Exclusive: A Glimpse into Everbright Group's Downfall and Wall Street's Hiring Scandals
China invites global investors for rare meeting as economy sputters; Uruguay saw opportunity in China and got schooled in the hazards of trade; China sets rules for AI
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Exclusive: A Glimpse into Everbright Group's Downfall and Wall Street's Hiring Scandals
The detention of Tang Shuangning and his spouse appears not to target Wen Jiabao, but another former member of the Politburo Standing Committee.
Following the downfall of China Everbright Group's former party secretary and chairman, Li Xiaopeng, in April, recent reports suggest that Tang Shuangning and his wife, who held the same positions at Everbright Group for ten years, were detained for investigation by authorities on July 12th, local time.
As conveyed by 'Finance My News', a fortnight earlier, a mid-level cadre at Everbright Bank was put under "retention" (a measure imposed on officials accused of negligence), which might be one direct trigger for Tang Shuangning's 'disappearance'.
Tang Shuangning, previously the Vice Chairman of the China Banking Regulatory Commission, steered the Everbright Group for a decade before retiring in December 2017. Li Xiaopeng succeeded him. In April this year, the Central Commission for Discipline Inspection announced that Li Xiaopeng was under scrutiny for serious disciplinary and legal violations. After the reassignment of Wang Jiang, Chairman of the Everbright Group, to the Central Financial and Economic Affairs Commission as Deputy Director in May, the top position at Everbright remains vacant.
Tang Shuangning, a 68-year-old Manchu from Liaoning with four decades in finance, has often given media interviews. A calligraphy enthusiast and a member of the Chinese Calligraphers Association, he has frequently appeared publicly as an artist and cultural scholar in recent years, often using the pen name 'Frost Condensing'.
Founded by the Ministry of Finance and Huijin Company, the Everbright Group, in operation for 40 years, is one of the three central financial holding companies. It owns a host of domestic and international listed companies, including Everbright Bank, Everbright Securities, Everbright Holdings, Everbright International, Everbright Yongnian, China CYTS Tours Holding, Jiashitang, China Aircraft Leasing, Everbright Jiabao, Everbright Water, and Everbright Green Environmental Protection.
Tang Shuangning seemed to withdraw from the business world after retirement, focusing on calligraphy and literature, but the investigation eventually reached him, according to a person with direct knowledge of the matter. The issues likely concern the Everbright Company or his tenure as the Deputy Chairman of the China Securities Regulatory Commission, both systems notorious for corruption.
Since its founding by China's 'National Uncle', Liu Shaoqi's brother-in-law, Wang Guangying, Everbright has been plagued with corruption and internal feuds. Zhu Rongji's favored official, Zhu Xiaohua, was transferred from the People's Bank of China to supervise Everbright, but was ejected due to corruption allegations. Issues related to Tang Shuangning's son were exposed by the New York Times a decade ago.
In August 2013, the South China Morning Post reported that the US Securities and Exchange Commission was investigating whether JPMorgan Chase expanded its business opportunities in China by hiring the children of powerful officials. These included Tang Shuangning's son and Zhang Shuguang's daughter, the former director of the Ministry of Railways' Transport Bureau.
The report suggested that after Tang Shuangning's son joined JPMorgan Chase in 2010, JPMorgan was involved both as a financial advisor for Everbright Group's IPO and in the asset sales of Everbright International. After hiring Zhang Shuguang's daughter, JPMorgan assisted China Railway Construction Corporation Limited, which had close business ties with the former Ministry of Railways, in conducting an initial public offering of over 50 billion USD. So far, neither JPMorgan nor its employees have faced allegations of misconduct.
In December 2013, the New York Times reported that documents revealed JPMorgan's hiring of 'princelings' involved under-the-table deals. These documents, reviewed by the New York Times, suggested that such hiring practices were common knowledge at the bank's Hong Kong headquarters.
