On April the Fourth this year, a Government car drove north out of Beijing.
In the passenger seat was a man embroiled in a huge corruption scandal: illegal land deals, secret payoffs, embezzlement of public funds. He was the city’s deputy mayor.
Old man: He came here in his car and was dropped off. He went up that little hill and the car turned around and went back to Beijing.
The deputy mayor was facing the death penalty for his crimes. So he walked into the forest, smoked two packets of cigarettes, and shot himself through the head.
The deputy mayor’s suicide revealed a scandal at the core of China’s government
And it’s triggered a sweeping political purge in Beijing..
At the heart of this scandal are the Princelings.
The Princelings are the children of China’s leaders...people like Deng Rong, daughter of the man they call the paramount leader, Deng Xiapong.They’re the new elite.At the opening of Beijing’s prestigious new meeting place, the Capital Club, Deng Rong is the guest of honour. Her attendance will ensure that the others rush to join because in China business connections are the key to success.
Deng Xiaoping has declared that “to get rich is glorious”. His family has embraced that decree and now controls an economic empire worth billions of dollars.
Deng Rong: My purpose in coming to New York on this occasion is for the publication of the English edition of my book, Deng Xiaoping. My Father.
I am so glad to see so many members of the press here today.In China we call reporters uncrowned kings and of course kings are those who are high up above, so actually we should change places. You should be up here on the platform and I should be down there on the floor.It’s Deng Rong and her peers who are China’s uncrowned kings. Deng Rong’s book was published by media mogul Rupert Murdoch who also hosted her trip to New York.
The Princelings are the second generation of China’s revolutionary families. Their fathers established the People’s Republican 1949, to end privilege and oppression.
But the Communist leaders immediately seized privilege of their own. They made their homes in Zhongnanhai, the centuries-old imperial living quarters next to Beijing’s Forbidden Palace.
The Princelings grew up here, guarded by imperial lions and soldiers with bayonets...Their compounds surrounded by high walls and shielded from public view by a screen that reads, “serve the people”.
The sons and daughters of the party bosses attended the finest schools in the country - as their children still do today. They were taught by trusted party cadres and brought up to inherit the revolution.
But today some of these young princelings and many ordinary Chinese are deeply unhappy with the privilege and power bestowed on the children of the revolution’s leaders.
Dai Qing: Deng Xiaoping’s family, Deng Xiaoping’s son and daughter can - I want to have position and he will give it.
The rich people will be the real master of this state. What is the revolution? They forget.
Dai Qing, now one of the Communist Party’s most vocal critics is a princeling herself, the adopted daughter of Marshal Ye Jianying, a key ally of Deng Xiaoping. She grew up in the privileged world of the princelings.
Dai Qing: I think in 1950’s nobody imagined maybe one day I can use this kind of privilege or this kind of name to make themselves rich, only we are going to be very important person for the Party and for the state.
But in 1966, the Princeling’s lives, along with the rest of the country, were turned upside down.
The ageing Chairman Mao launched the Great Cultural Revolution, to boost his waning influence and restore the country’s flagging revolutionary zeal. It was ten years of turmoil. Most of the leadership was purged, the Princelings and their families thrown out of their compounds and banished to the countryside.
The chaos only ended with the death of his twisted and tarnished revolution. It was then that Deng Xiaoping rose to power and launched a new revolution of his own. An economic transformation that would turn the country around and allow the Princelings to seize back the spoils of power.
Dai Qing: The main change in China is the power commercialised, and money become power...So who are they serving now?Serving themselves, serving the family, try to shift the state’s money abroad and become their own money.
The new head of the Deng dynasty is Deng Xiaoping’s eldest son, Deng Pufang. He’s nicknamed the crown prince - and generally treated like a king.His visit to Australia last month with a troupe of disabled performers was a VIP affair.
Peter Collins: You honour us with your presence. We hope this will not be your last visit to Sydney.
Deng himself crippled by Mao’s Red Guards during the Cultural Revolution. Today he travels the world as chairman and chief fund-raiser of China’s Disabled Federation.
But his fund-raising has been tainted by accusations of underhand dealings and corruption.
Deng Pufang: I have a very clear book-keeping system that accounts for every single penny I raised. Not one penny was spent for purposes other than the disabled. My fund-raising activities have stood the test of time and won the people’s trust.
Disabled Concert: Mr Deng Pufang
Deng Pufang: Let me share with you this nice and meaningful evening.
Politicians and tycoons line up to support his cause, especially those keen to do business in China. Rupert Murdoch’s News Corporation sponsored the troupe of disabled performers. His China expert Linda Lau arranged the tour, after Murdoch himself paid a private visit to Deng Pufang in Beijing.
Linda Lau - China Expert to Rupert Murdoch: What will Murdoch get out of this? Well, I don’t think that every little thing he does he expects to get dollar for dollar return out of it, (cut)It can only help his business interests in China though, can’t it? Well I don’t think it will harm it.
