Salient to Investors:

China’s new elite class, known as princelings, is fueling public anger over unequal accumulation of wealth, unfair access to opportunity and exploitation of privilege. The Immortals’ grandchildren are players in private equity amid China’s integration into the global economy. 26 ran or held top positions in state- owned companies that dominate the economy, 3 of which headed or run state-owned companies with combined assets equivalent to more than a fifth of China’s GDP.

Barry Naughton at the University of California said the Chinese Communist Party, led by 8 people, are losing it because they haven’t been able to control their own greed and selfishness. Naughton said ordinary Chinese are very aware of these princelings.

China’s rich-poor divide is 50 percent above a level analysts use to predict potential unrest – Disturbances, often linked to local corruption and environmental degradation, doubled in five years to almost 500 a day in 2010.

China’s new leader, Xi Jinping, and 3 other members of the 7-member ruling Politburo Standing Committee are princelings. Bloomberg’s website has been blocked in China since the publication on June 29 of a story about Xi’s extended family fortune.

Dai Qing said corruption at the top goes all the way down and without a free press there is no independent supervision to prevent it.

Academics estimate that wealth and influence is concentrated in the hands of as few as 14 and as many as several hundred families.

Roderick MacFarquhar at Harvard said there were 4 families under Chiang Kai-shek, now there are 44: changing the system demand some traumatic national experience.

Yang Dali at the University of Chicago said the entire country was in business, including the Party, military, courts, prosecutor’s office, police – insiders could get rich very quickly.

Fraser Howie said the problem is those with connections, who got the best stuff in the ’80s, are still getting the best access because the playing field has not been leveled. Howie said reforms have not made the market anonymous, they’ve made it more important to know who you are dealing with.

Ding Xueliang at the Hong Kong University of Science and Technology said he stopped his research after officials warned him he might be killed.

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