Bo Xilai’s relatives’ extensive web of foreign firms

The announcement in mid-March that Bo Xilai had been stripped of his political posts has exposed the former high-flying Chongqing party chief to the glare of publicity, shining attention on his family’s links to a web of foreign companies.

These assets have been traced to Hong Kong and elsewhere, and to large mainland state-owned firms and leading foreign businessmen, raising questions about the scale of Bo’s alleged corruption and the complicity of his family, particularly his wife, Gu Kailai .

Gu Kailai’s eldest sister, Gu Wangjiang , for example, is a starting point for a trail that extends from Hong Kong to Malaysia and the northeastern Chinese city of Dalian , where Bo was mayor. Under her Cantonese name Kuk Mong Kong, Gu Wangjiang operates several companies in Hong Kong, including one that was previously a joint venture with a big Malaysian conglomerate and another that is an existing joint venture with a large Chinese state-owned steel producer, according to Hong Kong corporate records.

Kuk and Vincent Tan Chee Yioun, one of Malaysia’s richest businessmen, were previously directors of Syntax, a Hong Kong company that existed from 1992 to 2000. Syntax was half-owned by Tan’s Berjaya Group, a conglomerate whose businesses include financial services, hotels, property and gambling.

In early 1993, Berjaya announced it had formed six subsidiaries, including Syntax, to undertake various businesses in China. In September 1993, Berjaya said it had won the right to manage a social welfare lottery project in Dalian. Just two months later, Bo, as Dalian mayor, denied claims by Berjaya’s competitor, a Malaysian-listed firm called Magnum, that Berjaya had a licence to operate slot machines in Dalian, according to media reports.

Bo’s father was the late People’s Liberation Army stalwart Bo Yibo , making the son a “red prince”. The Hong Kong corporate-governance activist David Webb also points out that Kuk’s father is Gu Jingsheng , a renowned PLA general, making Kuk and Gu Kailai “red princesses” in their own right.

“There does seem to be a correlation between the number of relatives one has in high office in China and the probability of success in Chinese business, but that doesn’t prove each individual case is the result of corruption,” Webb said.

Kuk’s wealth is substantial. Based on Tung Kong’s market capitalisation of 2.23 billion yuan (HK$2.73 billion) on May 14, her 29.92 per cent stake in the Shenzhen-listed firm translates to a personal wealth of 667 million yuan.

She was also vice-chairwoman of a troubled Hong Kong-registered ship-chartering company called Sitoro Shipping Enterprises, which was incorporated in Panama. The company was dissolved in 2002.

Auditors Moores Rowland gave a qualified opinion on Sitoro’s financial statements for 2000. “The company has not prepared financial statements in accordance with standard accounting practice by the Hong Kong Society of Accountants,” Moores Rowland said. “There is insufficient information concerning a subsidiary in these financial statements to give a true and fair view of the company.” Sitoro had net losses of US$4,958 in 2000 and US$2,779 in 1999. At the end of 2000, the company had net current liabilities of US$2.88 million and net assets of US$52,306.

Kuk is a director of three live Hong Kong companies, namely Hongkong Hitoro Holdings, True Shine (a wholly owned subsidiary of Hitoro) and Hangang Worldwide. Another older sister of Gu Kailai, Gu Wangning, is also a director of Hangang, according to Hong Kong corporate records.

Hangang is wholly owned by a British Virgin Islands company called Fujiang Steel Industrial, but in 2001 Hangang was half-owned by Handan Iron and Steel, a big Chinese state-owned steel producer. Handan Iron and Steel has 24,000 employees and more than 60 billion yuan of assets, and in 2008 its revenue was 35.9 billion yuan, according to its website.

Hong Kong Hitoro makes steel coils in China for export to Europe, North America and Southeast Asia and for use in China, according to the website of the Hong Kong Trade Development Council.

Hangang and Hitoro’s address is on the 37th floor of Tower 6, The Gateway in Tsim Sha Tsui. The South China Morning Post visited their elegant offices at Gateway but a woman in the reception would not accept questions from or admit reporters.

In 1992, Kuk, through Hitoro, acquired a 2,620 sq ft duplex occupying the 16th and 17th floors of Tower 9 in the luxury residential complex Hong Kong Parkview in Tai Tam for HK$13.25 million. According to Land Registry documents, the company sold the unit for HK$88 million in April 2011. Security guards at the property said the flat was occupied by a Hong Kong Chinese person.

There are also strong business links on Bo’s side. Bo’s eldest brother, Bo Xiyong , was an executive director and vice-chairman of China Everbright International, a Hong Kong-listed environmental protection firm, assuming the name “Li Xueming” in company documents.

On April 25, “Li Xueming” resigned as vice chairman, executive director and a member of the executive committee of the board of China Everbright International “to minimise possible adverse impact on the company of reports on his family background”, Everbright said.

Meanwhile, Xu Ming and Chen Chunguo, two Chinese businessmen reportedly investigated in relation to Bo Xilai, are linked to a Hong Kong company, Golden International (Hong Kong) Investment. Golden International was previously named Shide International (Hong Kong).

Xu and Bo Xilai are among at least 39 people detained in the mainland seaside town of Beidaihe , a retreat favoured by Chinese leaders, according to Britain’s The Daily Telegraph. Chen had been under investigation by the Chinese authorities since March, the mainland The Economic Observer newspaper reported.

Xu is chairman of the Dalian Shide Group, a private mainland conglomerate, with interests in building materials, petrochemicals, electric appliances, sports and insurance, and Chen is its chief executive.

Although Xu is not currently listed as a shareholder or director of Golden International, he was recorded in Hong Kong corporate documents in 2003 as owning 40 per cent of Golden International, while his brother Xu Bin owned 15 per cent and Shide CEO Chen owned 40 per cent.

On April 15, Shide denied on its website that it was going bankrupt and slamming “fraudulent media reports”. The company could not be contacted by phone or e-mail.

In 2009, Golden International invested in a mainland firm, Tianshi Xingye Investment, which has a registered capital of US$50 million, according to a Chinese government investment website. Tianshi manages investments in the Beijing Economic and Technological Development Zone.

“If an official’s friends and relatives own business assets, an obvious risk is conflict of interest,” Chris Leahy, a co-founder of strategic advisory group Blackpeak Group, said.

“There may be a conflict of interest if he or his family holds businesses contrary to his official function. That is why in a lot of countries, officials have to declare their assets.”

Beijing has been drafting proposals for a system that would require officials to declare their assets, but such a system has so far not been implemented, Beijing Review magazine reported.

According to a 2008 report by the central bank’s Anti-Money Laundering Monitoring and Analysis Centre, some officials and top company executives tended to transfer assets through at least eight routes, including cash smuggling, underground financial institutions and offshore financial centres.

“No sensible corrupt politician puts money in his or her own name nowadays,” said Robert Palmer, a campaigner for Global Witness, a British non-government human rights group. “Instead, they use complex webs of shell companies to hide their identity and assets. Jurisdictions with strong secrecy laws, such as Hong Kong, are particularly attractive for these individuals.

“Shell companies can be used for legitimate purposes, so the fact that a politician or his or her family member has one shouldn’t be taken as proof of criminality, but it becomes suspicious if they can’t explain what the company is used for.”

Toh Han Shih
South China Morning Post

Categories: Crime & Corruption

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5 replies

  1. Reblogged this on Craig Hill.



  2. China’s investigation of Bo Xilai extends to State Security Ministry spy scandal « China Daily Mail
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