China Corruption Fighter Wang is One of the World's 50 Most Influential People

Xi Jinping's enforcer and troubleshooter, with a nickname that translates as “Captain of the Fire Brigade”, has overseen the government’s corruption crackdown. Now he’s a key behind-the-scenes player in the effort to stabilize the economy and stock market. Bloomberg last year identified Wang Qishan as one of the world's 50 most influential people.

Once a refuge for Mao Zedong’s Red Army, the caves overlooking remote Yan’an City lure tourists who are mostly interested in reliving China’s revolutionary past. Search closer, though, and the pockmarked yellow hills hold clues to ties binding present-day China’s two most powerful men as they battle forces shaking their country and the world.

Locked away in a village compound, accessible only by climbing over a pigsty wall, stands a monument to 20,000 young people from elite families who, in 1969, were sent to labor here on Mao’s orders during the Great Proletarian Cultural Revolution. Like Mao a generation earlier, they lived in caves, sometimes huddling together for warmth.

Xi Jinping and Wang Qishan, who would have been students had schools not been shut down during that anarchic time, bonded in a cave a few meters from the monument; they even shared a quilt once. Today, they live and work among the pavilions and palaces of Zhongnanhai, the vermilion-walled leadership compound that abuts Beijing’s Forbidden City. Xi, now 62, needs no introduction. Increasingly seen as the most powerful leader since Mao, he has held center stage as Communist Party general secretary since 2012 and as China’s president since 2013. The less-well-known Wang, 67, is Xi’s most trusted enforcer—a troubleshooter who’s earned the nickname “Jiuhuo Duizhang,” or “Captain of the Fire Brigade.”

In 2009, when China’s Yao Ming was a big name in U.S. basketball, Wang got a memento from President Barack Obama on a visit to Washington.

Photographer: Zhang Yan/Xinhua Press/Corbis

The versatile Wang—a historian-turned-banker with a taste for popular Western culture that runs to critiquing the various actors who’ve played Mr. Darcy in Pride and Prejudice adaptations—is now fighting wildfires on two fronts. For the past three years, he’s been the high-profile spearhead of the biggest anti-corruption purge in the 66-year history of the People’s Republic. And, as hard as it is to decipher China’s secretive leadership machinations, it seems Wang is also increasingly a key behind-the-scenes player in Xi’s efforts to stabilize the Chinese economy and end stock market upheavals that in August sparked global financial turmoil.

Normally, Wang’s graft-busting day job would be responsibility enough. Declaring that venality now threatens the party’s existence, Xi has staked his political legacy on conquering it. Such is the barely conceivable scale of corruption and theft of state assets that it could be costing as much as $500 billion a year, according to former U.S. Treasury Secretary and Goldman Sachs Chairman Henry Paulson in Dealing With China, his memoir published in April. Then there’s corruption’s human toll: In August, for example, at least 173 people died in explosions at a chemical warehouse in Tianjin; the official Xinhua news agency reported that one of the owners, a son of a former police chief, had used his connections to bypass safety regulations.

Wang has responded on a spectacular scale. Since assuming command of the Orwellian-sounding Central Commission for Discipline Inspection, Wang and his agents have swooped down on 100,000 party officials high and low—“tigers and flies,” as Xi calls them. The tigers include more than 100 top-level government officials, senior executives of state-owned companies, and military brass. In June, Wang bagged his biggest prey when Zhou Yongkang, 72, former head of the country’s vast security apparatus, was jailed for life after admitting he accepted bribes.

“Xi is the boss, but Wang is one of the very few in the leadership who really understand finance,” says Brookings’s Cheng Li.

“Xi Jinping believes that curbing corruption is essential for the survival of the Communist Party, so it shouldn’t be surprising to anyone that he has gone to Wang Qishan to drive this,” Paulson, who has known Wang for 20 years, says in an interview. “Wang is a first-rate politician in addition to being a reformer, someone who understands how to make a system work to get things done.” In his memoir, Paulson remembers talking to the “spotless” Wang about a spree of photos on social media that showed government officials wearing wristwatches worth many times their salaries. Wang showed Paulson his own watch—aging and nondescript. “He said he changed the battery every year, the band every two years, and he had replaced the crystal three times,” Paulson wrote.