Two years ago, Murdoch was friendless in Beijing. After buying the Hong Kong-based Star television network, he immediately offended the Chinese Government with this remark about satellite TV.
Murdoch at Sky TV re-launch: Advances in the technology of telecommunications have proved an unambiguous threat to totalitarian regimes everywhere. (CUT)...satellite broadcasting makes it possible for information hungry residents of many closed societies to bypass State controlled television channels.
Murdoch was immediately frozen out. But since then his fortunes have turned around.
Newscorp recently found a lucrative foothold in China’s TV market, providing broadcast facilities for the country’s biggest sports event, the world table tennis championships.Rupert Murdoch also set up a TV joint venture in the city of Tianjin and went into partnership with the Communist Party’s leading newspaper, the People’s Daily
Deng Pufang values the friendship too People like Murdoch have helped him build a sprawling empire, raising and investing funds.for the handicapped.
Deng Pufang: Mr Murdoch as a well-known and successful business man is giving support to disabled people. I greatly appreciate this. In my work for the disabled I have become friends with many famous businessmen. It’s quite normal.
But when Deng Pufang went to Hong Kong eyebrows were raised at his methods.
Richard Margolis: Well Deng Pufang came down here a few years ago with an entourage, everybody rolled out the red carpet for him. But some of those around him were pretty tactless to say the least. Their approach to fundraising seemed to be to go round to prominent Hong Kong businessmen saying more or less, cough up or else we’ll make life difficult for you after 1997. And that went down very badly in Hong Kong and I think there were some protests privately and discreetly up to the top in Beijing.
But some Hong Kong business leaders were eager to give. The most generous was the colony’s richest man, property tycoon Li Ka-Shing. He handed Deng Pufang a cheque for 20 million dollars.
Li’s alliance with the Princelings and his role as an advisor to the Chinese Government have made him one of the most successful foreign investors in China.
Tai Ming Cheung: Li very much used the Princelings as a channel into China, especially into doing business in Beijing and Shanghai.
Oriental Plaza is Beijing’s biggest development. Just off Tianamen Square, it occupies an entire city block. The city government threw out McDonald’s 20-year lease to make way for the man with the connections - Li Ka-shing.That was before questions over planning breaches brought the whole project to a halt.
Thanks to Deng Pufang’s wealthy benefactors, China’s disabled became a celebrated cause. The money flowed in and Pufang’s Kanghua corporation expanded into a ministry-level conglomerate.
But the largest didn’t stop at lavish sports events.Kanghua had 200 subsidiaries trading in everything from cigarettes to textiles and cars. Behind the scenes the corporation was trading illegally, profiteering and dodging tax. And questions were being asked about where all the money was going.
Margolis: I think it was very difficult to know where the charity ended business started. (cut) I mean Deng Pufang obviously isn’t short of a bob or two and he sat on top of these twin pillars, one business and one charity, with an inadequate level of distinction between the two.
When popular resentment against corruption, and economic inequality exploded in the streets in 1989, Deng Pufang became a target of the people’s rage.
On June the 4th, Deng senior sent the army in to crush the protest. In the aftermath, Deng Pufang’s Kanghua corporation was condemned by the Government and shut down.
Six years on, it seems the Chinese Government has forgotten the lessons of 1989. Corruption and nepotism are out of control. In a recent speech Premier Li Peng declared the fight against corruption a matter of life or death for the nation. And yet, China’s Princelings are flourishing like never before.
The booming southern city of Shenzhen has become a symbol of the economic transformation wrought by Deng Xiaoping. In the 15 years since Deng made it China’s first special economic zone, it’s grown from a fishing village into a city of three million, Its economy is growing at 50 per cent a year.
Deng’s family have played a key role. As their father has grown older and frailer, his children have emerged as increasingly powerful spokesmen and champions of his reforms. They’ve been with him constantly, translating his barely audible mumbling into major policy directives.
Tai Ming Cheung: In terms of China, power is who gets access to the paramount leader, and increasingly that access was guarded by the family and in particular by Deng Rong, who acted as her father’s translator and secretary, so it was the case that when anyone wanted to approach Deng they would have to go through the family. From about late ‘92 onwards when Deng’s health began to fail his family were making more and more speeches, so people couldn’t tell whether it was Deng and people suspected it was Deng’s family
After helping promote Shenzhen's phenomenal development, Deng Rong set herself up in business as a property developer. She now heads a State-run development firm called Shenzhen Surpass.
Deng Rong was in Hong Kong last year to launch the company’s first big project - a luxury apartment complex.Developments like this have just been banned by the government, which deemed them a waste of money..
Rong:...Surpass is a company which combines commercial trade, real estate development and construction.