One senior executive at JPMorgan in Hong Kong noted in an email that a certain applicant's father was the chairman of a state-owned financial group, Everbright Group. This executive also extolled the overall benefits of the hiring scheme, telling colleagues in another email: "As you all know, I'm very optimistic about the 'Sons and Daughters Program.' It could directly secure us consulting services business for Chinese companies." Until these documents were revealed, there was no evidence that these hiring practices were linked to business transactions.
In addition to these documents, interviews with current and former JPMorgan employees indicated that some individuals within the bank, or associated with it, were incensed by this hiring strategy. At least two whistleblowers flagged it, with one filing a lawsuit with the Hong Kong Stock Exchange in April 2011, and another reporting the project to US authorities the same year. In December 2011, a lower-level JPMorgan employee in Hong Kong resigned from the bank and wrote in an email: "I feel that my family cannot provide the assistance that some other families can provide to you: bringing the business they control to the company." This incident underscored concerns in this area.
Initially, JPMorgan established the "Sons and Daughters Program" in 2006 to enforce stricter scrutiny over its hiring practices. However, by 2009, the program had become a fast-track for connected job candidates to become company employees. The documents revealed that, compared to ordinary junior employees, applicants from influential Chinese families faced more relaxed standards and fewer interviews.
JPMorgan also proposed another scheme for "full-time connected parties," which could offer contracts worth between 70,000 and 100,000 USD annually to employees with strong connections. Internal documents stated that this program could potentially provide "clear connections to business opportunities."
According to sources familiar with the investigation, JPMorgan once briefly maintained an electronic spreadsheet of "historical transaction records." It listed job candidates in one column and noted the "performance records" of transactions the bank had made with related companies in another. The documents suggested that other spreadsheets listed employees with strong connections, as well as the business gains JPMorgan received from private or state-owned Chinese enterprises related to these employees.
The hiring of Tang Xiaoning (transliteration) by JPMorgan Chase appears to clearly embody the spirit of the "Children's Program" designed for state-owned enterprise clients. Tang Xiaoning had worked at Goldman Sachs and Citigroup, and his father was the chairman of China Everbright Group.
Records and interviews show that in March 2010, Tang Xiaoning's father, Tang Shuangning, approached a senior executive of JPMorgan Chase in Hong Kong to discuss arranging a position for his son. The executive was in charge of JPMorgan Chase's investment bank in China and welcomed the request, urging colleagues in an email the next day to discuss "how we can better use this in the future." However, related documents indicate that the executive downplayed the importance of hiring Tang Xiaoning in an internal compliance form, stating that there were no "anticipated benefits."
Securities filings and news reports show that by March 2010, JPMorgan Chase appeared to have little or no business with China Everbright.
However, interviews indicate that soon after Tang Xiaoning's father contacted JPMorgan Chase, a subsidiary of China Everbright hired JPMorgan Chase to advise on a private stock issue worth $300 million. In 2011, months after Tang Xiaoning started working at JPMorgan Chase, a banking subsidiary of China Everbright chose JPMorgan Chase as one of several financial advisors to provide listing advice. This deal was delayed due to global market turbulence.
Around the same time, JPMorgan Chase offered Tang Xiaoning a second one-year contract; the company did not allow him to participate in any transactions related to China Everbright. Company executives said at the time that Tang Xiaoning had received overall good reviews. In addition, Tang Xiaoning had previously earned a master's degree in international affairs from Columbia University.
During Tang Xiaoning's tenure at JPMorgan Chase, his father's company's business volume with JPMorgan Chase continued to increase. Research service company S&P Capital IQ said that in 2012, China Everbright International, a subsidiary of China Everbright focused on new energy business, decided to sell shares worth $162 million, and JPMorgan Chase was chosen as the advisor for this transaction.
In May 2012, as Tang Xiaoning's contract was about to expire, JPMorgan Chase also faced a turning point. However, under the urging of the aforementioned JPMorgan Chase investment banking executive, Tang Xiaoning's contract was renewed.
The executive wrote, "Given our relationship with China Everbright, I think we should renew the contract with Xiaoning again."
