National Post (National Edition)
ICONS & ARM -
CHINESE STATE-OWNED ENTERPRISE DOGGED BY QUESTIONS OF TRANSPARENCY
Last November, FOUR ICONS that once adorned the SUMMER PALACE in Beijing — looted by British and French forces in 1860 — were put on display at an ART GALLERY. It was a world SCOOP FOR VANCOUVER. But behind the icons lies CHINA POLY GROUP, a sprawling enterprise that includes arms dealing.
One evening in downtown Vancouver last November, some of B.C.’s political and business elite rubbed elbows with executives of one of China’s largest state-owned enterprises, China Poly Group.
They were celebrating the launch of a boutique art gallery by one of China Poly’s many subsidiaries, Poly Culture Group, which operates the third-largest auction house in the world.
Under the watchful eye of Vancouver police in tactical gear, attendees admired four rare bronze zodiac heads — a tiger, monkey, ox and pig — that had once adorned the Summer Palace in Beijing. It was the first time these cultural relics — looted following the palace’s destruction by British and French forces in 1860 — had been displayed outside China since their repatriation.
The opening of a gallery and North American headquarters here by Poly Culture was the culmination of intense behind-the-scenes courting by local politicians — especially Liberal MLA Teresa Wat, then B.C.’s international trade minister — and was hailed as a “significant day for British Columbia in its relationship with China.”
But art is only one small part of the opaque Chinese enterprise. For years, media reports, security experts and human rights watchers, have tried to connect the dots between its many divisions, its powerful Chinese connections and its arms dealings in conflict zones around the world.
Some observers, such as Derek Scissors, a China expert with American Enterprise Institute, a conservative think tank in Washington, D.C., suggest that China Poly Group is basically a front for the People’s Liberation Army.
“Do (China Poly Group) have a lot of non-military businesses? Yes. But they are still connected to the People’s Liberation Army. That is fact,” he said in an interview with Postmedia.
At a time of heightened sensitivity about foreign investments, questions abound about the long-term plans by Poly Culture. Why does a Chinese company with deep military roots and controversial past have an arts arm? And what is it doing in Vancouver?
“If you look at what they do, there is no reason to think they would know how to do art,” Scissors said.
WHO IS CHINA POLY GROUP?
Founded in the early 1990s, China Poly Group boasts $95 billion in assets, according to Fortune magazine, and 76,000 employees in 100 countries. It operates in many industries, including arms and explosives, real estate development, infrastructure building, resource extraction — as well as arts and culture.
The company’s opaque organizational structure has led to questions about how its different entities relate to each other, and who’s in charge. A 2013 New York Times article said China experts were not sure “how Poly functions as a corporation, how power is shared internally, to whom its executives are really accountable or how its revenues and benefits are distributed.”
“Poly isn’t particularly large by centrally controlled standards, which have three of the top 10 firms in the world. They don’t seem to be very specialized in anything and that makes a lot of people suspicious that this is essentially another PLA-front company,” Scissors said in a 2013 Public Radio International report, which was circulated among Canadian officials tasked with reviewing Poly Culture’s background in 2016. In the 2013 report, Scissors explained that Poly’s often go-it-alone approach and reluctance to answer to officials on the ground is “completely normal” for Chinese SOEs with powerful connections. “What’s interesting about Poly is that (state assets watchdog) SASAC has been pushing companies to stop investing overseas in non-core businesses, but it’s still allowed to be heavily involved in a series of these fad industries.”
In the mid-1990s, its arms division, Poly Technologies, was investigated in connection with an international weapons-smuggling case in the United States. In 2013, the U.S. government sanctioned the division, alleging it violated sections of the Iran, North Korea and Syria Nonproliferation Act. The United States ended its sanctions against Poly Technologies in 2015.
The company has been in the headlines again more recently in connection to the high-profile disappearance of a Chinese billionaire Xiao Jianhua, who has Canadian citizenship.
In January, Xiao was abducted by Chinese police from a Hong Kong hotel. He has not been seen or heard from since.
In April, the Wall Street Journal reported that firms linked to the “formidable arms-trading conglomerate, China Poly Group Corp., executed at least three recent transactions involving the billionaire.”
And in late July, the South China Morning Post reported that Xiao was involved in a multi-billion-dollar investment in 2016 that was routed through a number of companies, including Cayman Island-registered Pohua JT. That company is 32 per cent owned by Poly Longma, a unit of China Poly Group, the Morning Post reported, and “the remainder of Pohua JT is linked to Xiao.”
Global Affairs Canada officials said they are monitoring Xiao’s case.