Deng Rong’s next project is a chain of luxury health clubs for China’s new elite....Her new partner is Hong Kong fitness queen Deborah Sims.
Deborah Sims: And what’s Deng Rong’s financial interest, is she an equal partner?Yes, I believe she has a major share in her company, in terms of the joint venture agreement, it will be on an equal basis yes.
Deborah says at least six clubs are planned, each costing four million dollars. Deborah will provide the image...Deng Rong will put up the money, and the ways and means to success.
Deborah Sims: You have to have connection to do business in China ...to get the permits.I know briefly of the procedure of getting a permit to do this sort of business there, but it seems that the procedure I know of is different from how they actually get the end result, so (laughs) and I don’t want to really get involved in, I don’t want to really know about it. I just leave it to them, as long as they get the permit and the license I just go in there and operate the business.”
But teaming up with the Deng’s family is no guarantee of success. Australian-Chinese businessman James Peng is now in jail paying for his mistake.
When James Peng set out to make his fortune in Shenzhen, he recruited a powerful local businesswoman. Ms Ding is a niece of Deng Xiaoping, and a close ally of the Shenzhen mayor..
But a dispute erupted over control of the company, and James Peng was thrown into jail. Miss Ding now controls his shares after she and the Shenzhen government did a deal.
Radio: Radio Shanghai, playing your favorites.
The city of Shanghai is China’s new economic showcase. It’s in the grip of a massive property boom. They’ve developed as much land here in five years as they did in Hong Kong in 35. Property prices are now the third highest in the world. For those with the right connections there’s big money to be made.
Albert Lau: People here who previously worked for the government or have been working for the government or who are friends of people who work for the government have some channels for foreigners when they come. Government people here, a lot of them don’t speak English, and that makes communication very difficult and at the moment you will find a lot of Chinese people who go abroad to study and command good English and come back to work in the state firms. Then when the opportunity comes to work for their own business they become a bridge between the foreign companies and the local enterprises and local government. This particular small group of people are I think becoming the king in the city at the moment.
It’s in Shanghai that Deng Rong’s younger brother Deng Zhifang has made best use of the Deng family name. Deng Zhifang set up shop here just a couple of years ago.Investors like Hong Kong’s Li Ka-shing were quick to sign up as partners. Zhifang’s company now has construction projects worth hundreds of millions of dollars underway.
One is a compound of 63 luxury villas, selling for a million dollars apiece. They’re built on a prime site that locals say was previously restricted from development.
Deng Xhifang’s staff were unwilling to divulge the secrets of his business success....Shanghai’s vice-chef of planning explained with surprising candour that it’s simply connections at work.
Yang Xianghai, Shanghai Planning Commission: “Mr. DXP is very well known and well respected here, so if his son is using Mr. Deng’s fame to do business and get some help during their business, maybe this is not so strange.”
China’s workers haven’t enjoyed an equal share in the spoils of reform and they fiercely resent the abuse of power and privilege.
vox pop man: We are angry because they do these things abusing the laws.
These workers labour at China’s biggest steelmaker, Shougang, for about $15 a week.Meantime, their corrupt bosses have brought their company to the verge of bankruptcy. It’s the workers’ livelihoods that are at stake.
vox pop man:The Chinese Government should pay more attention to corruption. If this goes on, it’s bad for China.
It’s Red Cross day at Shougang and company doctors drum up business for the free health checks provided by the firm.Shougang is the epitome of what they call the iron rice bowl, the system that underpins China’s still mainly state-run economy. The company provides not just work but healthcare, housing, schools and even haircuts for its 260 thousand workers and their families.
But maybe not for long. Jobs and welfare are being slashed, as state enterprises like Shougang are turned over to a new generation of entrepreneurs to run at a profit.In many cases it’s the Princelings who’ve taken control, as the new custodians of China’s economic assets.
man in truck vox pop: We’re only the workers. They’re the leaders. We have nothing to do with them.
Carl Goldstein: I think you can say that in general they treat state assets as their own. (cut) There just is no distinction between the state’s property and personal property.
Hong Kong is now the heart of the Princelings’ empire. This is where the stakes are the highest of all.
On the Hong Kong stock exchange, the Deng family controls companies with a listed value of at least half a billion dollars.The Princelings got on to the exchange through the back door, buying up already- listed companies to dodge disclosure requirements for new firms, according to business consultant Carl Goldstein.
Carl Goldstein: It was basically circumventing the central government policy. And then once they set up these companies they would build them up by injecting assets from the parent company back in China into the HK - listed company, so that’s essentially what the process was. So are China’s national assets being siphoned off? Absolutely.
One master of the backdoor listing is Wu Jianchang, the second son-in-law of Deng Xiaoping... Wu is the president of China’s national metals corporation. He controls assets worth seven billion dollars, a workforce of over a million and a string of listed subsidiaries in Hong Kong. Despite his high flying image, Mr Wu says he’s just one of the workers.
