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China's Poly Group: The most important company you've never heard of

Is it an art auctioneer, a miner, an arms dealer, a front for the army? Probably all of the above.

Norinco chinese missiles displayEnlarge
Men sit by a display of missiles models from Chinese manufacturer Norinco Group on the eve of the ninth China International Aviation and Aerospace Exhibition in Zhuhai on Nov. 12, 2012. (Philippe Lopez/AFP/Getty Images)

Editor's note: This is part of GlobalPost's two-part series about China's Poly Group. See Part 1 about Poly's powerful art auction house.

TAIPEI, Taiwan — Picture the China Poly Group Corporation as the first of a set of Russian nesting dolls.

Each of the larger wooden baubles represents a new line of diverse subsidiaries that shield its cloistered, princeling-controlled core.

China Poly Group Corporation is the parent of hundreds of subsidiaries — the exact number is a closely guarded secret. It has construction, real estate, resource extraction, fishing, military and entertainment firms. It also owns the world’s No. 3 art auction house.

It would be easy to describe the Beijing-based conglomerate as a bellwether firm in China’s state-dominated economic landscape. Its arms exports to troubled spots such as Myanmar or Zimbabwe make way for resource extraction projects for Chinese-owned firms. Its supremacy in Chinese cultural industries provides Beijing with an arm to export its “soft power” narrative overseas. 

On the surface it looks like a state-run outfit that checks off all of Beijing’s political, corporate and military boxes. But that masks the fractious relationships within the cliques that make up the country’s ruling elite. Analysts say the reality is Poly’s one cog in a machine run by powerful vested interests that are often in direct competition with each other. 

On any given day, observers say, Poly might ship arms to Zimbabwe or Sudan, announce plans to build a highway from Iraq to Syria or win China distribution rights for Ferrari or Maserati. The next day, it might hold a public offering on the Nasdaq for a movie distributor, win a lengthy exclusive fishing rights deal for Mauritius’ economic waters, be accused of bribing a former Namibian defense minister or get linked to missile sales to Iran or Saudi Arabia.

But, until recently, it was mainly known for Poly Technologies, China’s biggest arms exporter.

“Poly Tech has been on Amnesty [International]’s radar for a long time because of their arms shipments to conflict zones, especially Africa. There’s been an effort to shine a spotlight on Poly’s failure to apply any kind of international human rights standards to their exports of weapons,” says Frank Jannuzi, head of rights group Amnesty International’s Washington office and former Senate Foreign Relations Committee’s policy director for East Asian and Pacific Affairs.

“Skepticism about the Chinese to regulate their own arms trade is well founded when you have a company like Poly that is so diversified and has such strong connections, or ‘guangxi,’ with the Chinese leadership,” Jannuzi added.

Poly Group started in 1983 as a subsidiary of China International Trust and Investment Corporation (CITIC), a state-owned investment company. Set up at the behest of Deng Xiaoping in 1979, CITIC soon became one of China’s most influential financial and industrial conglomerates.

A 1997 report by Rand Corporation, a global policy think tank, called the investment firm “a front company for the PLA” (the Chinese People’s Liberation Army) and chastised Poly for illegally importing 2,000 AK-47 assault rifles into the US in 1996.

Deng installed Wang Jun, the son of a revolutionary elder, as head of both CITIC and Poly Group. Wang’s other claim to fame was a "Chinagate” subject, when it emerged the US Democratic Party had arranged for him to attend a coffee meeting at the White House in 1996 with former President Bill Clinton. 

Deng’s son-in-law, He Ping, a former army major general, was made president of Poly, and is still listed as honorary chairman of the company, which is top-heavy with former high-ranking PLA officers or the relatives and allies of Deng.

Business was good until former President Jiang Zemin became so concerned about rampant corruption within the army that he ordered the divestment of their business interests in 1998. 

Today, the state-owned Assets Supervision and Administration Commission of the State Council is supposed to control Poly, like all other state-owned enterprises, but observers say the move was largely cosmetic and the company is still run by former PLA officers and their relatives.

http://www.globalpost.com/dispatch/news/regions/asia-pacific/china/130218/chinese-poly-group-corporation-arms-military-economy