On the financial front, as China’s economy falters and capital markets tremble, analysts such as Cheng Li, director of the John L. Thornton China Center at the Washington-based Brookings Institution, say Xi may also be tapping Wang’s financial expertise. Officially, Wang ranks sixth in seniority in China’s seven-member decision-making Politburo Standing Committee, well behind Premier Li Keqiang, the official No. 2. But in reality, Wang is second only to Xi, Cheng Li says. “People talk about a Xi-Li government, but it’s really Xi-Wang,” Li says. “That they are aligned is the most important factor in Chinese politics in recent years. Xi is the boss, but Wang is one of the very few in the leadership who really understand finance and the economy. Most of the people in the Finance Ministry and Central Bank are his protégés or his friends, so it is very natural that people will consult him.”

As Li suggests, that makes Wang one of the world’s most influential figures. Wang didn’t respond to requests to be interviewed for this article, but an analysis of Wang’s track record and interviews with his friends, including Paulson, suggest that Wang is a committed, iron-nerved market reformer. He seems unlikely to be panicked into urging more of the disastrous state intervention that exacerbated the summer stock market crash.

In the 1990s, as executive chairman of China’s first investment bank, China International Capital Corp., Wang launched a wave of initial public offerings of state-owned companies. He surprised Western bankers with his bold decisions. Bypassing Morgan Stanley, then a major shareholder in CICC, he appointed Goldman Sachs to arrange the landmark share sale of China Telecom. Then, when the 1997 Asian currency crisis sent markets plunging, Wang ignored Goldman’s advice to lower the offer price and successfully held out for the $4.22 billion he had been seeking.

Wang, left, and Xi confer at the Great Hall of the People in Beijing earlier this year.

Photographer: China Daily/Reuters/Landov

In 2003, Wang also displayed a measure of transparency uncommon in high party circles when the government parachuted him into Beijing as acting mayor to successfully fight a SARS outbreak his predecessor had covered up. He stayed on to oversee preparations for a flawlessly executed 2008 Summer Olympics. For five years after that, Wang served as vice premier in charge of the economy and finance; in the darkest days of the global financial meltdown, he headed Beijing’s delegation to the U.S.-China Strategic and Economic Dialogue. It makes sense that Xi would want Wang at his side now at “a time of near crisis,” says Willy Lam, a senior fellow at the Washington-based Jamestown Foundation. “He’s decisive and takes quick action.”

That hasn’t been a hallmark of China’s leadership this year. During previous economic upheavals, including the one in 2008, Wall Street applauded Beijing for acting decisively. This year, though, China’s leaders lost the confidence of international investors by appearing confused and unsure as stocks plunged the most since 1996. At the same time, government attempts to transform China’s economy from one driven by state investment and exports to a consumption-based model have stumbled, with growth dipping from an average of 9.9 percent annually from 1978 to 2014 to an estimated 6.6 percent in July.

Ironically, Wang’s anti-corruption campaign is, in the short term, a brake on growth. Government decision makers are so afraid of Wang that they’re avoiding awarding tenders for fear of coming under suspicion. Median estimates of a September 2014 Bloomberg survey of economists indicated that Xi’s crackdown would boost gross domestic product growth by as much as 0.5 percentage point—or about $70 billion—by 2020. But before that happens, the turmoil it’s causing among spooked Chinese bureaucrats could have shaved as much as 1.5 percent, or $150 billion, off 2014 GDP growth alone, Bank of America Merrill Lynch estimated in September.