Wu Jianchang: My family basically have no worries. My family are all basically employees. We are senior employees. Like me, although I’m the manager, the money isn’t mine, it’s the country’s. If somebody commits corruption they should be arrested but it hasn’t happened yet.
Wu Jianchang is married to Deng Xiaoping’s eldest daughter Deng Lin...She’s a painter and one exhibition it’s said that a millionaire with an eye on making a connection insisted on paying 100 times the marked price.
DAI QING: Deng Lin is not very good, not very famous painter, I think her painting is 6000 for one picture is high, is high, I think so, I never buy a picture from her $6000! But the millionaire just wanted to flatter her, just want to make her happy, and make her father happy, and that put two zero after the price.
While his wife dabbles, Wu is busy transforming his state metals corporation into an international empire. The plan is to slash the workforce by half a million, and dump the company’s responsibility for housing and schooling its workers. Then, he plans to sell off parts of the corporation by issuing shares. State assets worth two hundred million dollars have already been transferred from the mainland company to its subsidiaries in Hong Kong, where they’ve been snapped up by investors like Li Ka-Shing.
Wu Jianchang: I believe what we’re going to achieve as a nation is to develop the production, to develop the economy, to improve the living standards of the entire nation. As long as we’re doing that I think we’re moving in the right direction.
MARGOLIS: The Chinese government suspects, probably rightly, that many assets which should formally be state-owned assets are being used for commercial purposes
Do you mean that you receive no personal financial benefit at all from those Hong Kong positions?Wu Jianchang: I personally do not receive any financial benefit from the positions I holdSo are you a rich man as people say?Wu Jianchang: Not very. My wife gets paid better than me, ha, ha.
The scandal of China’s national assets being drained into Princeling controlled companies in Hong Kong was finally exposed when the state-run steel maker Shougang collapsed.
It was run by Zhou Guanwu, an old comrade of Deng.Deng visited the plant in 1992 and gave it the power to invest, borrow and trade without state control...
As Hong Kong boomed China’s own budget figures showed that more than 10 billion dollars of national assets were disappearing each year, It was a scandal the government could no longer ignore.
Zhou Beifang: The speedy economic reform in China is having a beneficial impact on Hong Kong and its prosperity and stability.
Zhou sent his playboy son Zhou Beifang to expand the Shougang firm into Hong Kong. He teamed up there with the local tycoon Li Ka-Shing. They brought in Deng Xiaoping’s son Deng Zhifang to run the property arm, in a formidable Princeling partnership.
Shougang went on a spending spree with state money, buying up listed companies and stuffing them with assets transferred from the mainland parent company...
Margolis: When the acquisition was put together there was a sell-off of some of the property asset in the companies that were acquired and it’s very difficult to know what happened to that money.
In February the boss of Shougang, Zhou Guanwu was forced to resign. His son Beifang was arrested for economic crimes.The official media condemned their lust for profits and power.
The crippled Shougang now lumbers on, kept afloat by massive funding from Beijing, its workers fearing the future.
vox pop woman: Nobody cares about the workers. All we want is to fill our stomachs.
The Communist Party, aware of the people’s anger, fears for its own future. President Jiang Zemin, Deng’s lacklustre successor, seized on the corruption issue. Investigators swept through these offices of the Beijing City Government. Dozens of officials were arrested or questioned over planning scams and pay-offs.
As the purge escalated, the deputy mayor drove into the mountains and committed suicide. His boss the Beijing party chief was sacked.Deng Zhifang was reportedly interrogated but released.
Deng Rong: My father’s health is really still quite good, though he’s an old man. If he wasn’t well I wouldn’t be able to be here. Thanks for coming.
The immunity enjoyed by Deng’s family is guaranteed only as long as he’s alive. Their activities are now under scrutiny, including their association with Hong Kong’s Li Ka-Shing.
Li’s Oriental Plaza project has be stopped, after it was found to have been approved despite breaching planning regulationsThe Deng Princelings have been warned.
But in China, purges come and go. And China’s economi
c miracle goes on. The Princelings have bought themselves a piece of this revolution that no one can take away.
Goldstein: These people play a very important role because they’re in effect the middlemen between the party and the evolving private economy and I think they offer some hope to people at senior levels in the party who believe that the state sector needs to remain a very important part of the economy in China. I think the Princelings and their influence and their ability to operate offers some hope of enabling the state sector to survive.
For now the Deng family’s future, certainly their economic power, seems assured. Like their father they’ve learned to fight to survive.
Deng Pufang: This question is outside the subject for today. But I will answer it. Under my father’s leadership the country opened up to the world and is now enjoying political stability. The current leadership is mature. This maturity will ensure political stability.
The children of the revolution were always born to rule. But their fathers couldn’t have dreamed of the riches their reign would bring. China’s Princelings will inherit the new revolution, as surely as they betrayed the old.
