Common for foreign banks in China to hire princelings: Reports

Other than JP Morgan Chase, several other well-known banks are also said to be facing a probe by United States regulators for hiring these so-called "princelings". PHOTO: AFP

The practice of hiring the children and relatives of well-connected Chinese officials appears to be more prevalent in the banking sector, according to media reports.

Other than JP Morgan Chase, several other well-known banks are also said to be facing a probe by United States regulators for hiring these so-called "princelings".

Those cited by media reports include Goldman Sachs, Citigroup, Deutsche Bank, Morgan Stanley, Credit Suisse and UBS.

In February, HSBC confirmed in the footnote of its earning reports that it was being investigated for such hiring practices.

But unlike the JP Morgan expose, which listed names of specific persons related to current or former office holders, no other names were thrown up in the probe relating to the other banks.

  • Links in high places

  • •Mr Gao Jue, 33, son of Commerce Minister Gao Hucheng. The younger Mr Gao was hired by JP Morgan Chase in 2007, despite being described as the "worst candidate" by bank executives. He was eventually terminated in March 2009.

    •Ms Wen Ruchun, 43, otherwise known as Ms Lily Chang, is the daughter of former premier Wen Jiabao. From 2006 to 2008, the bank hired Ms Wen's consulting firm, Fullmark Consultants, to promote its standing in China. Her firm was paid a total of US$1.8 million for two years of service. The average pay of Hong Kong investment bankers then was US$250,000 a year, said the New York Times.

    •According to the Wall Street Journal, Chinese officials who have referred candidates to the bank included China Banking Regulatory Commission vice-chairman Guo Ligen, Minister of Public Security Guo Shengkun and People's Bank of China vice-governor Pan Gongsheng.

    •Chinese firms are also involved in referrals. Citic Group recommended three hires to the bank. Two 2010 trainees were referred by Mr Liu Lefei, son of China's propaganda chief Liu Yunshan. The younger Mr Liu heads a private equity fund affiliated to Citic.

Such dubious hiring practices also extend beyond the banking sector.

In March, Qualcomm, a US-based semiconductor and telecommunications equipment company, was slapped with a US$7.5 million (S$10.7 million) fine for hiring relatives of Chinese officials in exchange for business between 2002 and 2012.

The firm was deemed to have violated US anti-bribery laws, said the US Securities and Exchange Commission (SEC).

According to Reuters, the regulator said the Chinese officials related to new hires by Qualcomm were in a position to decide whether to buy mobile technology products from the firm. Some of these princelings also did not meet hiring standards.

Hong Kong-based political analyst Joseph Cheng said offering jobs to such princelings is the best way for firms wanting to do business with China to build ties that could get doors opened.

"This is exactly the kind of favours most sought after by the political and economic elites in China," he said.

Given that it is very common for these elites to send their children to the best schools abroad, the natural next step is to get internships or jobs at top investment banks or multinationals in the US.

"Then they will have the perfect CV (curriculum vitae)... to move into important positions in the banks or state-owned enterprises (in China)," Dr Cheng added.

Besides offering jobs, it is also common for multinationals to partner powerful princelings in order to break into tightly protected sectors.

The New York Times reported that Hollywood studio DreamWorks Animation had in 2012 entered the Chinese film market by partnering former Chinese president Jiang Zemin's son, Mr Jiang Mianheng.

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A version of this article appeared in the print edition of The Straits Times on November 19, 2016, with the headline Common for foreign banks in China to hire princelings: Reports. Subscribe