Chinese cadres and the country’s new rich are also abandoning the economy-boosting conspicuous consumption they used to luxuriate in. On Aug. 31, the Chinese gambling enclave of Macau announced its GDP had contracted a massive 26.4 percent in the second quarter after Wang’s crackdown scared off high rollers who fear they’ll be accused of using the territory’s casinos to launder ill-gotten gains. On the mainland, luxury goods retailers and liquor manufacturers are feeling the pinch. And at Beijing’s Shunfeng Cantonese restaurant chain, where miniskirted waitresses once served government officials suckling pig at $130 a plate and sea cucumber at $70 a portion, business is far from brisk. “Business is so bad we have had to reduce prices by 30 percent,” one waitress confides.

For all that, the head of a technology firm in Beijing says corruption continues. Her company still pays about 100,000 yuan ($15,700) a year to officials, she says, “to get things done. Officials are used to taking money from me, so changes cannot happen overnight.”

According to Berlin-based Transparency International’s Corruption Perceptions Index, the Xi-Wang anti-graft drive is viewed by many as a sham. “The recent prosecutions in China are largely seen as efforts to clamp down on political opponents of the regime as opposed to genuine anti-corruption commitments,” the organization said last year after relegating China to 100th out of 175 places on the index, down from 80th in 2013. Brookings’s Li says the campaign can go only so far. “It is genuine, it is effective, but it is also highly selective,” he says.

That may be, but Wang apparently believes that failing to address official corruption could imperil the very leadership of which he’s a part. Chinese state media have reported that after reading Alexis de Tocqueville’s The Old Regime and the Revolution, Wang instructed his underlings to read it, too, in order to understand how Louis XVI, one of the last kings of France, lost legitimacy (and his head) by allowing rampant inequality.

Former U.S. Treasury Secretary Henry Paulson and then-Vice Premier Wang pose together

at the U.S.-China Strategic and Economic Dialogue in Beijing in December 2008.

Photographer: Kyodo via AP Images

Wang, a slightly built figure with a gaunt, expressive face and a sometimes unruly comb-over, has spoken to some of his foreign contacts about the trials of being fireman-in-chief. In April, when he met with a small group of academics, he graphically described the task as difficult but doable, like surgically removing your own appendix without anesthesia, according to a transcript of the meeting posted on the Internet by one of the attendees.

People who have met Wang portray him as an enigmatic figure: fearless, puritanically incorruptible, yet warm and humorous. “He likes people, but it is more than that: He wants to understand what makes them tick, the cultural differences,” says Paulson, who’s now chairman of the Paulson Institute at the University of Chicago. “He is one of the few senior officials that you could actually become friends with,” says tycoon Ren Zhiqiang, a contemporary of Wang’s at Beijing No. 35 junior high school. Ren, founder of Beijing-based Huayuan Property, doubles as a social-media commentator with 30 million followers, often using his microblog to criticize government policy, including the anti-corruption campaign. Ren says Wang harbors no grudges: “He still invites classmates like me to Zhongnanhai because he wants to know the real thinking of ordinary people.”

“Wang is a first-rate politician in addition to being a reformer, someone who understands how to make a system work,” says Henry Paulson.

Wang himself is far from ordinary. His wife, Yao Mingshan, is the daughter of former Vice Premier Yao Yilin. Their 1976 marriage gained him admission to the so-called princeling circle, the elite that comprises children of former leaders. Xi Jinping, son of former Vice Premier Xi Zhongxun, is also a princeling, further cementing the Xi-Wang bond.

Wang was born in 1948, the year before Mao’s victory over the Nationalist government, whose leadership fled to Taiwan. He grew up in Beijing, where his father was a senior government engineer. At Beijing No. 35, Wang was already secretary of the Communist Party Youth League, says Ren. Then, in 1966, Mao unleashed the decade-long Cultural Revolution that purged intellectuals.

Wang’s father was forced to clean toilets, according to Paulson. Three years later, Wang joined the exodus to the countryside, where, along with his wife-to-be, he ended up at impoverished Kangping village outside Yan’an, in Shaanxi province, 1,000 kilometers (620 miles) west of Beijing. “The experience made me understand what the word hungry means,” he was quoted as saying years later by state media.

Xi, pointing, visits the cave dwelling in Yan’an where he spent part of the Cultural Revolution.

