CMYK
DAY,
AY,
Y, MAY
MAY
MAY
18,
18,
18,
2012
2012
2012
VOL. CLXI . . No. 55,775
Nxxx,2012-05-18,A,001,Bs-BK,E3
Today,
Today,
Today,
an
anan
abundance
abundance
abundance
ofof sun,
of
sun,
sun,
nice,
nice,
nice,
high
high
high
73.
73.73.
Tonight,
Tonight,
Tonight,
clear,
clear,
clear,
cool
cool
cool
once
once
once
again,
again,
again,
low
low
low
53.
53.53.
Tomorrow,
Tomorrow,
Tomorrow,
plenty
plenty
plenty
ofof of
sunshine,
sunshine,
sunshine,
pleasant,
pleasant,
pleasant,
aa bit
abitbit
warmer,
warmer,
warmer,
high
high
high
79.
79.79.
Weather
Weather
Weather
map,
map,
map,
Page
Page
Page
B16.
B16.
B16.
$2.50
$2.50
$2.50
NEW YORK, FRIDAY, MAY 18, 2012
© 2012 The New York Times
Late Edition
Today, an abundance of sun, nice,
high 73. Tonight, clear, cool once
again, low 53. Tomorrow, plenty of
sunshine, pleasant, a bit warmer,
high 79. Weather map, Page B16.
$2.50
China ‘Princelings’ Using
Family Ties to Gain Riches
China
China
China‘Princelings’
‘Princelings’
‘Princelings’Using
Using
Using
Family
Family
FamilyTies
Ties
Tiesto
totoGain
Gain
GainRiches
Riches
Riches
Leaders’ Relatives Take Key Business Posts
— Spoils System Poses Risk to Party
By DAVID BARBOZA and SHARON LaFRANIERE
Leaders’
Leaders’
Leaders’Relatives
Relatives
RelativesTake
Take
TakeKey
Key
KeyBusiness
Business
BusinessPosts
Posts
Posts
—
—
—
Spoils
Spoils
Spoils
System
System
System
Poses
Poses
Poses
Risk
Risk
Risk
to
toto
Party
Party
Party
SHANGHAI — The Hollywood
studio DreamWorks Animation
recently announced a bold move
to crack China’s tightly protected
film industry: a $330 million deal
to create a Shanghai animation
studio that might one day rival
the California shops that turn out
hits like “Kung Fu Panda” and
“The Incredibles.”
What DreamWorks did not
showcase, however, was one of
its newest — and most important
— Chinese partners: Jiang Mianheng, the 61-year-old son of Jiang
Zemin, the former Communist
Party leader and the most powerful political kingmaker of China’s
last two decades.
The younger Mr. Jiang’s coups
have included ventures with
Microsoft and Nokia and oversight of a clutch of state-backed
investment vehicles that have
major interests in telecommunications, semiconductors and construction projects.
That a dealmaker like Mr.
Jiang would be included in an undertaking like that of DreamWorks is almost a given in today’s China. Analysts say this is
how the Communist Party shares
the spoils, allowing the relatives
of senior leaders to cash in on one
of the biggest economic booms in
history.
As the scandal over Bo Xilai
continues to reverberate, the authorities here are eager to paint
Mr. Bo, a fallen leader who was
one of 25 members of China’s ruling Politburo, as a rogue operator
By
ByBy
DAVID
DAVID
DAVID
BARBOZA
BARBOZA
BARBOZA
and
and
and
SHARON
SHARON
SHARON
LaFRANIERE
LaFRANIERE
LaFRANIERE
By DAVID
BARBOZA
andwho
SHARON
LaFRANIERE
who
who
abused
abused
abused
his
hishis
power,
power,
power,
even
even
even
as
asas
SHANGHAI
SHANGHAI
SHANGHAI
—
—The
—
The
The
Hollywood
Hollywood
Hollywood
who abused his power, even as
his family members accumulated
a substantial fortune.