In the passenger seat was a man embroiled in a huge corruption scandal: illegal land deals, secret payoffs, embezzlement of public funds. He was the city’s deputy mayor.
Old man: He came here in his car and was dropped off. He went up that little hill and the car turned around and went back to Beijing.
The deputy mayor was facing the death penalty for his crimes. So he walked into the forest, smoked two packets of cigarettes, and shot himself through the head.
The deputy mayor’s suicide revealed a scandal at the core of China’s government
And it’s triggered a sweeping political purge in Beijing..
At the heart of this scandal are the Princelings.
The Princelings are the children of China’s leaders...people like Deng Rong, daughter of the man they call the paramount leader, Deng Xiapong.They’re the new elite.At the opening of Beijing’s prestigious new meeting place, the Capital Club, Deng Rong is the guest of honour. Her attendance will ensure that the others rush to join because in China business connections are the key to success.
Deng Xiaoping has declared that “to get rich is glorious”. His family has embraced that decree and now controls an economic empire worth billions of dollars.
Deng Rong: My purpose in coming to New York on this occasion is for the publication of the English edition of my book, Deng Xiaoping. My Father.
I am so glad to see so many members of the press here today.In China we call reporters uncrowned kings and of course kings are those who are high up above, so actually we should change places. You should be up here on the platform and I should be down there on the floor.It’s Deng Rong and her peers who are China’s uncrowned kings. Deng Rong’s book was published by media mogul Rupert Murdoch who also hosted her trip to New York.
The Princelings are the second generation of China’s revolutionary families. Their fathers established the People’s Republican 1949, to end privilege and oppression.
But the Communist leaders immediately seized privilege of their own. They made their homes in Zhongnanhai, the centuries-old imperial living quarters next to Beijing’s Forbidden Palace.
The Princelings grew up here, guarded by imperial lions and soldiers with bayonets...Their compounds surrounded by high walls and shielded from public view by a screen that reads, “serve the people”.
The sons and daughters of the party bosses attended the finest schools in the country - as their children still do today. They were taught by trusted party cadres and brought up to inherit the revolution.
But today some of these young princelings and many ordinary Chinese are deeply unhappy with the privilege and power bestowed on the children of the revolution’s leaders.
Dai Qing: Deng Xiaoping’s family, Deng Xiaoping’s son and daughter can - I want to have position and he will give it.
The rich people will be the real master of this state. What is the revolution? They forget.
Dai Qing, now one of the Communist Party’s most vocal critics is a princeling herself, the adopted daughter of Marshal Ye Jianying, a key ally of Deng Xiaoping. She grew up in the privileged world of the princelings.
Dai Qing: I think in 1950’s nobody imagined maybe one day I can use this kind of privilege or this kind of name to make themselves rich, only we are going to be very important person for the Party and for the state.
But in 1966, the Princeling’s lives, along with the rest of the country, were turned upside down.
The ageing Chairman Mao launched the Great Cultural Revolution, to boost his waning influence and restore the country’s flagging revolutionary zeal. It was ten years of turmoil. Most of the leadership was purged, the Princelings and their families thrown out of their compounds and banished to the countryside.
The chaos only ended with the death of his twisted and tarnished revolution. It was then that Deng Xiaoping rose to power and launched a new revolution of his own. An economic transformation that would turn the country around and allow the Princelings to seize back the spoils of power.
Dai Qing: The main change in China is the power commercialised, and money become power...So who are they serving now?Serving themselves, serving the family, try to shift the state’s money abroad and become their own money.
The new head of the Deng dynasty is Deng Xiaoping’s eldest son, Deng Pufang. He’s nicknamed the crown prince - and generally treated like a king.His visit to Australia last month with a troupe of disabled performers was a VIP affair.
Peter Collins: You honour us with your presence. We hope this will not be your last visit to Sydney.
Deng himself crippled by Mao’s Red Guards during the Cultural Revolution. Today he travels the world as chairman and chief fund-raiser of China’s Disabled Federation.
But his fund-raising has been tainted by accusations of underhand dealings and corruption.
Deng Pufang: I have a very clear book-keeping system that accounts for every single penny I raised. Not one penny was spent for purposes other than the disabled. My fund-raising activities have stood the test of time and won the people’s trust.
Disabled Concert: Mr Deng Pufang
Deng Pufang: Let me share with you this nice and meaningful evening.
Politicians and tycoons line up to support his cause, especially those keen to do business in China. Rupert Murdoch’s News Corporation sponsored the troupe of disabled performers. His China expert Linda Lau arranged the tour, after Murdoch himself paid a private visit to Deng Pufang in Beijing.
Linda Lau - China Expert to Rupert Murdoch: What will Murdoch get out of this? Well, I don’t think that every little thing he does he expects to get dollar for dollar return out of it, (cut)It can only help his business interests in China though, can’t it? Well I don’t think it will harm it.
