Commentary
Who the wealthiest man in China is depends on who you ask. According to the 2019 Forbes list of billionaires, it’s either Ma Huateng of Tencent, Alibaba’s Jack Ma, or Hui Ka Yan of the Evergrande real estate group.
But in recent years, the progress of Beijing’s anti-corruption campaign and high-profile data leaks have exposed many hidden holders of wealth—much of it ill-gotten and closely linked to the commanding heights of political power in China. New revelations point to the progeny of Jiang Zemin, the 92-year-old former head of the Chinese Communist Party, as owning wealth exceeding that of any listed billionaire.
Jiang Zhicheng, also known by his Anglicized name of Alvin Jiang, was born in 1986 and is the grandson of Jiang Zemin. His father is Jiang Mianheng, the eldest son of Jiang Zemin. In 2010, at the age of 24, Jiang Zhicheng established his own private equity firm, Boyu Capital, after leaving his job at Goldman Sachs, where he had been employed for less than a year.
In 2014, Reuters published a special report detailing how Jiang had made use of his status as a “princeling”—that is, the child of a CCP official—to amass wealth in the world’s largest emerging private equity market.
And just this April, Chinese billionaire-in-exile Guo Wengui accused the Jiang family of having accumulated at least $1 trillion in embezzled Chinese funds, and that Jiang Zhicheng has managed to launder half of it overseas.
Guo, who also goes by the name Miles Kwok, escaped China in 2015, and now lives in Manhattan. He is known for his connections to retired Chinese regime officials, particularly those associated with Jiang Zemin. Jiang and his allies reigned supreme in Chinese politics from 1997 to 2012, the year current leader Xi Jinping came to power.
According to Guo, the top ten Chinese companies, including the supposedly privately-owned Huawei, Alibaba, and Tencent, are in fact “militarized state-owned enterprises” controlled by the Jiang family. The Jiangs also own multiple large overseas companies as part of their investments.
Though Guo’s claims regarding the scale of Jiang’s corruption may seem suspicious, they are not in fact far-fetched, as there is plenty of circumstantial evidence to suggest that Jiang Zhicheng amassed hundreds of billions of dollars in a little over a decade.
Corruption From Generation to Generation
Jiang Zhicheng and his father Jiang Mianheng are both “red princelings.” In Chinese society, which is under the strict administration of the Communist Party, princelings can easily tap into their families’ political connections to make vast fortunes.In the 1980s, princelings leveraged their positions for massive profits. Public anger at their behavior contributed to the 1989 student protests at Tiananmen Square.
Following the June 4 massacre, Jiang Zemin stepped up to helm the Communist Party, beginning a period of “rule by corruption” that further empowered the princelings to abuse their status and engage in vast economic malfeasance.
In this political climate, Jiang used his power to turn strategically valuable state-owned enterprises over to his son Jiang Mianheng, who bought the firms at very low prices or, in some cases, for nothing at all. Mianheng gained full control of Shanghai Alliance Investment Ltd., a private equity and venture capital arm of Shanghai Municipal Government’s Shanghai Economic Commission. By investing through this company, Jiang Mianheng built up a massive telecom empire and dipped his hands in almost every monopoly industry such as real estate, finance, and health care.
Propped up by his father’s status as Party leader and the CCP’s endemic corruption, Jiang Mianheng gained himself the infamy of being seen as the “most corrupt man in China.”
According to earlier claims by Guo Wengui, Jiang Mianheng also benefited physically from the Chinese regime’s widespread practice of forced organ harvesting. In 2017 and 2018, Guo said that Jiang Mianheng received three kidney transplant surgeries at the Nanjing Military Hospital between 2004 and 2008 using organs harvested from living donors.
The second generation of the Jiang Zemin dynasty preyed on the wealth of the Chinese people, but the third generation—that of Jiang Zhicheng—aims at foreign countries such as the United States.
Educated at Harvard, Jiang Zhicheng dispensed with his father’s open robbery of Chinese enterprises and citizens. Instead, he chose a more easily masked and far more effective route: financial manipulation.
Jiang Zhicheng found that he could easily acquire hundreds of billions of dollars out of Hong Kong, United States, and other foreign stock markets by using Chinese companies for financial operations. All he needed to do was to use his grandfather’s power to manipulate, pressure, or influence Chinese companies to act as lures for foreign financial organizations and firms eager to enter the club of powerful CCP-affiliated groups.