But evidence is mounting that
the relatives of other current and
former senior officials have also
amassed vast wealth, often playing central roles in businesses
closely entwined with the state,
including those involved in finance, energy, domestic security,
telecommunications and entertainment. Many of these so-called
princelings also serve as middlemen to a host of global companies
and wealthy tycoons eager to do
business in China.
“Whenever there is something
profitable that emerges in the
economy, they’ll be at the front of
the queue,” said Minxin Pei, an
expert on China’s leadership and
professor of government at
Claremont McKenna College in
California. “They’ve gotten into
private equity, state-owned enterprises, natural resources —
you name it.”
For example, Wen Yunsong,
the son of Prime Minister Wen
Jiabao, heads a state-owned company that boasts that it will soon
be Asia’s largest satellite communications operator. President Hu
Jintao’s son, Hu Haifeng, once
managed a state-controlled firm
that held a monopoly on security
scanners used in China’s airports, shipping ports and subway
stations. And in 2006, Feng Shaodong, the son-in-law of Wu Bangguo, the party’s second-ranking
Continued on Page A14
hishis
family
family
family
members
members
members
accumulated
accumulated
accumulated
studio
studio
studio
DreamWorks
DreamWorks
DreamWorks
Animation
Animation
Animationhis
SHANGHAI
But evidence
substantial
a substantial
fortune.
fortune.
fortune.is mounting that the relatives
recently
recently
recently
announced
announced
announced
aabold
bold
a bold
move
move
moveaasubstantial
he Hollywoodtotostudio
DreamWorks
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other
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But
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evidence
evidence
evidence
isismounting
is
mounting
mounting
that
that
thatsenior officials have
crack
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China’s
China’s
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tightly
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protected
protected
protected
the
the
the
relatives
relatives
relatives
of
of
other
of
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current
current
current
and
and
film
film
film
industry:
industry:
industry:
a
a
$330
$330
a
$330
million
million
million
deal
deal
deal
mation recently announced a bold move also amassed vast wealth,and
often playing central
Remembering a Horror
former
former
former
senior
senior
senior
officials
officials
officials
have
have
have
also
also
also
to
to to
create
create
create
aa Shanghai
aShanghai
Shanghai
animation
animation
animation
Mejra Dzogaz, who
her husband,
three sons
and a grandson
to the 1995 Srebrenica
massacre, in
Potocari,in
Bosnia.
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to lost
crack
China’s
tightly
protected
film
inroles
businesses
closely
entwined with the
amassed
amassed
amassed
vast
vast
vast
wealth,
wealth,
wealth,
often
often
often
playplayplaystudio
studio
that
that
that
might
might
might
one
one
one
day
day
day
rival
rival
rival
Hague, it was Day 2 of the genocide trial of studio
Ratko
Mladic,
who
led
the
military
unit
that
carried
out the
massacre.
Page
A12.
dustry: a $330 million
deal
to create
athat
Shanghai
state,
including
involved in finance, enering
ing
central
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central
roles
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inthose
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shops
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closely
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state,
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animation studio that
might
one
day
rival
the
gy,
domestic
security,
telecommunications
and
hits
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like
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like
“Kung
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and
and
andclosely
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California shops that turn out hits like “Kung Fu entertainment. Many of these so-called princediseases
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nance,
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What
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2012 and
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FORT
CAMPBELL,
Ky.
—
To
bullets
most
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struck.
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did
not
showcase,
how- tainment.
altainment.
companies
wealthy
tycoons eager to do
tainment.
Many
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ofofand
these
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its
itsits
newest
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—
—and
—
and
most
most
most
important
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areand
concerns
that
the potential
those unfamiliar
with
a battleA year after he returned to the
field’s bleak routine, Col. Michael lessons from such data could be states,
Colonel Wirt and
his
dataprincelings
princelings
princelings
also
also
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serve
serve
serve
as
as
as
middlemiddlemiddle—
—
Chinese
—
Chinese
Chinese
partners:
partners:
partners:
Jiang
Jiang
Jiang
MianMianMianever,
was
one
of
its
newest
—
and
most
imporbusiness
in
China.
