks have always had to work with the children of China’s political elite as it is a surefire way of gaining influence within the often arcane political structure of China.
However, the situation has supposedly changed since Xi Jinping took over the reins, promising to crack down on cronyism and nepotism.
JPMorgan reportedly hired Tang Xiaoning, the son of Tang Shuangning, who headed up the credit management division of the Peoples Bank of China and is now the chairman of the China Everbright Group, a state-controlled financial group.
After the son joined JPMorgan, the bank secured several important assignments from Everbright, including advising one of its units on an Initial Public Offering.
The children of senior leaders, known as “princelings”, have huge power and privilege in China, and have worked to help build relationships between overseas firms and Chinese decision-makers.
Relationships and personal connections play a vital role in business decisions, and the princelings have been particularly successful in their association with private equity funds.
Many of the offspring of influential leaders have been able to use their leverage to amass vast sums of money, especially during the heyday of the large-scale IPOs in China a decade ago. Former Communist Party boss in Chongqing Bo Xilai was ousted in China’s biggest political scandal in two decades last year, following his wife Gu Kailai’s conviction for the murder of a British businessman, Neil Heywood.
His trial is due to begin on Thursday in Jinan, capital of Shandong province.
He is accused of “grave violations of party discipline” and has been expelled from the ranks of the Communist Party.
However, Bo is the son of a legendary early leader of the Communist Party, Bo Yibo.
Despite his downfall, he remains popular with some elements in the party and he is thought unlikely to face the death penalty because of his lingering influence.
Last year, The New York Times examined the business dealings of former premier Wen Jiabao’s only son, Wen Yunsong, who is also known by his English name Winston Wen. He has been involved in numerous start-ups with state-owned firms such as China Mobile.
The news that JPMorgan Chase is being investigated by the US Securities and Exchange Commission over its hiring policy in China has not been widely reported in China. However, the prevailing attitude is that this happens all the time.
The SEC was careful to say there had been no suggestion that the employees hired by the bank were unqualified, and said JPMorgan, although under investigation, had not been accused of any wrongdoing.