Regime Power Broker Ships Money Out of China

May 29, 2012 Updated: October 1, 2015
A China Eastern Airlines jet
A China Eastern Airlines jet flies over a temple before landing in Taipei on June 29, 2010. Zeng Qinghong laundered money through the airlines to Taiwan in 2002. (Patrick Lin/AFP/Getty Images)

After well-connected officials in China turn their influence into cash, they need to figure out how to move the money out of the country. No one is better connected than Zeng Qinghong, and, with the help of a Taiwanese businessman, Zeng and his family have set up enterprises that have allowed them to move huge sums offshore.

Zeng has long had the reputation of being one of the Chinese Communist Party’s (CCP’s) most influential power brokers. Currently the head of the National People’s Congress, he reached the peak of his official power in the years 2002-2007 when he was a member of the decision-making Politburo Standing Committee and the vice-president of China.

Behind the scenes, Zeng has been credited with saving the political career of CCP head Jiang Zemin when Deng Xiaoping was looking to replace him in the early 1990s and helping Jiang out again by orchestrating the removal from office of Beijing Mayor Chen Xitong in 1995.

According to a source familiar with Zeng Qinghong’s dealings, Zeng first began working with the Taiwanese businessman when China Eastern Airlines ran into stiff economic turbulence in 2002.

The Taiwanese businessman injected cash, saving the airline. Zeng Qinghong and his son, Zeng Wei, were very grateful. Zeng Wei was the behind-the-scenes boss of China Eastern.

The new relationship would prove mutually beneficial. The Zengs’ benefactor was the CEO of two financial companies in Taiwan and well-connected in Taiwan’s political circles.

Hong Kong Trade

Zeng Qinghong and the businessman began working immediately to turn Zeng’s political connections to their advantage.

Zeng had been Jiang Zemin’s point man on Hong Kong affairs and was named the head of the CCP’s Hong Kong and Macao Project Coordination Group.

One of Zeng’s main tasks was to put in place the Closer Economic Partnership Arrangement (CEPA), a kind of free trade agreement between Hong Kong and the People’s Republic of China.

On the surface, CEPA appeared to be about attracting investment, but Zeng and Jiang’s families had ulterior motives for wanting the agreement put in place.

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The Taiwan businessman bought a bank in Hong Kong at a low price. After CEPA was signed in 2003, that bank has been used to channel Taiwan funds through Hong Kong into the mainland, and for the Zeng and Jiang families to begin laundering money and shipping it from China overseas.

A life insurance company owned by the Taiwan businessman entered the China market and its business partner was China Eastern Airlines. From then on, Zeng Wei together with the Jiang family started laundering money and sending it overseas through China Eastern Airlines.

In 2006 the Shandong Luneng Group, a giant state-owned enterprise, was privatized, and, with channels established for moving money directly out of the country, the Zeng family was ready to take advantage. An estimated 70 billion yuan (US$11 billion at current exchange rates) in state assets were lost in the deal, and most of this money was transferred abroad.

Political Influence Purchased

One senior Taiwan politician, who is a close friend of the businessman, had his eyes on Jiang and Zeng. He put his money in the businessman’s bank, and from there the senior politician bribed the Zeng and Jiang families.

This politician bought from Zeng and Jiang a promise of “carrying out a policy of compromise on the Taiwan issue for the next few years.” For those few years, during the critical moment, there was always someone on the PRC side who could come out and express opinions on Taiwan that met the needs of this Taiwan politician.

The Zeng family had powerful influence in the Civil Aviation Administration of China (CAAC). In 2005, Pu Zhaozhou, the director of the Taiwan, Hong Kong and Macau office of CAAC, held a press conference on behalf of Taiwan Affairs Office of China’s State Council, to announce the expansion of cross-strait charter flights.

This was done without first even notifying the Taiwan Affairs Office, the PRC office that has authority over Taiwan affairs. This announcement was a political return to the Taiwan politician for bribing Zeng.

Australian Home and Retirement

CCP officials not only seek to move their money out of China, where they believe it will be safe even if the CCP falls. They also seek to move their families out of China for the same reason.

Zeng had advised his son to immigrate to Australia and in 2008 Zeng Wei completed the purchase of Craig-y-Mor in Point Piper, at 32 million Australian dollars the third-most expensive house ever sold in Australia.

Zeng was due to retire from the Politburo Standing Committee in October 2007 at the 17th National Congress but was trying to hang onto his place on the committee.

At the 16th Party Congress in 2002, Zeng and Jiang had made up a rule that anyone 68 or older had to retire from the Standing Committee. They did so to push the widely admired Li Ruihuan off that key body.

Zeng was now 68 but now he and Jiang in advance of the 17th Party Congress were arguing that the rule should not apply in Zeng’s case. Zeng said he intended to stay on to “continue mentoring the new cadres.”

Meanwhile, some old officials and members of the Politburo who supported Party head Hu Jintao persistently requested that Zeng Qinghong explain clearly why his son had emigrated to Australia.

Each summer the Party’s top officials get together at the beach resort Beidaihe. At the 2007 meeting, a retired official criticized how the Vice President’s son had secretly emigrated to another country and then been publicized by foreign media.

“This is too shameful, too indecent, too outrageous,” the old official said.

Facing accusations by many people, Zeng Qinghong became furious and yelled in a meeting that he didn’t know about the immigration and couldn’t control his son.

Hu Jintao, because Zeng had “betrayed the country for money,” used an article in People’s Daily to give him a warning. Zeng Qinghong understood Hu’s warning and was forced to retire.

When Zeng stepped down, he put the best face on his disgrace, claiming he had sacrificed himself in order to help Xi Jinping, who joined the Standing Committee and then was named Hu Jintao’s successor.

Read the original Chinese article.

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