D. Wirt’s database could be read lost, because no one has yet base point to the promise and obBy JIM RUTENBERG
brought theson
information
together
like a catalog
of horrors.
In
it,61-year-old
men
men
men
to
to
ato
atohost
host
astudying
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ofofmore
global
of
global
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companies
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companies
and JEFF ZELENY
heng,
heng,
heng,
the
thethe
61-year-old
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son
son
ofofJiang
of
Jiang
Jiangstacles
related
tant
—
Chinese
partners:
Mianheng,
“Whenever
there
is something profitable
made it fully cohere. the
more
than 500 AmericanJiang
soldiers and
than
aand
decade
of American
war.
Joe Ricketts, an up-by-theand
and
wealthy
wealthy
wealthy
tycoons
tycoons
tycoons
eager
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to
todo
to
dodo
Zemin,
Zemin,
Zemin,
the
the
the
former
former
former
Communist
Communist
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subjected to characteristic
Colonel Wirt was a brigade surThe amassed information on
bootstraps
billionaire whose son
var- are
61-year-old
of
Jiang
Zemin,
the
former
Comthat
emerges
in
the
economy,
they’ll be at the
forms
of
violence
of
the
Afghan
geon
from
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years
ied holdings include a namebusiness
business
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in
in
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in
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leader
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and
and
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the
the
the
most
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powerpowerpowervision during the American-led
brand brokerage firm in Omaha, war.
amounts to the most detailed
effort
in
2010
and
2011
to
dislodge
Faces
are
smacked
with
shrapmunist
Party
and
the most
powerful
po- front
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queue,”
said Minxin Pei, an expert
“Whenever
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there
there
isissomething
is
something
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ful
ful
political
political
political
kingmaker
kingmaker
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ofofChina’s
of
China’s
China’s
a baseball
team in Chicago,
herds leaderful
Continued on Page A3
of bison in Wyoming and a start- nel, legs are blasted away near the Taliban from their rural
profitable
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along the Arghandab
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litical
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DADO
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wanted to be a player in the 2012 young men’s abdomens. Vehicles River. His database was part offieconomy,
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cial
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part personal
recrushing
bones.
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Thursday younger
he was, roll over,
Mr. Digits
Jiang’s
coups have in- ment at Claremont McKenna
College
in Califorare sev- search project.
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though not in the way he had in- drums rupture.
A
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queue,”
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Minxin
Minxin
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Pei,
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an
an
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have
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ventures
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ered.
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cluded
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Microsoft
and
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and
nia.
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tabs onand
ailing
and
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soldiers
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expert
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on
onon
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leadership
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and
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and
Word that Mr. Ricketts had
Microsoft
and
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and
Nokia
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and
and
overoveroverDon’t Flaunt It
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more begin journeys home, ed soldiers, and to inform him of
True
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milcre,
e,
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owned
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ary vehicles
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Romney,
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Continued on Page A20
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pressure dictates that consumpbase
ase
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point
point
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to
tothe
to
the
the
promise
promise
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and
and
and
obob-ob- over Bo Xilai
No. 1, continues
and each sold more than
a suburban
Donna
Summer,
the multiannounced
plans
to
relocate.
Philadelphia
to
the
cenAs
the
scandal
to
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the
party’s
second-ranking
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that
that
held
held
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a
a
monopoly
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a
monopoly
on
on
on
security
security
security
tion
be
kept
on
the
down
low.
history.
history.
history.
million copies.
million-selling
singer
and song-more
Many people, including a group
ter of the city caused art lovers
“The message here is, ‘Keep
acles
tacles
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related
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related
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tohits
studying
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more
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used
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in
in
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China’s
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airairairHer
combination
of
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captured
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that
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to
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were
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of
worry.
