Rise of the Princelings
Foreign investment in China remains limited, at best. In many ways, it’s a state-controlled economy, with the gateways of investment in the hands of government officials. This makes it especially difficult for outsiders to invest in areas such as finance, or our personal favorite at Oil & Energy Daily – the energy sector.
Enter the Chinese Princelings.
A Princeling in China is the son or daughter of a high-ranking government official. They’re someone who has influence, as well as the potential to get would-be investors into deals they wouldn’t normally be able to access (due to government restrictions). They’re also very active in the private equity sector, raising billions in capital for investment.
Take Liu Lefei, for example. He’s the son of Liu Yunshan, prominent leader in the Communist Party of China. Liu Lefei is the head of CITIC Private Equity Funds Management, which has raised over $5.1 billion in investment capital.
Or Alvin Jiang, the grandson of former president, Jiang Zemin, who co-founded Boyu Capital at the age of 25. At the beginning of January 2014, Boyu Capital just finished raising $1.5 billion for its second China-focused fund, which is impressive considering similar Chinese-centric funds drew the lowest amount of money in 2013 than they have in four years.
Perhaps the best example of Princeling privilege in young Alvin’s case is Boyu Capital’s 2011 purchase of a 40% stake in Sunrise Duty Free, which runs all of the duty-free stores at Shanghai and Beijing’s international airports. Investors felt this deal proved that Alvin, due to his family connections, could get access to strictly controlled state sectors.
In a controlled economy environment such as China, Princelings like Liu Lefei and Alvin Jiang are directly connected to the gatekeepers. While it’s difficult to prove whether or not either of these Princelings used their connections, that hasn’t stopped the belief that Princelings are doing just that – especially in China – where work and family have always been closely intertwined.