Shanghai bans officials' relatives from running private businesses

Shanghai has banned the relatives of senior officials from running private businesses in the city in an attempt to curb rampant nepotism as China's anti-corruption campaign continues apace.

Under new rules, spouses of officials running city departments, state enterprises, district governments and courts are banned from owning or running private businesses anywhere in the country.

Officials' children and children-in-law are forbidden from registering businesses in the city or in any jurisdiction they oversee.

The regulations covering close relatives of officials are the strictest so far in China but do not appear to address some common abuses of power.

Many children or spouses of officials register businesses through a complex web of corporate structures that take advantage of proxy agents, fake names or fake identity cards in order to disguise their shareholdings.

Forbidding relatives of officials from private business would not have addressed most of the issues in Shanghai's most famous corruption scandal - the 2006 downfall of the city's powerful Communist party secretary, Chen Liangyu.

Chen's wife was a senior official at an opaque state-run charity organisation that real estate developers in the city knew to shower with lavish donations if they wanted to get parcels of prime land.

His son and wife were both given sinecures at state-owned enterprises as a way to funnel bribes to Chen in exchange for land parcels, government projects or illegal loans from the city's pension fund.

Chen was sentenced to 18 years in prison. Most political analysts say his corruption was not extraordinary in the Chinese context and his downfall was part of an internecine political struggle.

The new rules in Shanghai were first proposed in March by President Xi Jinping, who launched the current corruption crackdown when he ascended to the top of the Communist party in late 2012.

State media said this pilot project may eventually be rolled out to the whole country.

The rules require officials to disclose any jobs held by their spouses and children to party investigators but not to the public.

Regulations forbidding officials and spouses from doing business have supposedly been in place since 1985 but have been largely ignored.

The Shanghai government said anti-corruption authorities would conduct random checks on the family business disclosures of 20 per cent of officials each year.

The rules also explicitly ban spouses or children from being employed by foreign companies in China.

They did not mention any details about the business activities of siblings.

The New York Times and Bloomberg have both published detailed reports on the extensive shareholdings and business activities of Mr Xi's older sister Qi Qiaoqiao.

The extensive business activities of close relatives of many other senior Chinese officials are common knowledge in China or matters of public record.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation