China: Time of Transition

Expose on Wen Jiabao’s Wealth—Storm in a Teacup?

A recent New York Times article claiming that Chinese Premier Wen Jiabao's family accumulated $2.7 billion in may have grabbed headlines globally, but it appears to have caused little stir within a country that has become accustomed to stories about graft and the wealth of its elite.

Christophe Archambault | AFP | Getty Images

Yet coming just ahead of a major transition in China's political leadership that takes place once every 10 years, analysts say the story is not only likely to resonate with the new government but also highlights one of its most pressing problems: corruption.

Frequent corruption scandals and stories about the riches accumulated by senior leaders also come at a time when a growing wealth gap is causing public discontent.

"Corruption is a very serious problem that they (Chinese leaders) themselves recognize," said David Zweig, director of the center on China's transnational relations at the Hong Kong University of Science and Technology. "I think it will be high on Xi Jinping's agenda," he added, referring to China's vice-president, groomed to become the country's next president in the transition now under way.

(Read More: China's New Leaders – the Lineup)

Detailing a number of deals, the New York Times said relatives of Wen Jiabao, known as "Uncle Wen," became extraordinarily wealthy during the premier's term in office. The report found no indication that Wen had intervened on behalf of his family and said he himself did not appear to have amassed assets.

Analysts say that because Wen is part of an outgoing team, the incident is unlikely to harm a smooth power transition, which has weathered a bigger political storm this year – a , who has been charged with corruption, abuse of power and engaging in the cover-up of the murder of a British businessman.

But they add that because the scale of the wealth amassed by Wen's family was so large, according to the New York Times article, the new leadership could feel greater pressure to deliver political reforms quickly.

"Shining a bright light on the intricate relationship between wealth and power in China ratchets up the pressure on the new leadership for real change in the political system," Elizabeth Economy, the director for Asia Studies at the Council on Foreign Relations, said in a paper posted on the think-tank's website.

The ruling Communist Party has launched an internal inquiry into the allegations made by the NYT, with Wen asking for the probe, local media reported last week.

Wen has on several occasions urged the need to curb corruption and pressed leaders to ensure families and business associates do not abuse relations with the government.

Outgoing Chinese President Hu Jintao last week warned that the ruling Communist party.


Income inequalities are a major concern for China's authorities keen to avoid public discontent and possible unrest in an economy that has developed rapidly in the past 30 years to become the world's second biggest.

Despite that rapid economic development, more than a hundred million people in China live on a dollar a day in a country that is home to the second largest number of billionaires after the U.S.

A report by the United Nations earlier this year said that China's rural wealth gap was nearing levels associated with disturbances.

"(A rising wealth gap) can foster an environment of discontent," Rita He, who manages a property consulting firm in Beijing, told a CNBC special report on China's transition.

Her advice is to "stop complaining" and "think about how you can make it" in modern China. But she adds: "The problem is that more and more people feel like they can't (make it)."

A wave of unrest broke out in several Chinese cities last year over anger at corruption, police abuses and economic discontent.

Strikes have also become increasingly frequent in recent years at private owned factories – Foxconn, a major supplier to tech giant Apple, was forced to close one of its large China factories in September after a fight broke out. Plans to expand a petrochemical plant in eastern China meanwhile were shelved last month after days of protest.

To help narrow the wealth gap, the government has implemented measures such as constructing millions of low-cost homes and hiking pay.

(Read More: Reform With Zeal – Can China's New Leadership Deliver?)

It may do more to tackle this gap and the image of corruption, analysts said.

"Every Chinese person knows that the people at the top – and or their families – both at central and local levels benefit unduly from their positions of power. That is not unique to China," said Dane Chamorro, director global risk analysis at Asia-Pacific Control Risks.

"(President) Hu's (Jintao) approach was to remove those who were too careless about it. Even if he wanted to he wouldn't be able to remove everyone with dirty hands because the government would fall apart," he said.

And China watchers say this is the nub of the problem for China's new leaders – tackling a problem that appears embedded in the political system.

(Read More: True Agenda of China's New Leader Still a Mystery)

"It would take a tremendous amount of political will to get rid of corruption and there will be strong resistance," said Joseph Cheng, Professor of Political Science at City University of Hong Kong.

"The new leaders will have to ask themselves – do we want to fight this war? If the answer is yes, they are going to need a lot of political will," he said.

Additional reporting by CNBC's Eunice Yoon in Beijing

- By CNBC's Dhara Ranasinghe