The announcement that Zhou Yongkang, the once powerful domestic security tsar and a member of the Politburo Standing Committee, is a target of a corruption investigation has left China shell shocked, proving that no one is safe from President Xi Jinping’s anti-corruption purge.
It’s no exxaggeration Zhou’s downfall will reshape China’s political landscape and power structure among elite leaders. His case could also send quakes through several business sectors, both domestic and overseas.
Zhou used to control state oil giant China National Petroleum Corporation (CNPC). A number of CNPC executives and oil tycoons have now been detained for their connections with Zhou’s family, especially his son Zhou Bin. Last year chairman of CNPC supplier Sichuan Star Cable Co Ltd, Li Guangyuan, was implicated.
Investigations have also spread overseas. Two executives at CNPC’s Canadian operations have been detained recently, causing delayed payment of a billion-dollar oil sands project CNPC has purchased from Canadian firm Athabasca Oil Corp.
Zhou built his power base and business empire while serving as party secretary of southwest China’s Sichuan province. More than a dozen Sichuan mining and property tycoons affiliated with Zhou’s family or his allies have been investigated, detained, or tried. Liu Han, former chairman of Sichuan-based Hanlong Group, the largest shareholder of ASX-listed Moly Group and Sundance Resources, received a death sentence in March for gang crimes. It is now understood that Chinese authorities are closely investigating business dealings in Sichuan province during Zhou’s tenure.
Sources said more than 300 of Zhou’s relatives, allies and protégé have also been taken into custody or questioned, as authorities further go after the fortunes amassed by Zhou’s family, the case will implicate more oil firms and figures, and cause the ongoing anti-corruption campaign to escalate to a new level.
Many organizations, both foreign and domestic, are responding to the crackdown by heightening their legal and compliance efforts for their Chinese business dealings. This includes increased due diligence on business partners, suppliers and agents along with localized training on domestic Chinese compliance.
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You may also be interested to read our whitepaper – The Role Due Diligence of Due Diligence in Anti-Corruption Compliance.
Hui Zhi is the Senior Manager for Content with the China Compliance Digest.