THE COURTSHIP BEGINS
Richard Fadden, director of the Canadian Security Intelligence Service from 2009 to 2013, cautioned in an email that “more due diligence is warranted” when doing business with Chinese firms.
Without referring specifically to China Poly Group, Fadden said: “Canadians generally, including all governments and the private sector, should treat our relations with China and Chinese companies differently than we do with companies from other countries.”
Hundreds of provincial and Canadian government records obtained by Postmedia through freedom-ofinformation requests show some Canadian officials were alerted last year to a media report highlighting accusations that China Poly has “earned a reputation for bending the rules” and “providing arms to despots.”
Yet, as Poly Culture finalized its plans to set up in Vancouver, officials did not appear to give any pause.
Records show China Poly Group’s path to B.C. started in 2014 when Wat met with Poly Culture’s general manager, Jiang Yingchun, in a meeting “facilitated by Bank of China in Vancouver.”
In early 2015, Poly Culture registered as a business in B.C. and eventually set up a temporary headquarters in Richmond, in the same office building and on the same floor as Wat’s constituency office.
During a spring 2015 trade mission to China, Wat visited the Poly Art Museum in Shenzhen. In November of that year, Wat and thenpremier Christy Clark visited China Poly Group’s Beijing headquarters — a 110-metre skyscraper featuring an enormous glass-curtain wall and triangular footprint.
A 2013 New York Times article highlighted the novel fact that visitors to Poly’s imposing tower could “shop for a painting on the third floor or a missile system on the 27th.” Clark and Wat’s visit did not include the 27th floor, according to their itinerary.
It did, however, culminate with a visit to the 29th floor ceremony room to witness the signing of a memorandum of understanding between Poly Culture and HQ Vancouver, the provincially and federally funded office that has played a role in bringing several Chinese companies to Vancouver.
In an emailed response to detailed questions posed about China Poly Group’s background and her role in the deal process Wat said: “In my capacity as B.C.’s minister of international trade, I regularly met with local and international corporations. … Poly Culture Group is one of the numerous corporations that I had meetings and conversations with as part of these efforts.”
Clark, who had also met Chairman Xu in Beijing in 2015, did not respond to requests, either while she was premier or after, for an interview about China Poly Group.
CHAIRMAN AND THE GENERAL
China Poly Group’s roots can be traced directly to Deng Xiaoping, the Communist leader of China from the late 1970s through the 1990s, who is credited with reforms that ignited an unprecedented wealth boom in the country.
Deng’s son-in-law, He Ping, a former army general, was made general manager of China Poly Group when it formed in 1992. Today, he serves as honorary chairman and in corporate photos, he can be seen next to the current chairman, Xu Niansha.
A former Chinese navy captain and real estate developer, Xu is also a member of the foreign affairs committee of China’s top political advisory body, the National Committee of the Chinese People’s Political Consultative Conference.
Slogans and symbolic images feature prominently on China Poly Group’s website. One poster shows a red ribbon flowing past a ship’s wheel towards a large hand that is placing black and white circular pieces onto different parts of the globe. It’s a depiction of Go, an ancient Chinese strategy game in which the goal is to acquire land and surround your opponent’s territorial markers with your own.
Another section of China Poly Group’s website features articles designed to draw inspiration from the Red Army’s famous “Long March” in the 1930s.
China Poly Group and Poly Culture appear eager to help the Chinese state achieve its expansive One Belt, One Road project, company documents indicate. Announced in 2013 by China’s president, Xi Jinping, the plan aims to connect China with Asia, Africa, the Middle East and Europe through roads, shipping lanes, pipelines and other large infrastructure projects — all in an effort, some analysts suggest, to extend China’s reach as a dominant global power.
A Poly Culture investor report says that one month before the company’s new Vancouver gallery was opened, in October 2016, Xu Niansha visited Poland with a Poly theatre executive to explore cultural projects in response to China’s “national construction policy of One Belt One Road.”
Before making its move to Canada, Poly Culture went public on the Hong Kong Stock Exchange in 2014. The company prospectus emphasized a “clear delineation” between it and other China Poly Group companies. It also noted that Poly Technologies had withdrawn its 32 per cent stake in the company.
CORPORATE PLANS
Representatives of Poly Culture North America did not respond to written questions to discuss its current and future plans in Canada, citing the need to obtain approval from the parent company in Beijing. But earlier in the year, they told Postmedia they looked forward to contributing to economic development and cultural prosperity between Canada and China.
Poly Culture will always abide by laws and “uphold Canada’s high standards of business practices,” they said.