Two years ago, Murdoch was friendless in Beijing. After buying the Hong Kong-based Star television network, he immediately offended the Chinese Government with this remark about satellite TV.
Murdoch at Sky TV re-launch: Advances in the technology of telecommunications have proved an unambiguous threat to totalitarian regimes everywhere. (CUT)...satellite broadcasting makes it possible for information hungry residents of many closed societies to bypass State controlled television channels.
Murdoch was immediately frozen out. But since then his fortunes have turned around.
Newscorp recently found a lucrative foothold in China’s TV market, providing broadcast facilities for the country’s biggest sports event, the world table tennis championships.Rupert Murdoch also set up a TV joint venture in the city of Tianjin and went into partnership with the Communist Party’s leading newspaper, the People’s Daily
Deng Pufang values the friendship too People like Murdoch have helped him build a sprawling empire, raising and investing funds.for the handicapped.
Deng Pufang: Mr Murdoch as a well-known and successful business man is giving support to disabled people. I greatly appreciate this. In my work for the disabled I have become friends with many famous businessmen. It’s quite normal.
But when Deng Pufang went to Hong Kong eyebrows were raised at his methods.
Richard Margolis: Well Deng Pufang came down here a few years ago with an entourage, everybody rolled out the red carpet for him. But some of those around him were pretty tactless to say the least. Their approach to fundraising seemed to be to go round to prominent Hong Kong businessmen saying more or less, cough up or else we’ll make life difficult for you after 1997. And that went down very badly in Hong Kong and I think there were some protests privately and discreetly up to the top in Beijing.
But some Hong Kong business leaders were eager to give. The most generous was the colony’s richest man, property tycoon Li Ka-Shing. He handed Deng Pufang a cheque for 20 million dollars.
Li’s alliance with the Princelings and his role as an advisor to the Chinese Government have made him one of the most successful foreign investors in China.
Tai Ming Cheung: Li very much used the Princelings as a channel into China, especially into doing business in Beijing and Shanghai.
Oriental Plaza is Beijing’s biggest development. Just off Tianamen Square, it occupies an entire city block. The city government threw out McDonald’s 20-year lease to make way for the man with the connections - Li Ka-shing.That was before questions over planning breaches brought the whole project to a halt.
Thanks to Deng Pufang’s wealthy benefactors, China’s disabled became a celebrated cause. The money flowed in and Pufang’s Kanghua corporation expanded into a ministry-level conglomerate.
But the largest didn’t stop at lavish sports events.Kanghua had 200 subsidiaries trading in everything from cigarettes to textiles and cars. Behind the scenes the corporation was trading illegally, profiteering and dodging tax. And questions were being asked about where all the money was going.
Margolis: I think it was very difficult to know where the charity ended business started. (cut) I mean Deng Pufang obviously isn’t short of a bob or two and he sat on top of these twin pillars, one business and one charity, with an inadequate level of distinction between the two.
When popular resentment against corruption, and economic inequality exploded in the streets in 1989, Deng Pufang became a target of the people’s rage.
On June the 4th, Deng senior sent the army in to crush the protest. In the aftermath, Deng Pufang’s Kanghua corporation was condemned by the Government and shut down.
Six years on, it seems the Chinese Government has forgotten the lessons of 1989. Corruption and nepotism are out of control. In a recent speech Premier Li Peng declared the fight against corruption a matter of life or death for the nation. And yet, China’s Princelings are flourishing like never before.
The booming southern city of Shenzhen has become a symbol of the economic transformation wrought by Deng Xiaoping. In the 15 years since Deng made it China’s first special economic zone, it’s grown from a fishing village into a city of three million, Its economy is growing at 50 per cent a year.
Deng’s family have played a key role. As their father has grown older and frailer, his children have emerged as increasingly powerful spokesmen and champions of his reforms. They’ve been with him constantly, translating his barely audible mumbling into major policy directives.
Tai Ming Cheung: In terms of China, power is who gets access to the paramount leader, and increasingly that access was guarded by the family and in particular by Deng Rong, who acted as her father’s translator and secretary, so it was the case that when anyone wanted to approach Deng they would have to go through the family. From about late ‘92 onwards when Deng’s health began to fail his family were making more and more speeches, so people couldn’t tell whether it was Deng and people suspected it was Deng’s family
After helping promote Shenzhen's phenomenal development, Deng Rong set herself up in business as a property developer. She now heads a State-run development firm called Shenzhen Surpass.
Deng Rong was in Hong Kong last year to launch the company’s first big project - a luxury apartment complex.Developments like this have just been banned by the government, which deemed them a waste of money..
Rong:...Surpass is a company which combines commercial trade, real estate development and construction.
Deng Rong’s next project is a chain of luxury health clubs for China’s new elite....Her new partner is Hong Kong fitness queen Deborah Sims.