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As
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the
scandal
scandal
scandal
over
over
over
Bo
Bo
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Xilai
Xilai
Xilai
reverberate,
the
authorities here
are eager to Devotees
product,’” saidthe
a Facehelped
Merrill Lynch
win a deal shipping
to arrange
rooted voice and up-to-thegiddyof
hedonism
of the 1970s
sure that it could only desecrate
of this great polyglot
han
han
than
aadecade
decade
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of
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of
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war.
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book executive who requested
ports,
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shipping
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ports
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and
and
subway
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minute
dance beatsthe
wasthe
a
temdisco era and the feisty female
continues
continues
continues
to
toreverberate,
to
reverberate,
reverberate,
the
auauau-ports,
this
singular
institution.
collection,
heavy ports
with
anonymity state-run
while discussing inpaint
Mr.
Bo,
a
fallen
leader
who
was
one
of
25
$22
billion
public
listing
of
the
giant
plate for 1970s disco, and, with ROBERTA
solidarity
of the
early
1980s, died
Renoir,
Cézanne
Others,
myself
included,
The
The
The
amassed
amassed
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information
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information
on
ononthorities
ternal matters. “If someone buys
stations.
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inand
2006,
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Feng
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thorities
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are
are
are
eager
eager
eager
to
to paint
to
paint
paintstations.
her
producers
Giorgio
Moroder
on Thursday at her home in NaMatisse, which the
not object to the move per se, but
a fancy
car and postslarga picture of
of10China’s
ruling
Politburo,
as
a
rogue
bank
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what
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world’s
ombatants
ombatants
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over
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over
10
years
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yearsMr.
and Pete Bellotte,
she
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SMITH
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ART
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est
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one
one
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of
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members
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of
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China’s
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Love” in 1977, a sound that perand his death in 1951,
a terrible idea. To us it seemed
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ing
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hair ily
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Ms. Summer became the queen
of disco — the music’s glamorous
public face — as well as an idol
with a substantial gay following.
Her voice, airy and ethereal or
She riffled through styles as diverse as funk, electronica, rock
and torch song as she piled up 14
recordings have been sampled
by, among others, Beyoncé, the
Pet Shop Boys, Justice and Nas.
Ms. Summer won Grammy
Awards for dance music, R&B,
Barnes spent years obsessively
arranging his installation cheekby-jowl in the mansion in Lower
Merion, Pa., that he built for the
purpose and opened in 1925, and
Barnes’s straitjacketed displays,
wonderful as they often were.
And why go to the trouble of moving the collection to a more accessible location when the galleries
ing employees to a hackathon, or
Continued on Page B7
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keep him under house arrest.
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eking
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ve
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hen said.
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roamtoside
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vernment
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y
eaders
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akes
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Onthat
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other
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the
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In August 2005, a
otten
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embarparty
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Mr.that
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ists for
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political elite
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spoils system
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in- the architects of China’s econom- previous officials, the
Roderick
China specialist
at private eq
local officials, central officials, ruption. Without naming Mr. Bo the potential
ic system.
His
son,
Levin
Zhu,
e equity firm Chinese
officials and their relatives rarely
Harvard University. “It would be a tsunami.”
und, New Hori- joined China International Cap- military officers, police offi- by name, People’s Daily, the offi- benefits from
discuss
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issue
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cial Communist
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York Times
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denounced
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ests are now per,
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the party’s
purityChanges
by state monopoly
are so many
publicinofficials
their relatives
this article,
could
benefit
populace.
connections to make money.”
smuggling ill-gotten gains out of
Jeffrey Zeng
th the families executive for the past decade.
often through
their companies. NoneToofshore
those
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financial
country. services, for instance,
up confidence
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Efforts to open the power secmer Politburo
,” said one fireached
to comment
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could
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tor agreed
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interests
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of senior lead- DreamWorks
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Rongji, China’s prime minister from 1998 to 2003
regularly
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greedy
tives
of
Li
Peng,
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former
prime
capital firm se
unholy
alliances.
