In November 2018, Peter Navarro, the White House trade adviser who at the time was intimately involved in President Donald Trump’s trade war with Beijing, launched a scathing attack on what he called the “globalist billionaires” of Wall Street.
He accused the “self-appointed group of Wall Street bankers and hedge fund managers” of engaging in their own “shuttle diplomacy” with the Chinese side and attempting to sabotage U.S. trade negotiations by putting enormous pressure on the White House to give way to Beijing. Navarro further accused the financial elite of being “unregistered foreign agents” acting as part of Beijing’s influence operations in Washington.
It was strong stuff, but was there any foundation to it?
The titans of U.S. finance have for decades been guiding the nation’s China policy. Whenever presidents Clinton, Bush, or Obama threatened to take a tougher stance on China’s trade protectionism, currency manipulation, or technology theft, Wall Street chiefs used their influence to persuade them to back off. And it was pressure from Wall Street that proved decisive in the Clinton White House’s decision to support China’s admission to the World Trade Organization, despite China’s serial violation of trade rules.
Financial institutions have been Beijing’s most powerful advocates in Washington.
The finance sector—the big banks, hedge funds, and investment vehicles—is thus in the center of the map of power in the United States, and occupying pride of place is Goldman Sachs. No organization has been more important to the Chinese Communist Party’s (CCP) campaign to penetrate U.S. elites, or more willing. For the CCP, titans of finance are easy targets, as there’s a concordance of interests. Wall Street executives, anticipating an Eldorado when Beijing opens up its vast finance markets to foreigners, have been advising Chinese companies about which American companies to buy and lending them the money to do it, taking a cut from the sales. In the words of a senior White House official, “people who like making deals really like the Chinese Communist Party.”
The CCP is pushing on an open door. But the alignment of interests may not be long term, as it’s Beijing’s intention to eventually make Shanghai the financial capital of the world, displacing New York and the City of London. As Lenin reputedly said: “The capitalists will sell us the rope with which we will hang them.”
By 2003, Goldman Sachs “had become the lead underwriter for major Chinese state-owned companies.” In 2006, Henry Paulson moved from CEO of Goldman Sachs to Treasury secretary under George W. Bush, taking with him one of the best contact books on the Chinese elite. Paulson had visited the country some 70 times. He asked the president if he could take charge of America’s China economic policy and Bush agreed.
But Paulson, in the judgment of author and journalist Paul Blustein writing in Foreign Policy, screwed up.
The Princelings of Wall Street
The CCP has not been content to rely solely on a concordance of interests between Beijing and big finance in the West. Another important avenue of influence is the princelings—the sons and daughters of top Party leaders past and present. For years, the giant state-owned investment company CITIC has been dominated by princelings, as has China Poly Group, the conglomerate built around arms manufacturing. China’s burgeoning private equity sector is controlled by the “red aristocracy” and their children.For Western hedge funds, insurance companies, pension funds, and banks, a prerequisite for doing business in the emerging, highly lucrative Chinese capital markets is a network of connections to the families that control the largest companies and dominate the Party hierarchy. Giving jobs to the sons, daughters, nephews, and nieces of these families brings immediate guanxi, or personal networks for reciprocal benefit. The offspring need not be well qualified or even especially bright; it’s their connections that count. An ideal career path for a princeling is an undergraduate degree at a prestigious university, preferably an Ivy League college or Oxbridge, then straight onto the trading floor of a big bank or hedge fund in New York or London and after a few years there, an MBA and then a Wall Street firm.
One was Gao Jue, the son of China’s commerce minister, Gao Hucheng. A recent graduate of Purdue University, Gao Jue landed a job after a meeting between his father and senior JPMorgan executive William Daley. (Daley was a U.S. Commerce secretary under Bill Clinton and pushed for China’s entry into the WTO. He later served as President Obama’s chief of staff.)
Gao Jue interviewed poorly but was offered a coveted analyst position with the bank. Prone to falling asleep at work, he was soon judged to be an “immature, irresponsible and unreliable” employee. When, as part of a general downsizing, the bank later wanted to lay him off, his father took the head of the bank’s Hong Kong office, Fang Fang, to dinner and pleaded for his son to be kept on, promising to “go extra miles” for JPMorgan in its China deals. Fang was persuaded and a senior executive in New York agreed to keep Gao Jue on, even though the executive’s own son had been laid off. Business is business. When Gao Jue was eventually let go, he took other finance jobs before winding up at Goldman Sachs.
There are, of course, many mainland Chinese working in U.S. finance who are highly competent and deserve their positions, often very senior ones. Fang is one example. He graduated from the prestigious Tsinghua University in the 1980s and then studied for an MBA at Vanderbilt University in Nashville. In 1993, he took a job at Merrill Lynch, working in New York and Hong Kong, and in 2001, he began a 13-year career with JPMorgan, rising to the position of chief executive for China investment banking, based in Hong Kong. In that time, he brokered the appointment of many sons and daughters to positions within the bank. He also gained intimate knowledge of the personal finances of some of China’s ruling elite. The New York Times described Fang as having a “deep network of contacts in Chinese government and business circles.”
While not CCP royalty, Fang is on very close terms with the red aristocracy. Fortune describes him as “a media-friendly executive with close ties to the Communist Party.” In 2011, he founded the Hua Jing Society in Hong Kong, a social club for the children of mainland elites who had studied abroad and returned to Hong Kong. The society has been described as the Princelings’ Club and the Hong Kong branch for CCP princelings.
For the CCP elite, entanglement with the masters of Wall Street through the placement of scores of princelings serves a more important purpose than employment for their kids. It is a means of gathering intelligence and exerting influence because it places its informants and agents in the heart of American power.
The entire workings of a U.S. firm may be sent back to a father or an uncle in China, along with confidential information on the personal and financial affairs of the wealthiest people in North America.