Briefing notes show that if a reporter were to ask Wat about China Poly Group’s defence activities, she was advised to say its entry into the B.C. market was “exclusively” for arts and culture purposes. But other records obtained by Postmedia showed Poly Culture’s mandate in B.C. includes “scoping out” investment opportunities and potential real estate deals.
POLY ISN’T PARTICULARLY LARGE BY CENTRALLY CONTROLLED STANDARDS, WHICH HAVE THREE OF THE TOP 10 FIRMS IN THE WORLD. THEY DON’T SEEM TO BE VERY SPECIALIZED IN ANYTHING AND THAT MAKES A LOT OF PEOPLE SUSPICIOUS ... — DEREK SCISSORS, CHINA EXPERT
Greg D’Avignon, CEO of the B.C. Business Council, for instance, described the company this way in a lunch invitation to local business leaders and China Poly Group executives: “As the only corporation set up by Poly Group in North America, Poly Culture North America will also help Poly Group expand and develop its business, including culture and arts business, real estate development, and other possible industries across North America.”
In fact, documents show that another China Poly Group subsidiary, Poly Real Estate, sent a small delegation to B.C. in spring 2016 to meet Wat.
An April 10, 2016, email says three Poly Real Estate delegates were seeking Canadian visas for the visit, and that the China Poly Group Chairman, Xu Niansha, and the Poly Culture CEO, Jiang Yingchun, were “already there.”
“According to the agenda, the delegation will be meeting minister Teresa Wat for dinner, and make a few site visits to ***,” the email says.
The fact that China Poly Group’s real estate arm was sending representatives to B.C. at the same time its cultural arm was finalizing a deal there seems to align with the company’s investment strategies.
Poly Culture’s 2016 annual report touts the term “cultural real estate.” “For (China) Poly Group, it is always dedicated to the merger between real estate and culture,” the report says, noting that the addition of a cultural property, such as a theatre, to an area can enhance the commercial value of nearby real estate.
The company did that in Australia, establishing a huge footprint in Sydney and Melbourne in late 2014. Last fall, Peter Cai, a research fellow at the Lowy Institute for International Policy, wrote a column suggesting political and business leaders should exercise caution at the rise of China’s “soft power” in Australia.
It is a political reality, he wrote, that most Chinese entities have either formal or informal connections to the ruling Communist party and most of the time this is not a problem. “Politicians and business people should be alert but not alarmed.”
CLOSING THE DEAL
In August 2016, Wat travelled to China for a vacation and ended up staying there until early November. Government emails say that she had fallen in Zhuhai, a city near Hong Kong, and needed time to recover in hospital.
Days before she returned to B.C., Wat was pictured Nov. 1 with Canadian business delegates at the China International Aviation & Aerospace Exhibition in Zhuhai. Among the wares on display, according to Chinese media reports, were armoured vehicles and missile systems built by Norinco and China Poly Group, a past event sponsor.
Records show China Poly Group executives sought meetings with Canadian federal officials, including the minister of international trade, in the lead-up to the November 2016 gallery launch in Vancouver.
Emails exchanged between Global Affairs Canada staffers showed the three-day visit by China Poly Group executives was billed as an “opportunity to explore other significant investment opportunities in Canada for Poly Group.”
But the emails also show the federal government was carrying out “due diligence” on the company. A 2013 online article by Public Radio International — titled ‘China’s Poly Group: The most powerful company you’re never heard of’ — was circulated among federal staff in the due diligence process.
The article begins with a suggestive image: “Picture the China Poly Group Corporation as the first of a set of Russian nesting dolls,” the article says. “Each of the larger wooden baubles represents a new line of diverse subsidiaries that shield its cloistered, princeling-controlled core.”
The media report goes on to highlight the company’s arms exports “to troubled spots such as Myanmar or Zimbabwe” and quotes an expert saying that Poly Technologies “has been on Amnesty (International)’s radar for a long time because of their arms shipments to conflict zones, especially Africa.”
The national security review of Poly Culture, conducted by the Ministry of Innovation, Science and Economic Development, was approved.
In the months since the launch of Poly Culture’s art gallery in Vancouver, Poly Culture has signed an agreement with the Vancouver Symphony Orchestra to develop joint programs. The company has said it is keen to build a large art centre and develop filmmaking partnerships.
Bruce Ralston, the B.C. NDP’s new minister of jobs, trade and technology, declined an interview request for this story. In a statement, he said the government will conduct a review of HQ Vancouver, the publicly funded program that played a key role behind the scenes to bring Poly Culture to Vancouver.
Meanwhile, a government official recently announced where John Horgan, B.C. ’s new premier, will be visiting for his first overseas trip: China.