Manipulating Chinese Enterprises to Gather Foreign Wealth
Jiang appears to have first struck gold in his journey of corruption in mid-2011, with the purchase of controlling stock in Sunrise Duty Free. Sunrise, a travel retailer that specializes in the monopoly business of duty-free merchandise requiring special grant by the Chinese authorities, was founded by Fred Kiang, a Chinese-American with close ties to the Jiang Zemin family.Reuters reported that in 2011, Jiang Zhicheng’s company, Boyu, valued Sunrise at $200 million, and paid about $80 million for a 40 percent stake in Sunrise. In 2013, Boyu marked the Sunrise business on its books at a value of around $800 million.
“Bankers, however, value Sunrise at twice that amount - at around $1.6 billion - based on 2012 sales figures the company filed with Chinese authorities, which Reuters reviewed.” That means that by purchasing Sunrise, Boyu earned at least seven times its initial investment.
The investors were impressed. The fact that Jiang Zhicheng acquired Sunrise almost for free proved that he could not only play in strictly monopolized industries, but also turn these assets into huge profits. For princelings, the low-transparency private equity market became an exclusive cash cow.
In their 2013 article “Red Bigwigs Going Wild in Central District: Jiang Zemin’s Grandson’s Super Equity,” Next Media in Hong Kong outlined the red princelings’ path to dominating the Hong Kong financial sector. They first work in an international investment banks, then found equity firms in Hong Kong. Luring wealthy individuals from both inside and outside China, they then move to take over enterprises in China. The investment banks where they work or the equity firms they found easily manipulate hundreds of billions of dollars for astronomical profit.
Boyu, for example, raised a first fund of $1 billion from high profile investors like Asia’s richest man, Li Ka-shing. Today, Boyu is one of China’s largest private equity firms, managing almost $10 billion of U.S. dollar funds.
Jiang Zhicheng has also collaborated with CITIC Capital, another firm controlled by red princelings, through which he purchased HK$390 million (about US$49 million) worth of stock in China Cinda Asset Management. But Jiang’s real target was likely China’s greatest financial prize, Alibaba.
Going After Alibaba
At the time of Boyu’s founding, Alibaba was already China’s biggest e-commerce company, and its Alipay was China’s top third-party payment platform.But since then, Alibaba experienced some unusual turmoil. In May 2011, Alibaba Group transferred Alipay to Zhejiang Alibaba, a company controlled by Jack Ma and Xie Shihuang, the company’s, without the consent of Alibaba’s controlling shareholders, which included Yahoo.
Alibaba stated publicly that the controversial move was made to comply with the CCP’s policies and avoid controls by foreign funding agreements, so as to acquire a third-party payment license. However, Chinese media refuted this, saying that the government policies were not very specific, and that Zhejiang Alibaba could not prove its lack of influence of foreign agreements. More importantly, half of the 27 sponsor companies who were awarded the certificate involved foreign funds, and none of them was rejected due to involvement with foreign agreements.
The transfer of Alipay sabotaged the legal profits of Alibaba’s shareholders, and the truth behind this move remains a mystery. But according to overseas media, the root cause of the transfer was Jiang Zhicheng’s motive in taking over Alipay once it was separated from Alibaba.
In 2014, Zhejiang Alibaba changed its name to Ant Financial. By 2018, Ant Financial had become the world’s biggest “unicorn” with a value of $160 billion. The term “unicorn” refers to an unlisted innovative tech company with a history of less than a decade, yet is valued at $1 billion or more.
Rumors abound about interactions between Boyu and Alibaba. In September 2012, Boyu, together with CITIC and CBD Capital, helped Alibaba buy back all the shares that Yahoo held.
In September 2014, Alibaba Group debuted on the NYSE with a record-breaking IPO of $25 billion, becoming one of the world’s most valued tech companies. This apparently made its biggest shareholder, owner Jack Ma, the wealthiest man in China.
Boyu invested $400 million in Alibaba in 2012. After Alibaba listed, Boyu earned over $2 billion in just two years. But this is just a small fraction of Jiang’s overall gains from Alibaba. Using his status as Jiang Zemin’s grandson, Jiang Zhicheng also seized unpublicized stock option gains from Alibaba, which formed the great bulk of his profits.
A Look at Jiang Zhicheng’s Bizarre Fortune
Alibaba’s POST IPO statement showed that in 2014, 14.6 percent of its stock was held by Alibaba management, including 7.8 percent held by Jack Ma. SoftBank held another 32.4 percent, and Yahoo held 16.3 percent. Intriguingly, the statement did not mention the ownership of the remaining third of Alibaba’s stocks.Combing through Alibaba financial data, however, offers a glimpse of Jiang Zhicheng’s shadow assets.
