May 13, 1995

NO FOOLS, THESE CHILDREN OF THE REVOLUTION

ERIC ELLIS, Beijing

THEY ARE the fat cats of China's new order: rich, privileged and the owners of great contact books. They are the tai zi dang, the so-called princelings, sons and daughters of China's political elite - and no self-respecting foreign venture that wants to make it big in the New China should be without at least one.

Numbering about 3,500, they grease the wheels of China's "socialist market economy" with their fathers' imprimatur, thriving on what is known as "tea money" - commissions that might be an imported car, a first-class air ticket, or a lazy $US100,000 in a Hong Kong bank account. "In their own way they are no different from someone with an old school tie in the West," says a Shanghai-based Western diplomat. "They are the beginnings of an establishment."

Just how influential the princelings have become was made patently clear yesterday in Beijing at the China Summit 1994, a top-drawer investment roadshow at which leading Chinese economic officials have assured Western big business about their commitment to economic reforms.

The main conference room, brimming for most speakers, was packed to the rafters during the talk by Mr Chen Yuan, the deputy governor of the central People's Bank of China and the right-hand man to the economic tsar Mr Zhu Rongji.

In language that might have made Adam Smith blush, Mr Chen, 48, mapped out what was in effect a blueprint for China's banking system, anchored by the rapid convertibility of the Renmimbe yuan.

If Smith would blush, imagine how Chen's father would feel. The octogenarian Mr Chen Yun is a key economic hard-liner, one of the group of"Immortals" who chartered China's post-1949 socialist market. He is the conservative around whom party factions gather to oppose the "capitalist pollution" gathering over China.

Young Chen's sister, Ms Chen Weili, was until recently a senior executive of China Venturetech Investments, one of China's most sophisticated investors, a CITIC-in-waiting backed by the State Commission on Science and Technology.

(The vice-chairman of the science commission is another princeling, Ms Deng Nan, the most powerful of Deng's daughters, who recently visited Australia.)

Weili's boss was Zhang Xiaobin - his father was a Mao minister - who recently launched a venture capital joint venture with Goldman Sachs. Mr Zhang is also behind a head-hunting firm which specialises in placing well-connected taizi.

At their worst, these princelings are witless conspicuous consumers who owe their perks to Daddy being a big wheel, the embodiment of the nepotism and corruption that was a particular target of the 1989 Tiananmen Square protests

At their best, they are China's best hope - smart, polyglot, cosmopolitan, often Western-educated and holding a networked stake in its future to guarantee its post-Deng transformation is a peaceful one.

Western embassies and consuls in China and Hong Kong closely track the movements and activities of leading taizi.

The Australian Embassy in Beijing recognised their clout by inviting dozens to the glittering lunch hosted by Mr Keating at Beijing's Shangri-La Hotel, the centrepiece of his trip to China last year.

China's Prime Minister, Mr Li Peng, could be classified as a princeling, being the adopted son of Mao Zedong's moderate and elastic Prime Minister, the late Zhou En-lai.

After Li, whose son is also making his way in business, the title of most celebrated "princeling" would probably be a toss-up between Deng Zhifang and Larry Yung, sons respectively of senior strongman Deng Xiaoping and the Vice-Premier "Red Capitalist" Rong Yiren.

That he had a prominent father has certainly helped. But no-one questions Larry Yung's business skills.

He is the chairman of Hong Kong-based CITIC Pacific, the quasi-investment bank at the sharp end of China's reforms that is experiencing near exponential rises in annual profits as the part-owner of airline Cathay Pacific, Hong Kong's telecom monopoly and just about every infrastructure project of size in the colony.

Deng Zhifang, an assistant general manager at CITIC, has been a particular favourite of Hong Kong's richest man, Mr Li Ka-shing, and the two have teamed up in a number of property deals in China and Hong Kong, though this alliance might falter should the Deng faction be toppled after the old man's death.

More recently, he is believed to have been in Australia seeking funds for the proposed Sydney float of his Shanghai Grand Development Holdings - a trip that was co-ordinated in part by CITIC Australia.

As he toughs it out in God's waiting room, Deng Xiaoping's most trusted aides, and aids, are his children.

Indeed, on the rare occasions when the frail Deng makes a public appearance, it is always with the physical support of daughters Deng Rong and Deng Nan.

The Deng girls translate the old man's barely audible whispers into sweeping statements urging China on to greatness and, according to a Deng-watching Western diplomat, "wield near unlimited influence in China".

"It could be argued they are the real leaders of China. No-one really knows if their father says what he is supposed to say," he said.

Deng's brat pack also extends to his three sons-in-laws: Zhang Hong, a director of China's prestigious Academy of Sciences; Wu Jianchang, a vice-president of the powerful China National Non-Ferrous Metals; and Deng Rong's husband, Major-General He Ping, a deputy director of the People's Liberation Army procurement and arms trading division.