The New York Times also reported that JPMorgan Chase had business dealings with Wen Ruchun, the daughter of Wen Jiabao, who used the alias Lily Chang. The article mentioned that in order to improve its status in China, JPMorgan Chase found a seemingly unknown consulting company. Its director was 32 years old at the time and named Lily Chang.
According to the contract, Lily Chang's company received $75,000 per month from JPMorgan Chase (about 600,000 RMB at the time). The company seemed to have only two employees, and on the surface, Lily Chang lacked the influence and public recognition needed to open doors for JPMorgan Chase.
However, senior executives of JPMorgan Chase in Hong Kong and executives of some other large companies knew that "Lily Chang" was not her real name, but the alias of Wen Ruchun, the only daughter of then Premier Wen Jiabao. The economy and finance were under Wen Jiabao's control.
At the same time as establishing contact with Wen Ruchun, JPMorgan Chase also invested in some companies related to the Wen family. The connection between JPMorgan Chase and Wen Ruchun had not been previously reported. Confidential documents reviewed by The New York Times, Chinese public records, and interviews with informed individuals showed that this relationship pointed to an overall strategy for accumulating influence in China: hiring relatives of the powerful figures who rule China.
If people look up Tang Shuangning now, whether Wen Jiabao will be investigated is of utmost concern to everyone. Rather than saying everyone is focusing on Tang Shuangning, it would be more accurate to say that what people are really concerned about is Wen Jiabao.
Exclusive: China invites global investors for rare meeting as economy sputters
Reuters
Chinese financial regulators have invited major global investors to a symposium next week in order to encourage them to continue investing in the country. The meeting will focus on the challenges facing US dollar-denominated investment firms in China, with attendees encouraged to provide suggestions and share their outlook on the economy. The gathering comes as confidence in China's economic outlook wanes and Sino-US relations remain strained over national security issues. The meeting reflects Beijing's desire to shore up confidence among foreign investors and encourage them to keep investing in China despite these challenges.
Uruguay Saw Opportunity in China. It Got Schooled in the Hazards of Trade.
NY Times
Uruguay's bid for a bilateral trade deal with China has failed, much to the dismay of the country's beef farmers. China is the largest buyer of Uruguayan beef, but the South American country faces tariffs of 12% on its meat exports to China, compared with 0% for New Zealand and 6% for Australia. Uruguay's hope for a deal with China was met with anger and retaliation from neighbouring Brazil and Argentina, who also belong to the Mercosur trade bloc. In recent months, Brazil has sought a wider trade agreement with China on behalf of Mercosur, sidelining Uruguay. Uruguay's trade unions, politicians, and Mercosur officials are concerned about the consequences of a rift within the trade bloc; Uruguay's deal with China would have opened its markets to Chinese-made factory goods in exchange for lower tariffs on beef exported to China, threatening producers in Brazil and Argentina. Uruguay hoped a trade deal with China would have helped to redraw its terms of engagement with the rest of the world and serve as a counterweight to the dominance of the US, but instead, it appears that it has damaged its dealings with its neighbours and achieved no economic gains.
China sets rules for AI to keep it bound by ‘core socialist values’
Washington Post
China has released new regulations for generative artificial intelligence (AI) services, which are set to take effect on 15 August. The regulations aim to encourage the growth of China's AI industry while maintaining strict control over information available to the public. The rules require companies offering AI-generated content to ensure its accuracy and reliability, as well as its compliance with China's socialist values. Critics argue that compliance will be challenging for smaller companies without an existing compliance and censorship apparatus. The regulations also signal Beijing's support for the sector and its interest in Chinese companies competing globally.
US Secretary of State Blinken urges stability in Indo-Pacific
Reuters
US Secretary of State Antony Blinken has called for stability in the Indo-Pacific region and urged nations to work together to address threatening behavior by North Korea. He also highlighted the need for a peaceful resolution to Russia's aggression in Ukraine and called on Myanmar's military to end hostilities and engage in dialogue. Blinken emphasized the importance of freedom of navigation in the South and East China Seas and maintaining peace and stability across the Taiwan Strait. His remarks come after Chinese fighter jets monitored a US Navy patrol plane in the Taiwan Strait and as China conducted military exercises near the island. Blinken also condemned North Korea's recent missile launch and called for collective action to address its weapons program. He urged Myanmar's ruling military to halt violence and implement a peace plan agreed upon with its Southeast Asian neighbors.
