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Relatives shed assets as China’s leader fights graft

Chinese President Xi Jinping.
Philip Reynaers | Photonews | Getty Images
Chinese President Xi Jinping.

As President Xi Jinping of China prepares to tackle what may be the biggest cases of official corruption in more than six decades of Communist Party rule, new evidence suggests that he has been pushing his own family to sell hundreds of millions of dollars in investments, reducing his own political vulnerability.

In January of last year, just after Mr. Xi took power, his older sister and brother-in-law finalized the sale of their 50 percent stake in a Beijing investment company they had set up in partnership with a state-owned bank. According to the billionaire financier Xiao Jianhua, who co-founded the company that bought the stake, the move was part of a continuing effort by the family to exit investments.

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They did it "for the family," Mr. Xiao's spokeswoman said in a statement.

A review of Chinese records shows that there is evidence to back up Mr. Xiao's claim. From 2012 until this year, Mr. Xi's sister Qi Qiaoqiao and brother-in-law Deng Jiagui sold investments in at least 10 companies, mostly focused on mining and real estate. In all, the companies the couple sold, liquidated or, in one case, transferred to a close business associate, are worth hundreds of millions of dollars, part of a fortune documented in a June 2012 report by Bloomberg News.

No investment stakes have been tied directly to Mr. Xi or his wife and daughter. But the extensive business activities of his sister and brother-in-law are part of a widespread pattern among relatives of the Politburo elite, who have built up considerable fortunes by trading on their family's political standing.

After taking power, Mr. Xi vowed to do battle with the "tigers and flies" — senior and petty officials engaged in corrupt or unseemly business activities — to shore up the party's credibility. But there are doubts that he could carry out a wholesale crackdown on financial dealings by ruling families, who are deeply enmeshed in the state-driven business culture of the country.

Records show Ms. Qi; her husband, Mr. Deng; and her daughter Zhang Yannan still hold tens of millions of dollars in company shares and real estate, including a villa overlooking Hong Kong's exclusive Repulse Bay. It is also unclear whether the price paid to them for the investments they did sell resulted in a profit or a loss — meaning it is not clear if Mr. Xi's order to exit investments amounted to a hardship for his relatives.

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Still, the move to divest a significant portion of their fortune may put Mr. Xi on stronger footing as he oversees his anticorruption drive. That effort includes an undisputed "tiger," the former security chief Zhou Yongkang, who was detained in December, people familiar with the situation have told The New York Times.

Ding Xueliang, a professor of politics at Hong Kong University of Science and Technology, said party and government officials had told him on a recent trip he took to mainland China that Mr. Xi had told his family to get out of their investments.

"It is a minimum thing — he must do this," Mr. Ding said. "If he doesn't do this, it is very hard for him to convince other families to be more self-disciplined."

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The elite ruling families of China have accumulated billions of dollars in assets, including company shares and real estate, in the past decade as China's economy has boomed. Many of the investments are in areas such as mining, infrastructure and property that involve the privatization of formerly state-owned assets, including a rare-earth mining company that until recently was partly owned by Mr. Deng.

At least four families among the nine-man Politburo Standing Committee that ruled the country from 2007 to 2012 each owned or controlled documented assets in excess of $150 million, including relatives of Mr. Xi, former Prime Minister Wen Jiabao, Mr. Zhou and Jia Qinglin, the former fourth-ranked party member.

That accumulation of wealth has led to calls for officials to disclose their assets amid surging income inequality that is among the highest in the world and far greater than in Japan, South Korea and Taiwan: neighbors that, unlike China, do not have Communist roots.

The subject remains politically charged in China. Even while Mr. Xi's relatives were selling off assets, those calling publicly for more disclosure have been punished, including the lawyer Xu Zhiyong, who was given a four-year jail sentence for gathering crowds to disturb public order. The websites of The Times and Bloomberg, which have both reported on elite shareholdings, have been blocked in China for many months.

Ms. Qi, who uses her mother's last name and also goes by the name Qi Lianxin, and her husband began selling off assets owned by their principal Beijing holding company, the Qinchuan Dadi Investment Company, in late 2012, records filed with the country's State Administration of Industry and Commerce show. Qinchuan was set up in the weeks after Mr. Xi ascended to the Politburo Standing Committee in 2007 with $2.7 million in investments, ballooning to $156 million four years later.

At least eight of the 11 investments that Qinchuan disclosed at the end of 2011 are no longer owned by the company, records show.

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Two of the Qinchuan investments were bought by companies run by Shi Weixue, a real estate executive who made headlines recently for his project to build a resort complex on the tropical island of Hainan, including a "seven-star hotel," shaped like apple trees. Mr. Shi's Beijing-based property company, Zhonglianya, was also the majority investor in a Qinchuan-invested property company in the Hubei Province of central China that was liquidated last year.

Luo Zhehong, a property and mining executive from Zhejiang Province in eastern China, where Mr. Xi served as the top official from 2002 to 2007, owned a mining company with Qinchuan in Qinghai Province in western China. Records show that he acquired Qinchuan's 35 percent stake and also bought out its share in a Beijing investment company.

Mr. Shi and Mr. Luo were not available to comment. Ms. Qi and Mr. Deng did not respond to faxed questions asking about their investments.

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Mr. Xiao, in his statement, said his company had contacted Qinchuan about its asset disposals after the publication this month of an article in The Times about his own business empire and political ties.

Shareholders of the company "voluntarily quit their legitimately operated business which they worked very hard to found, costing them their input or bringing them a huge loss," Mr. Xiao said through a spokeswoman.

Mr. Deng, through a Shanghai holding company, also owned more than one-sixth of a rare-earth mining company in the Jiangxi Province of eastern China that last year reported owning assets of about $2.1 billion. Records show that he is no longer a shareholder in the Shanghai company, and even if he were, it no longer owns a stake in the mining company.

In April, that stake was taken over by a state-owned aviation investment company. Rare earths go into critical components in electric cars and wind turbines.

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Ms. Qi, her daughter Ms. Zhang and Mr. Deng still own many companies across China, stretching from Hainan in the south to Beijing in the north. Records examined this month show the couple still owns their Shenzhen-based investment company, Yuanwei, which holds tens of millions of dollars in assets.

Ms. Zhang also remains the owner of a spacious villa in Hong Kong that records show she bought in early 2009, during the depths of the global financial crisis, for $19.3 million. Since then, prices have appreciated significantly.

A visit to the villa this month suggested that it had been vacant for many years. It is falling into disrepair, with the subtropical Hong Kong foliage slowly reclaiming the driveway and sprouting out from below the black and gold steel gate. A villa on the same street recently listed for 238 million Hong Kong dollars, or more than $30 million.

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And the couple did not sell three of its most valuable assets held by Qinchuan, including two infrastructure companies in the city of Xiangyang in Hubei Province. The three assets are together worth at least $234 million.

But on Oct. 8, after no changes in its shareholding structure for almost six years, ownership of Qinchuan itself was transferred out of the family and into the hands of a longtime business associate, Xu Zaisheng, documents filed with the Chinese government show.

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