Cheng
Li,
an
exm part of your
comment about their relationship with Mr. Jiand one of the architects of China’s economic
minister. Li Xiaolin, his daughter, officials caught with their hand in pert on Chinese politics with the owned entitie
egal.”
ang. is the chairwoman and chief ex- the till. In 2008, for system.
Levin Zhu,
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secretary,
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ington,
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Chen
Liangyu,
was
sentenced
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ro member, L
for
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Chinese
government
to
fficial corrupcable from 2009, released two years ago by the try’s biggest investment banks, in 1998 and has
power generating compa- 18 years in prison for bribery and push through major political re- operate the $4
nist Party WikiLeaks
has big fiveproject,
cited reports that China’s served as its chief executive for the past decade.
ed its ethics nies in China. Her brother, Li abuse of power. One of his crimes forms aimed at extricating pow- vate Equity Fu
elite had
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gest state-ma
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ts latest iteranomicofpie.
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and
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tives,
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land
deal
that
former
presid
those
now
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power.
010 required
all
openly boast that their ties to the political elite
relatives of Li Peng, a former prime minister.
“This is one of the most diffi- netted his brother, Chen Lianghe jobs, whereAnd with no independent judi- helped establi
give them
a competitive
advantage
ina China’s
Li Xiaolin, his ciary
daughter,
is thehechairwoman
private equity
$20 million profit.
ments of their
cult challenges
China faces,”
said jun,
in China,
said, party and
highly
regulated
marketplace.
of China
Power
International,
ren, as well
as Mr.
Pei, an authority
on China’s
would
essentially
be way to raising
But exposés inchief
the executive
foreign leaders
s. But the dis- A leadership.
“Whenever they
Most recen
them- genpress —
like the the
report
in 2010 ofcharged
Chinese sportswear
company
called
flagship
one ofwith
theinvestigating
big five power
Fears of a backlash
against a culture of
‘Red Nobility.’
Xidelong, for example, proudly informed some
potential investors that one of its shareholders
was the son of Wen Jiabao, according to one of
the investors. (A private equity firm, New Horizon, that the son, Wen Yunsong helped found
invested in the company in 2009, according to
Xidelong’s Web site.) “There are so many ways
to partner with the families of those in power,”
said one finance executive who has worked with
the relatives of senior leaders. “Just make them
part of your deal; it’s perfectly legal.”
erating companies in China. Her brother, Li
Xiaopeng, was formerly the head of another big
power company and is now a public official.
“This is one of the most difficult challenges
China faces,” said Mr. Pei, an authority on China’s leadership. “Whenever they want to implement reform, their children might say, ‘Dad,
what about my business?’ ”
There are also growing concerns that a culture of nepotism and privilege nurtured at the
top of the system has flowed downward, perme-
ating bureaucracies at every level of government in China. “After a while you realize, wow,
there are actually a lot of princelings out there,”
said Victor Shih, a China scholar at Northwestern University near Chicago, using the label
commonly slapped on descendants of party
leaders. “You’ve got the children of current officials, the children of previous officials, the
children of local officials, central officials, military officers, police officials.We’re talking about
hundreds of thousands of people out there — all
trying to use their connections to make money.”
To shore up confidence in the government’s
ability to tackle the problem, high-ranking leaders regularly inveigh against greedy officials
caught with their hand in the till. In 2008, for
instance, a former Shanghai Party secretary,
Chen Liangyu, was sentenced to 18 years in
prison for bribery and abuse of power. One of
his crimes was pressing businessmen to funnel
benefits to his close relatives, including a land
deal that netted his brother, Chen Liangjun, a
$20 million profit.
But exposés in the foreign press — like the
report in 2010 that Zeng Wei, the son of China’s
former vice president Zeng Qinghong, bought a
$32 million mansion in Sydney, Australia — are
ignored by the Chinese-language news media
and blocked by Internet censors.
