Walter Hutchens’ Blog

Reuters reports that “Citigroup Suspends Two in China.” Margaret Ren (任克英), the daughter-in-law of Zhao Ziyang and another banker named Earl Yen have been “suspended” for giving false information to Citigroup and its regulators, according to the article which reflects an internal Citigroup memo. The story is also covered by the Financial Times here, Bloomberg here.

The Reuters story observes two related things. First, that “Fast-growing China has been the world’s hottest IPO market since late 2003, and is expected to generate about US$26 billion worth of overseas listings this year[.]” Second, “The ranks of top China investment bankers are dotted with the relatives of China’s ruling elite.”

Levin Zhu, son of former premier Zhu Rongyi, has been prominently involved in CICC, the China Construction Bank-Morgan Stanley joint venture.

I don’t know the full roster of princelings involved in investment banks doing PRC business. Such a list would have to include princelings working for PRC banks, foreign banks and PRC-foreign joint ventures. Also, the involvement of princelings in the securities sector would be a broader list, extending to listed companies and perhaps regulatory organizations.

Many investment bankers in China are I imagine not the children of top leaders, and outside China it is not unusual to find the children of elites entering investment banking. Indeed, I think overall markets (including but not limited to securities markets) are anit-hegemonic. In the long run developing securities markets in China should be politically positive. They could create sources of power outside the state. But especially in this transitional (I hope) period, these ties between the children of ruling families and the securities industry (”one family, two systems” as they say) suggest the embeddedness of the securities sector in the PRC political structure. This Citigroup story, like the recent stories about the firing of some Lucent China executives for corrupt activities, may also show the tension between “traditional” Chinese ways of doing business and the expectations of multi-national companies.