According to the Form 20-F that Alibaba submitted to the U.S. Securities and Exchange Commission in 2018, Alibaba had 2,592,184,258 ordinary shares outstanding as of July 18. Of these shares, about 1.67 million, or 64.4 percent, were held by 128 record shareholders with registered addresses in the United States, including brokers and banks that hold securities on their customers’ behalf. In its annual report, Alibaba only reviewed one part of its ownership structure, including the management and beneficial owners who hold 5 percent or more of the company’s shares.
However, a Yahoo! Finance analysis of Alibaba’s 2017 13-F quarterly data showed that as of December 31, 2017, 1,926 U.S. companies held 1.05 billion shares, or 40.54 percent of Alibaba’s outstanding shares. This means that though the number of U.S.-registered shareholders fell fifteen-fold, their shares increased from two fifths to over three-fifths of the total.
A vast majority of the 2,000 U.S.-registered shareholders sold or transferred their Alibaba shares to the 128 remaining shareholders, a development that coincided with the large influx of Alibaba shares into the United States. An American accountant going by the internet handle Deep Throat suggests that this may be a result of the Chinese regime manipulating a large number of offshore companies, the same strategy they used to manipulate the yuan.
The drastic change in the makeup of Alibaba’s ownership may have something to do with the global campaign against tax evasion that began in 2018. In November 2017, 13.4 million documents were leaked from a large offshore financial company, known as the Paradise Papers. Like the Panama Papers in 2016, the Paradise Papers exposed how a large number of politicians, celebrities and international enterprises skirted taxes by registering offshore companies in tax havens. The Paradise Papers also unveiled many owners of hitherto anonymous wealth, including the assets of Chinese officials and their children.
The papers led the United States and the European Union to confront tax havens like the Cayman Islands and Bermuda. In December 2017, the EU issued its first list of tax havens. The following year, the U.S. Department of Justice announced the most large-scale incitement, which involved charges of defrauding the United States by obstructing the functions of the IRS in its implementation of the Foreign Account Tax Compliance Act (“FATCA”).
Under U.S. and EU pressure, tax havens including Bermuda, the British Virgin Islands, Cayman Islands, and Luxembourg implemented the Common Reporting Standard (CRS) system to exchange financial information, facilitating efforts against tax evasion.
This forced tax evaders and anonymous investors to transfer their investments back into the United States in order to legally hide their true identities. This includes the faceless shareholders of Alibaba. In the first six months of 2018, Alibaba’s U.S.-registered shareholders representing customers dropped by 93 percent, while 20 percent of circulating shares (about 620 million) flowed back to the United States.
The New York Times shed more light on this issue in a July 2014 article titled “Alibaba’s I.P.O. Could Be a Bonanza for the Scions of Chinese Leaders.” According to this piece, a portion of Boyu’s Alibaba shares are held via Athena China Limited, which is registered in the British Virgin Islands. It went on to say that “Athena is controlled by another offshore entity, Prosperous Wintersweet BVI, which in turn is owned by the Cayman Islands-registered Boyu Capital Fund I.”
Boyu’s complex ownership structure appears designed to hide Jiang Zhicheng’s identity as an Alibaba shareholder. Based on this, it is reasonable to assume that the 20 percent of Alibaba shares that flowed back to the United States last year are likely those from offshore companies controlled by Jiang.
At its peak, Alibaba was worth over $500 billion and is currently worth $450 billion. Based on the figure of 20 percent, Jiang Zhicheng may have gained and hidden over $100 billion in wealth from Alibaba alone.
Apart from Alibaba, Ant Financial, which owns Alipay, is about to be listed, and has a current value of $160 billion. Foreign media reports suggest that Alipay is in Jiang’s pocket, and according to Guo Wengui’s claims, Jiang also holds controlling stakes in Huawei, Tencent, and multiple other major Chinese enterprises.
Jiang, Guo says, has also been selling China’s lands to overseas consortia at low prices in exchange for profit, with the help of the privileged Shanghai Bank, Shanghai Industrial Group and the Shanghai Jiushi holding company.
In light of how Jiang Zhicheng employs Alibaba to siphon wealth from the U.S. capital market, Guo’s claims about the Jiang family’s assets may be close to the truth.
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