Photographer: Lan Hongguang/Xinhua Press/Corbis

Around the same time, Xi Jinping, then 16, was also dispatched to the countryside after his prominent father was jailed. Xi ended up at Liangjiahe, 50 kilometers from Kangping. Wang, who would have known of Xi’s father, became a de facto elder brother to Xi and the pair would swap books at a time when reading material was rare, according to Ren. In 1971, Wang wangled a job as a museum guide. He gained a history degree from Northwest University in Xi’an and then, in 1979, returned to Beijing as a researcher at the Chinese Academy of Social Sciences. A meteoric rise followed. By 1994, Wang was governor of China Construction Bank, which the following year formed a joint venture with Morgan Stanley to create CICC. Wang became executive chairman.

As Paulson says in his book, Wang was never just a banker. He was committed to reforming China’s money-losing state-owned enterprises and turning them into profitable, publicly listed companies. He invited Goldman to become CICC’s main international partner in China Telecom’s 1997 IPO.

What drives Wang, like Xi, is the preservation of the Communist Party above all else

Paulson speculates that Wang and Morgan Stanley fell out because they had approached the joint venture with different expectations. “Perhaps Morgan Stanley wanted to run a successful local operation pursuing domestic business that purely foreign banks couldn’t touch,” Paulson wrote in his memoir. “Wang Qishan had bigger game in mind: He wanted to modernize a country.” John Mack, who in 1997 was Morgan Stanley’s president before rising to become chairman and CEO, says the investment in CICC was a success and that Morgan Stanley won more than its share of deals in China; the most likely reason Wang chose Goldman for China Telecom was to spread the deals around. “No investment bank is allowed to dominate in China,” says Mack, who remains an adviser to Morgan Stanley—and a friend of Wang. “We worked together to create CICC,” says Mack.

Four months before the IPO, the Asian financial crisis struck. Hong Kong’s market plunged 50 percent. When Goldman wanted to lower the offer price, Wang insisted on HK$11.80 a share. Wang turned out to be right, Paulson acknowledges. The following year, again working in tandem with Goldman, Wang successfully cleaned up what was then the country’s largest bankruptcy by restructuring $6 billion owed to foreign creditors by state-owned Guangdong Enterprises Holdings.

But perhaps the most dramatic example of Wang’s firefighting came when the SARS virus appeared and Beijing became mainland China’s most affected city, with 191 fatalities. Instead of admitting the extent of the crisis, Beijing’s then-mayor attempted to conceal it, grossly underreporting cases.

Inevitably, the true scale of the calamity emerged. The mayor was sacked, and Wang flew in from China’s southernmost province, Hainan, where he had been party boss. “His straightforward, candid response saved the day,” Paulson writes. “He shut schools, quarantined thousands of people, released accurate case numbers, and designated new SARS-only hospitals.” One such facility was built in eight days. Two months later, the World Health Organization declared the epidemic in Beijing over.

Now, Wang faces the twin challenges of corruption and an unsteady economy. “He is bold, he is skillful, and he has a great sense of timing,” Li says. “But no one knows whether that will be enough because the challenges are extraordinary.”

What drives Wang, like Xi, is the preservation of the Communist Party above all else, which may explain why neither man has any interest in changing China’s political system. According to the transcript of Wang’s meeting with the academics in April, he dismissed the idea of creating a Western-style independent judiciary in China: “That is impossible. The judiciary has to be under the Communist Party.”

For Wang and Xi to hold such views is understandable, given their background, Ren says. “They are from revolutionary families, and they hold a similar belief that they must not ruin the regime founded by their fathers,” he says. A stern reminder of that belief confronts everyone entering the Zhongnanhai leadership compound through the main New China Gate. There, a giant slogan in red and white proclaims, “Long Live the Great Communist Party of China!” For now, the job of ensuring longevity is very much in the hands of the Captain of the Fire Brigade.

—With assistance from Ting Shi and Keith Zhai.

Link to Bloomberg story: http://www.bloomberg.com/features/2015-markets-most-influential/#qishan