Deborah Sims: And what’s Deng Rong’s financial interest, is she an equal partner?Yes, I believe she has a major share in her company, in terms of the joint venture agreement, it will be on an equal basis yes.
Deborah says at least six clubs are planned, each costing four million dollars. Deborah will provide the image...Deng Rong will put up the money, and the ways and means to success.
Deborah Sims: You have to have connection to do business in China ...to get the permits.I know briefly of the procedure of getting a permit to do this sort of business there, but it seems that the procedure I know of is different from how they actually get the end result, so (laughs) and I don’t want to really get involved in, I don’t want to really know about it. I just leave it to them, as long as they get the permit and the license I just go in there and operate the business.”
But teaming up with the Deng’s family is no guarantee of success. Australian-Chinese businessman James Peng is now in jail paying for his mistake.
When James Peng set out to make his fortune in Shenzhen, he recruited a powerful local businesswoman. Ms Ding is a niece of Deng Xiaoping, and a close ally of the Shenzhen mayor..
But a dispute erupted over control of the company, and James Peng was thrown into jail. Miss Ding now controls his shares after she and the Shenzhen government did a deal.
Radio: Radio Shanghai, playing your favorites.
The city of Shanghai is China’s new economic showcase. It’s in the grip of a massive property boom. They’ve developed as much land here in five years as they did in Hong Kong in 35. Property prices are now the third highest in the world. For those with the right connections there’s big money to be made.
Albert Lau: People here who previously worked for the government or have been working for the government or who are friends of people who work for the government have some channels for foreigners when they come. Government people here, a lot of them don’t speak English, and that makes communication very difficult and at the moment you will find a lot of Chinese people who go abroad to study and command good English and come back to work in the state firms. Then when the opportunity comes to work for their own business they become a bridge between the foreign companies and the local enterprises and local government. This particular small group of people are I think becoming the king in the city at the moment.
It’s in Shanghai that Deng Rong’s younger brother Deng Zhifang has made best use of the Deng family name. Deng Zhifang set up shop here just a couple of years ago.Investors like Hong Kong’s Li Ka-shing were quick to sign up as partners. Zhifang’s company now has construction projects worth hundreds of millions of dollars underway.
One is a compound of 63 luxury villas, selling for a million dollars apiece. They’re built on a prime site that locals say was previously restricted from development.
Deng Xhifang’s staff were unwilling to divulge the secrets of his business success....Shanghai’s vice-chef of planning explained with surprising candour that it’s simply connections at work.
Yang Xianghai, Shanghai Planning Commission: “Mr. DXP is very well known and well respected here, so if his son is using Mr. Deng’s fame to do business and get some help during their business, maybe this is not so strange.”
China’s workers haven’t enjoyed an equal share in the spoils of reform and they fiercely resent the abuse of power and privilege.
vox pop man: We are angry because they do these things abusing the laws.
These workers labour at China’s biggest steelmaker, Shougang, for about $15 a week.Meantime, their corrupt bosses have brought their company to the verge of bankruptcy. It’s the workers’ livelihoods that are at stake.
vox pop man:The Chinese Government should pay more attention to corruption. If this goes on, it’s bad for China.
It’s Red Cross day at Shougang and company doctors drum up business for the free health checks provided by the firm.Shougang is the epitome of what they call the iron rice bowl, the system that underpins China’s still mainly state-run economy. The company provides not just work but healthcare, housing, schools and even haircuts for its 260 thousand workers and their families.
But maybe not for long. Jobs and welfare are being slashed, as state enterprises like Shougang are turned over to a new generation of entrepreneurs to run at a profit.In many cases it’s the Princelings who’ve taken control, as the new custodians of China’s economic assets.
man in truck vox pop: We’re only the workers. They’re the leaders. We have nothing to do with them.
Carl Goldstein: I think you can say that in general they treat state assets as their own. (cut) There just is no distinction between the state’s property and personal property.
Hong Kong is now the heart of the Princelings’ empire. This is where the stakes are the highest of all.
On the Hong Kong stock exchange, the Deng family controls companies with a listed value of at least half a billion dollars.The Princelings got on to the exchange through the back door, buying up already- listed companies to dodge disclosure requirements for new firms, according to business consultant Carl Goldstein.
Carl Goldstein: It was basically circumventing the central government policy. And then once they set up these companies they would build them up by injecting assets from the parent company back in China into the HK - listed company, so that’s essentially what the process was. So are China’s national assets being siphoned off? Absolutely.
One master of the backdoor listing is Wu Jianchang, the second son-in-law of Deng Xiaoping... Wu is the president of China’s national metals corporation. He controls assets worth seven billion dollars, a workforce of over a million and a string of listed subsidiaries in Hong Kong. Despite his high flying image, Mr Wu says he’s just one of the workers.