US-China relations: we must talk security, Wang Yi tells Antony Blinken
South China Morning Post
China's foreign policy chief, Wang Yi, has called for greater communication on diplomacy and security with the United States, saying the two rival superpowers need to remove stumbling blocks to improve ties. He stated that the US needs to take a rational and pragmatic approach and work with China to expand communication channels in diplomatic and security fields. Wang stressed Beijing's position on Taiwan, urging Washington to avoid interfering in Beijing's internal affairs or undermining its sovereignty. Both sides have agreed to maintain communication following the meeting.
China can't just keep building the world's biggest dam in secret
Nikkei Asia
China is constructing the world's first super dam near its border with India. The dam, which has a planned capacity of 60 gigawatts, would generate three times as much electricity as the Three Gorges Dam. The project is being built in a seismically active area, making it potentially dangerous for downstream communities in India and Bangladesh. China has a record of keeping dam projects on international rivers under wraps until they are too far along to hide. The dam could also have negative ecological impacts and threaten the environment and biodiversity of the region.
China executes kindergarten teacher who poisoned 25 of her students, killing 1
The Toronto Star
A Chinese kindergarten teacher who poisoned 25 students, killing one, has been executed. Wang Yun, 40, was convicted of putting toxic sodium nitrite in porridge served to children at Mengmeng Pre-school Education in March 2019. While other students recovered, one died from multiple organ failure after 10 months of treatment. Wang had previously poisoned her husband with the same substance. It is not clear if she intended to kill or sicken her husband and the students. Attacks on young students have become a disturbing trend in China in recent years.
Divisive China, Taiwan bids to join Pacific trade pact in focus at meet
Reuters
China and Taiwan's applications to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are set to be discussed by member nations at a meeting in Auckland. While China applied to join the group less than a week before Taiwan, both applications have been on hold pending the UK's application. The 12-country trade pact is also expected to finalise Britain's membership.
Chinese military’s three-day show of force increases headache for Taiwan
CNN
China sent dozens of warplanes past the median line of the Taiwan Strait this week, causing concern that the People's Liberation Army (PLA) is attempting to wear down the mental ability of Taiwan's people to resist a potential takeover by Beijing. The PLA aircraft included fighter jets, H-6 bombers, anti-submarine warning aircraft, and reconnaissance drones. Carl Schuster, a Hawaii-based analyst, said the surge in PLA activity is aimed at diminishing the Taiwan population's will to resist, and that the continued presence of large numbers of PLA warplanes and ships around Taiwan can lull the island's defenders into complacency.
Arms deals overshadow rights concerns as France welcomes India's PM Modi
RFI
French President Emmanuel Macron is welcoming Indian Prime Minister Narendra Modi on a state visit to France. The visit comes as the two countries deepen their military ties and discuss arms deals worth several billion euros. However, Modi’s visit has been met with protests and criticism from human rights groups, who accuse him of authoritarianism and persecution of religious minorities. France has remained relatively quiet on Modi’s human rights record, but values India as a counterweight to China’s power. Trade between France and India was valued at €25bn in 2022.
Solomon Islands says China to assist with policing, cybersecurity
Al Jazeera
The Solomon Islands has rejected claims by Australia and others that its policing deal with China poses a threat to regional peace. The United States, Australia, New Zealand, and the Solomon Islands' opposition party have called on Prime Minister Manasseh Sogavare to release details of the deal, amid concerns it will invite further regional contest. The statement from Sogavare's office said that China's police will enhance the capabilities of Solomon Islands' police officers in cybersecurity and community policing, and that Chinese police will add to the existing Australian and New Zealand policing support. Australia's Foreign Minister Penny Wong expressed her concerns about security in the Pacific during a meeting with China's top diplomat in Jakarta.
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