The General Office of the Central Committee of the Chinese Communist Party (CCP) has recently issued a new guideline. It outlines business requirements for relatives of senior Chinese officials who wish to do business, run private enterprises, or use foreign funds.
According to China’s state-run Xinhua News Agency, the new regulations forbid high-level government cadres’ spouses, children, and their relatives from managing enterprises.
The regulations also ban them from holding senior positions at private equity funds or foreign-funded enterprises and engaging in commercial operations.
It is noteworthy that the conditions above were created at President Xi Jinping’s request.
When it comes to private funds, it’s impossible not to mention Jiang Zhicheng, grandchild of former Communist Party Chairman Jiang Zemin, and his private equity fund Boyu Capital.
According to Reuters, Boyu Capital made a big impression on investors when it bought a controlling stake in Sunrise Duty-Free in 2011.
Sunrise Duty-Free is a company that runs all the duty-free stores at Shanghai and Beijing’s international airports. The deal demonstrates that Jiang Zhicheng could exploit state-owned monopoly enterprises to convert those assets into a highly profitable investment.
Boyu Capital recovered much of its Sunrise investment through dividend payments.
In 2012, Jiang Zhicheng met Alibaba’s founder Jack Ma. Then Boyu Capital joined a consortium headed by China Investment Corporation (CIC) to raise some of the 7.1 billion dollars to repurchase 20% of Jack Ma’s stake from Yahoo. Thus, 5.6% of Alibaba was then owned by the consortium led by CIC. At that time, Alibaba was estimated to be worth 38 billion dollars.
Alibaba’s market value in 2014 was at least 140 billion dollars, meaning it profited around 3.5 times that amount in just 18 months.
Jiang Zhizheng took advantage of his family background to make a fortune and use private equity funds to eat all of China’s fine assets.
According to Reuters, private equity funds have become a natural haven for “princelings”. And the princelings all play a central role in the sectors of finance, energy, domestic security, telecoms and media.
But with the anti-corruption campaign started by President Xi Jinping, princeling privilege is proved not always inviolate in China.