Wu Jianchang: My family basically have no worries. My family are all basically employees. We are senior employees. Like me, although I’m the manager, the money isn’t mine, it’s the country’s. If somebody commits corruption they should be arrested but it hasn’t happened yet.
Wu Jianchang is married to Deng Xiaoping’s eldest daughter Deng Lin...She’s a painter and one exhibition it’s said that a millionaire with an eye on making a connection insisted on paying 100 times the marked price.
DAI QING: Deng Lin is not very good, not very famous painter, I think her painting is 6000 for one picture is high, is high, I think so, I never buy a picture from her $6000! But the millionaire just wanted to flatter her, just want to make her happy, and make her father happy, and that put two zero after the price.
While his wife dabbles, Wu is busy transforming his state metals corporation into an international empire. The plan is to slash the workforce by half a million, and dump the company’s responsibility for housing and schooling its workers. Then, he plans to sell off parts of the corporation by issuing shares. State assets worth two hundred million dollars have already been transferred from the mainland company to its subsidiaries in Hong Kong, where they’ve been snapped up by investors like Li Ka-Shing.
Wu Jianchang: I believe what we’re going to achieve as a nation is to develop the production, to develop the economy, to improve the living standards of the entire nation. As long as we’re doing that I think we’re moving in the right direction.
MARGOLIS: The Chinese government suspects, probably rightly, that many assets which should formally be state-owned assets are being used for commercial purposes
Do you mean that you receive no personal financial benefit at all from those Hong Kong positions?Wu Jianchang: I personally do not receive any financial benefit from the positions I holdSo are you a rich man as people say?Wu Jianchang: Not very. My wife gets paid better than me, ha, ha.
The scandal of China’s national assets being drained into Princeling controlled companies in Hong Kong was finally exposed when the state-run steel maker Shougang collapsed.
It was run by Zhou Guanwu, an old comrade of Deng.Deng visited the plant in 1992 and gave it the power to invest, borrow and trade without state control...
As Hong Kong boomed China’s own budget figures showed that more than 10 billion dollars of national assets were disappearing each year, It was a scandal the government could no longer ignore.
Zhou Beifang: The speedy economic reform in China is having a beneficial impact on Hong Kong and its prosperity and stability.
Zhou sent his playboy son Zhou Beifang to expand the Shougang firm into Hong Kong. He teamed up there with the local tycoon Li Ka-Shing. They brought in Deng Xiaoping’s son Deng Zhifang to run the property arm, in a formidable Princeling partnership.
Shougang went on a spending spree with state money, buying up listed companies and stuffing them with assets transferred from the mainland parent company...
Margolis: When the acquisition was put together there was a sell-off of some of the property asset in the companies that were acquired and it’s very difficult to know what happened to that money.
In February the boss of Shougang, Zhou Guanwu was forced to resign. His son Beifang was arrested for economic crimes.The official media condemned their lust for profits and power.
The crippled Shougang now lumbers on, kept afloat by massive funding from Beijing, its workers fearing the future.
vox pop woman: Nobody cares about the workers. All we want is to fill our stomachs.
The Communist Party, aware of the people’s anger, fears for its own future. President Jiang Zemin, Deng’s lacklustre successor, seized on the corruption issue. Investigators swept through these offices of the Beijing City Government. Dozens of officials were arrested or questioned over planning scams and pay-offs.
As the purge escalated, the deputy mayor drove into the mountains and committed suicide. His boss the Beijing party chief was sacked.Deng Zhifang was reportedly interrogated but released.
Deng Rong: My father’s health is really still quite good, though he’s an old man. If he wasn’t well I wouldn’t be able to be here. Thanks for coming.
The immunity enjoyed by Deng’s family is guaranteed only as long as he’s alive. Their activities are now under scrutiny, including their association with Hong Kong’s Li Ka-Shing.
Li’s Oriental Plaza project has be stopped, after it was found to have been approved despite breaching planning regulationsThe Deng Princelings have been warned.
But in China, purges come and go. And China’s economi
c miracle goes on. The Princelings have bought themselves a piece of this revolution that no one can take away.
Goldstein: These people play a very important role because they’re in effect the middlemen between the party and the evolving private economy and I think they offer some hope to people at senior levels in the party who believe that the state sector needs to remain a very important part of the economy in China. I think the Princelings and their influence and their ability to operate offers some hope of enabling the state sector to survive.
For now the Deng family’s future, certainly their economic power, seems assured. Like their father they’ve learned to fight to survive.
Deng Pufang: This question is outside the subject for today. But I will answer it. Under my father’s leadership the country opened up to the world and is now enjoying political stability. The current leadership is mature. This maturity will ensure political stability.
The children of the revolution were always born to rule. But their fathers couldn’t have dreamed of the riches their reign would bring. China’s Princelings will inherit the new revolution, as surely as they betrayed the old.