Princes of privatisation reign
JASPER BECKER
They are now calling Jiang Mianheng, the eldest son of Jiang Zemin, ''China's digital princeling''.
The 48-year-old, US-educated engineer has emerged both as the chief beneficiary of the break-up of China Telecom and his father's most important aide in fulfilling his vision of turning China into a hi-tech giant.
Jiang junior was brought from Shanghai, where he successfully masterminded the deregulation of the local telecoms market, to Beijing to become vice-president of the Chinese Academy of Sciences. There he has been busy drawing up plans to help China leapfrog to the front of the pack in the hi-tech stakes.
Now Beijing is swirling with rumours that China's top princeling will be promoted into the Central Committee at the autumn Party Congress, thus transforming the technocrat into a politician.
The future of all the princelings is at stake as the jockeying for position intensifies ahead of the 16th Party Congress, where many of the present generation of leaders will retire.
The media is forbidden to draw attention to Jiang Mianheng's activities but the activities of other princelings are coming under the spotlight as the power struggle turns vicious.
Securities Weekly is in trouble after attacking the role of Li Xiaopeng, the eldest son of National People's Congress Chairman Li Peng, who is the president and chairman of the nation's largest independent electricity producer, Huaneng Power International.
Last year, another journalist was imprisoned after voicing corruption allegations about Bo Xilai, mayor of Shenyang and son of veteran Bo Yibo.
The children of Premier Zhu Rongji, Vice-President Hu Jintao and many others are also vulnerable to smear campaigns arising from high-level power struggles because of their involvement in privatisation efforts.
There is an underlying disgust among party members at the way socialist princelings are taking the leading role in the privatisation of state assets.
President Jiang's family rules the telecoms sector, while Li Peng's family is deeply involved in the deregulation and privatisation of the power sector. Energy conglomerate Huaneng Corporation was one of the first to list in New York and more listings of power companies are being prepared as the state power generation and distribution monopoly is broken up into competing regional companies.
Mr Zhu's son, Levin Zhu Yunlai, works for Morgan Stanley, and Mr Hu's daughter was hired by JP Morgan, both global financial services firms. The big American financial houses are competing fiercely with each other to advise on and underwrite the selling off of the crown jewels of the Chinese state sector.
These foreign investment bankers are also plunging into the still riskier business of disposing of the rest of the state sector, the vast pile of non-performing loans and bankrupt state companies.
One of the first acts of President Jiang after he came to power in 1989 was to issue an edict banning the children of high-ranking leaders from going into business.
In the 1980s, protesting students and their supporters were infuriated by the way in which the princelings were exploiting their fathers' influence to buy cheap raw materials from the state and sell them at high prices in the free market.
What has since happened is far more profound. Now the princelings are getting rich by selling off publicly owned state property. Hitherto, most of this privatisation has been in ''sunset industries'' - industries that have little future such as coal, steel or textiles - but last year saw strategic battles fought about the ''sunrise'' industries - telecoms, micro-electronics and the media.
It is here that President Jiang is going to leave his deepest mark on China. Last year saw him strengthen his grip on this key sector and smash the deep-rooted bureaucratic opposition to privatisation led by Minister of Information Industry Wu Jichuan.
Mr Wu fought tooth and nail to stop President Jiang from breaking up China Telecom and throwing the protected industry open to foreign investment. He even threatened to resign if China allowed foreigners to own up to 49 per cent of telecom companies under the World Trade Organisation deal.
Mr Wu wanted to keep the telecoms industry developing as a giant monopoly under the tight control of the state, much the way Malaysia, South Korea, Singapore and Japan have done. He argued that China's telecoms sector had witnessed enough explosive growth without competition, and had avoided duplicate investments.
But President Jiang has been obsessed with how America has emerged the victor in the technology wars with Japan. Eighteen months ago, he enthused to Morgan Stanley chief economist Stephen Roach and others about how the US technology stock market, the Nasdaq, despite its inflated prices, was the epitome of all that was great about American business.
''He worships technology. It is like a new religion,'' says one industry observer.
Much of Mr Jiang's enthusiasm for competition the American way is also a reflection of his disappointment in the poor results from decades of government-funded research programmes in areas such as the design and production of memory and logic semi-conductors.
During October's Asia Pacific Economic Co-operation forum meeting in Shanghai, Mr Jiang, Mianheng and Mr Jiang's grandchildren spent most of a day talking to Microsoft chairman Bill Gates, largely about his vision of the wired economy and preventing the so-called digital divide. The Jiangs want to see all China wired as quickly as possible.
Mr Jiang is noted for devoting much time talking to other Nasdaq heroes, who reciprocate the admiration.
President Jiang and his son are not only forging personal ties with the world's top tycoons but also pushing China to copy America's creative chaos. Across the Pacific, all sorts of companies and technologies are fighting for a future as sectors like entertainment, media, cable, the Internet and fixed and mobile phone industries converge and overlap.
In September, President Jiang made a decisive move. He ordered Premier Zhu to run a new supra-ministerial Information Management Commission that has split China Telecom into two and bulldozed aside those protecting their ministry's fiefdoms or promoting protectionist policies. Beijing announced this week the industry would be split into four competing telecoms giants.
Observers are unsure whether Mianheng is his father's disciple or his guru in shaping the future of a sector that is estimated to grow to account for seven per cent of GDP.
China Netcom, the company which Mianheng founded in 1999, is to take charge of the new company controlling north China's fixed-line network.
The newly merged company which will also control the broadband, fibre-optic cables Netcom is laying along China's railways is set to be listed this year. Rival merchant banks are battling with Morgan Stanley, the favourite, to win perhaps the most lucrative prize of the year.
To placate the vested bureaucratic interests, the management of the new company is to be drawn from China Telecom, not the youngsters who ran Netcom; but insiders say Mianheng is bound to remain in charge.
Mianheng is therefore increasingly being treated as if he were a tycoon in his own right. Although his influence may last only as long as his father remains in power, and it is not clear what the Jiang family actually owns, others like media giants the Murdochs are committed to forging family alliances with the Jiang clan.
Star Television chairman James Murdoch, the son of media tycoon Rupert, was an early investor in Mianheng's Netcom. Another example is Taiwan's Wang Yung-ching, of Formosa Plastics, whose son Winston Wang went into business with Mianheng to establish a chip plant in Shanghai.
Despite their openness to foreign ideas, technology and cash, both Jiangs sound as stridently nationalist as Wu Jichuan.
Mianheng has warned against America's ''cyber imperialism'' and stressed the need to build up a great Chinese firewall. He is trying to break Microsoft's stranglehold by setting up a company, Red Flag, to make rival Linux-based software a standard item on Chinese-made computers.
President Jiang believes China's security cannot be assured if it relies on US software and US-designed chips.
Mianheng is believed to be spearheading efforts to boost domestic chip production to supply half the country's needs by 2010.
President Jiang, who like his son is an electronics engineer, has largely surrounded himself with other engineers. The Jiangs are keener on acquiring hardware than sponsoring the creativeness needed to provide content for the communications revolution.
As Rupert Murdoch is aware, vast changes in China's weak media and entertainment industry have yet to begin.
china.scmp.com |
