A property company controlled by a niece of former Chinese Vice President Zeng Qinghong is sinking deeper in default as the power struggle between Zeng (above, left) and Chinese President Xi Jinping intensifies.
The rivalry between Xi and his adversaries is heating up in the run-up to the sixth plenum of the Communist Party of China (CPC) to be held in Beijing from November 8 to 11. It has grown so serious that Xi apparently declined the invitation to attend the Glasgow Climate Summit, the year’s most important such international climate conference, from October 31 to November 12, as he can’t afford to be absent from the country in the leadup to the 6th Plenum out of fear of a possible leadership challenge, sources say.
At the plenum, a “historic resolution” is expected to be passed which would boost Xi’s power, as a step to giving himself a further term at the “Two Sessions” in March next year. If Xi succeeds in prolonging his presidency, he will break the two-term limit set on Chinese presidents by the late Chinese leader Deng Xiaoping after the excesses of the Maoist era.
“More evidence has emerged of a ferocious power struggle between China’s supreme leader, President Xi Jinping and powerful factions and personages including former Vice-President Zeng Qinghong and current Vice President Wang Qishan,” wrote Willy Wo-Lap Lam, a senior fellow of the Jamestown Foundation, on the US think tank’s website on October 14.
“Even more obvious is the power struggle between Xi and former PBSC (Politburo Standing Committee) member and Vice President Zeng Qinghong. Zeng, a princeling and close aide of former president Jiang Zemin, is also a major leader of the so-called Shanghai Faction. Zeng is believed to be the “protection umbrella” behind several multi-billion enterprises. One of these enterprises, Fantasia Holdings which is headed by his niece Zeng Baobao,” Lam added.Zeng Baobao, also known as Baby Zeng Jie, is the founder and controlling shareholder of Fantasia, a Hong Kong-listed property developer.
On October 26, Fantasia announced its property management subsidiary, Colour Life Services Group, had defaulted on a RMB700 million (US$110 million) loan from Country Garden, a large Hong Kong-listed property developer. As a result, Country Garden enforced the terms of the loan by acquiring a subsidiary of Colour Life, Link Joy Holdings, tentatively for RMB2.6 billion instead of an earlier-agreed RMB3.3 billion.
The Hong Kong share price of Colour Life plunged 35.6 percent to HK$1.63 on October 27, after being suspended from September 29 to October 26. Fantasia’s shares remain suspended since September 29.
On October 4, Fantasia announced it defaulted on US$500 million of US dollar offshore bonds.
On October 7, Baby Zeng made a post on Weibo, a Chinese social media platform, which said, “Specialized matters should be handled by specialists, the ass decides for the brain, it will be given to the most stable ass, as for the other discourses, thanks and don’t worry. Keep calm, think hard, pay attention.”
The original Chinese post is, “专业的事交给专业人，屁股决定脑袋的决策，交给屁股坐得最定的那个，其他七嘴八舌，致谢不虑。心稳、思沉、专注”.
“Zeng’s subtle comments seemed to be targeted at Xi, who has been putting pressure on a host of real estate and technology companies, some of which have been nationalized,” wrote Lam.
In China, local governments are taking over parts of the operations of China Evergrande Group, one of the largest Chinese property developers, reported Caixin on September 27. The Hong Kong-listed firm is teetering on the verge of default with US$300 billion of debt, making it the world’s most indebted property company.
Evergrande’s woes are wreaking collateral damage in China’s real estate sector, contributing to recent defaults of Hong Kong-listed property companies like Colour Life, Fantasia and Modern Land. In the worst-case scenario, the liquidity of a third of the Chinese property developers rated by S&P Global Ratings “may be acutely strained,” according to a report of the international rating agency on October 27.
“There are signs of increasing tensions within the different factions of the CPC (Communist Party of China), with Zeng Qinghong in one group,” Andre Wheeler, chief executive officer of Asia Pacific Connex, an Australian consulting firm, told Asia Sentinel. “The CPC are trying to downplay this tension, particularly as they are now saying that the review of Xi Jinping’s leadership is normal at these “events, but the fact that Xi is not going to Glasgow suggests it is not business as usual.
“There also appear to be social cracks emerging in Beijing, with social media questioning Xi’s handling of the real estate crisis (Evergrande), zero-carbon push and the impact it will have on production, jobs and basic heating,” Wheeler added.
The Chinese president is under increasing internal pressure as resistance grows amid China’s economic slowdown, the failure of some Chinese officials’ aggressive “wolf warrior” diplomacy and the associated increased international isolation of China, Wheeler explained.
Probably, fears for his safety are part of the reason that Xi is cracking down on the Ministry of Public Security, said a source linked to Chinese officials.
Asia Sentinel reported on October 2 that Xi indirectly admitted he was locked in a power struggle with the Shanghai Faction headed by Jiang, through charges announced against Sun Lijun, a former Public Security vice minister and a Jiang ally.
Several days ago, a meeting was convened at the Ministry of Public Security in Beijing to “eradicate the poisonous influence of Sun Lijun and others,” the ministry announced on its website.
At that meeting, it was announced that Sun and others “severely damaged the unity of the Chinese Communist Party and seriously endangered the political security of the party and nation.” With that statement, the Public Security Ministry effectively admitted the party is divided and that a cabal of Chinese officials, not just Sun, is plotting against Xi.
The meeting called for a thorough investigation of “people and matters involved in the serious crimes of Sun and others” and the cautionary education of the entire police force on the lessons of Sun and others. Thus, the Public Security Ministry acknowledged there remain rebels still at large within its ranks and it is trying to root them out.
The Zeng family is facing pressure from Xi in another sector, the entertainment industry. Baby Zeng’s father is Zeng Qinghuai, a brother of the former Vice President. Thanks to his previous position as the Hong Kong-based special commissioner of China’s Ministry of Culture, Zeng Qinghuai is well connected in entertainment circles in Hong Kong and the mainland. He knows Chinese movie stars like Vicki Zhao Wei. As a sign of official displeasure, all mention of Zhao was expunged from China’s internet system in August. At least 25 Chinese artistes including Zhao are on the Chinese government’s blacklist, according to media reports.This article is among the stories we choose to make widely available. If you wish to get the full Asia Sentinel experience and access more exclusive content, please do subscribe to us.