Among the revelations in the Panama Papers, the enormous cache of leaked documents exposing how the world’s most powerful people hide their wealth, is that many members of China’s elite have relatives with massive offshore holdings. One of those people is the most important man in China, President Xi Jinping. His brother-in-law was named in the documents, along with other members of the Communist Party Politburo Standing Committee. Xi has been flexing his muscles more than any Chinese president in a generation, stifling dissent and reorganizing the armed forces. He has also been leading an unprecedented crackdown on corruption.
To discuss what the Panama Papers leak means for Chinese governance, I called Richard McGregor, an expert on China’s leadership apparatus, a visiting fellow at the Sigur Center at George Washington University, and the author of The Party: The Secret World of China’s Communist Rulers. We discussed how elites get rich in China, whether this latest scandal will be censored by authorities, and why President Xi has become so unpopular within the Communist Party. The conversation has been edited and condensed.
Chotiner: How have the revelations from the Panama Papers surprised you or confirmed your prior suspicions?
McGregor: It’s extremely interesting but not surprising. I think that—and this may be a rather tortured way of describing it—the previous revelations in the New York Times and Bloomberg about the wealth of top leaders was like an atom bomb. The stuff we have in the Panama Papers is like the radiation that inevitably follows. It is confirmation, in fascinating detail, of what we would expect.
It seems that if you become a high-ranking official in the Communist Party in China either you or your family become very rich, if you weren’t already.
That’s the sad truth. And it may not even be these Politburo members as individuals. It could be, but it could also be family members once removed or a number of times removed using your name and trading on it.
Can you explain how that works? It seems like you are saying that these guys are not themselves necessarily the ones enriching their families.
Yeah. A classic case of that is [former Premier] Wen Jiabao, whose wealth was chronicled in the New York Times. The wealth was mainly related to his wife and his son. His wife had been involved in the diamond-trading business in China. His son was in private equity. Did they have a family meeting, and did Wen say, “go for it”? Or did his wife and son effectively use their [husband and] father’s position as a form of access? It’s possible that it is just as much the latter as the former.
This leads to the larger question about the crackdown on corruption, led by the president. What do you think that crackdown is trying to accomplish?
There is no doubt that a lot of corrupt people are being caught and locked up, and there is no doubt that the campaign has gone much, much further than anyone anticipated. There are some people who would tell you that it is just political and that it is just based on factional politics. I think that is not true. It has attacked fiefdoms of power that spread, especially in the energy center, under Xi’s predecessor, Hu Jintao, who was a relatively weak leader. But it isn’t targeting people on a factional basis. These are people who amassed wealth and power in their own pursuit of power. I think it is also similar to investigations in the United States: Once you get one person, you get the next person down the line. But it’s also true that the core group of elite families—the so-called Red Princelings—don’t appear to have been touched. You can point to a political element there.
Do you think the president legitimately wants to make the country less corrupt, then?
Corruption is an existential threat. It used to be said that China was not like Indonesia under Suharto. In Indonesia under Suharto, corruption gnawed at the core, whereas in China, corruption, in theory, used to be everybody just getting a few percent. I think clearly it has become much much worse than that and heading toward Russian levels of kleptocracy. There was an argument that something really had to be done. I think Xi is popular amongst the people because of this, even though he isn’t popular among party officials.
Why isn’t he?
He is a much-hated figure among many officials because he basically has destroyed a whole bunch of rich families and their networks overnight. They are gone. I think he has hurt a lot of people. It may not be true that everyone is corrupt, but the system partially runs on corruption, and so everyone feels vulnerable. People thought they were doing what everyone else was doing.
Will the revelations in the Panama Papers reach a wide audience in China? I know news reports have been censored.
I don’t think so. A certain elite will know about it. The Chinese firewall is pretty good when they want it to be. And much like Putin does in Russia, this can always be spun as a conspiracy against China by the evil West. It isn’t a good thing for the party, but it won’t bring the whole show down.
You said former President Hu was a weak leader, and I guess the current president is the strongest leader since Deng Xiaoping?
Yeah, you could say that.
If he is hated within the party, how has he been able to be such a strong leader?
He’s become hated. He wasn’t like this when he started out. He did two things: He grabbed the reins of power much more quickly than Hu. He also decided to be a different type of leader. He thinks that to get anything done, you have to be dictatorial. If you try to have consensus-led leadership, like Hu did, you get nothing done. And if you get a hold of the right ministries, you have the power. People often forget that the anti-corruption campaign is a party campaign. The law is an afterthought. When you are arrested, it is just a few guys showing up at your office and taking you away. You have no rights at all. If you want to wield that power, you can. It is frightening if you are on the receiving end. It’s why he is both internally effective and unpopular.
It has often been rumored that Putin has hidden billions. Does one hear the same sorts of stories about Xi?
The New York Times provided pretty conclusive evidence that Xi’s family enriched itself. Since then, and this is according to reports in Hong Kong and Taiwan, he has called a number of family meetings and told family members to stop accumulating things and unwind what they have acquired. In theory, he did respond to these reports and try to get things under control.