Allegations of bribery and corruption
against the nation’s top leaders typically follow — rather than precede — a fall from political grace. Mr. Bo’s downfall this spring, for
instance, came after his former police chief in
Chongqing told American diplomats that Mr.
Bo’s wife, Gu Kailai, had ordered the murder of
Neil Heywood, a British businessman, in a dispute over the family’s business interests.
Evidence has surfaced of at least $160 million in assets held by close relatives of Bo Xilai,
and the authorities are investigating whether
other assets held by the family may have been
secretly and illegally moved offshore.
Wen Jiabao, the prime minister, responded
by demanding a more forceful crackdown on
corruption. Without naming Mr. Bo by name,
People’s Daily, the official Communist Party
newspaper, denounced fortune seekers who
stain the party’s purity by smuggling ill-gotten
gains out of the country.
Some scholars argue that the party is now
hostage to its own unholy alliances. Cheng Li,
an expert on Chinese politics with the Brookings Institution in Washington, said it would
be difficult for the Chinese government to push
through major political reforms aimed at extricating powerful political families from business
without giving immunity to those now in power.
And with no independent judiciary in China, he said, party leaders would essentially be
charged with investigating themselves. “The
party has said anticorruption efforts are a lifeand-death issue,” Mr. Li said. “But if they want
to clean house, it may be fatal.”
Chinese tycoons have also been quietly welcomed into the families of senior leaders, often
through secret partnerships in which the sons,
daughters, spouses and close relatives act as
middlemen or co-investors in real estate projects or other deals that need government approval or backing, according to investors who
have been involved in such transactions.
Moreover, China’s leading political families, often through intermediaries, hold secret shares in dozens of companies, including
many that are publicly listed in Hong Kong,
Shanghai and elsewhere, according to interviews with bankers and investment advisers.
Lately, the progeny of the political elite have
retooled the spoils system for a new era, moving into high-finance ventures like private equity funds, where the potential returns dwarf
the benefits from serving as a middleman to
government contracts or holding an executive
post at a state monopoly.
Jeffrey Zeng, the son of the former Politburo member Zeng Peiyan, is a managing partner at Kaixin Investments, a venture-capital
firm set up with two state-owned entities, China
Development Bank and Citic Capital. Liu Lefei,
the son of another Politburo member, Liu Yunshan, helps operate the $4.8 billion Citic Private
Equity Fund, one of the biggest state-managed
funds. Last year, Alvin Jiang, the grandson of
former president Jiang Zemin, the former Communist Party leader and president, helped establish Boyu Capital, a private equity firm that
is on its way to raising at least $1 billion.
Most recently, with the Communist Party
promising to overhaul the nation’s media and
cultural industries, the relatives of China’s political elite are at the head of the crowd scrambling for footholds in a new frontier.
The February announcement of the deal
between DreamWorks and three Chinese partners, including Shanghai Alliance Investment,
was timed to coincide with the high-profile visit
to the United States of Xi Jinping, China’s vice
president and presumptive next president. The
news release did not mention that Shanghai Alliance is partly controlled by Jiang Zemin’s son
Jiang Mianheng. A person who answered the
telephone at the Shanghai Alliance office here
declined to comment.
Zeng Qinghuai, the brother of Zeng Qinghong, China’s former vice president, is also in
the film business. He served as a consultant for
the patriotic epic “Beginning of the Great Revival.” The film exemplified the hand-in-glove relationship between business and politics. It was
shown on nearly 90,000 movie screens across
the country. Government offices and schools
were ordered to buy tickets in bulk. The media
was banned from criticizing it. It became one of
last year’s top-grossing films.
Scholars describe the film industry as the
new playground for princelings. Zhang Xiaojin,
director of the Center of Political Development
at Tsinghua University, said, “There are cases
where propaganda department officials specifically ask their children to make films which
they then approve.”
Zhao Xiao, an economist at the University of
Science and Technology in Beijing, said, “They
are everywhere, as long as the industry is profn
itable.”