China Power | Politics | East Asia

‘Red Roulette’: Tell-All Book Reveals the Dark Underbelly of China’s Gilded Age

Beneath Desmond Shum’s deeply personal memoir about corruption and wealth, we can glimpse the profound political and economic tectonic shifts that foreshadowed Xi Jinping’s second term of office.

‘Red Roulette’: Tell-All Book Reveals the Dark Underbelly of China’s Gilded Age
Credit: Depositphotos

Whitney Duan was once the poster woman for China’s rags-to-riches narrative of business success. But she went missing in 2017 following reports that she facilitated business dealings with family members of China’s then-Premier Wen Jiabao and other senior Communist Party officials.

Four years after Duan’s mysterious disappearance, her ex-husband and business partner, Desmond Shum’s tell-all book, “Red Roulette: An Insider’s Story of Wealth, Power, Corruption, and Vengeance in Today’s China” is quickly shaping up to be the new must-read among observers of Chinese elite politics. The book so startled Beijing that it elicited two consecutive phone calls from Shum’s ex-wife, who is now in detention, in a last ditch effort to scuttle its publication.

In an exclusive interview, Desmond Shum said that Duan left another message for him after the two calls. “She is apparently reachable now,” Shum said, adding that he had asked their son to call his former wife in hope that they could communicate on a regular basis. Shum revealed that three months prior to the book’s official launch, Chinese authorities had taken one of his warehouses in Beijing where he had kept some of his personal belongings, though whether the incident was related to the book remains unclear.

Although the specific details of Shum’s accounts are almost impossible to verify, multiple business and diplomatic sources who have overlapped with Duan and Shum’s business undertakings in Beijing said the gist of Shum’s narratives fit with what transpired during that period.

“I found it absolutely credible. It vividly describes a way of doing business through political connections that I got to witness during my years in China,” said Jorge Guajardo, a senior director at McLarty Associates who served as Mexico’s ambassador to China from 2007 to 2013.

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“Even though I do not know if the characters he mentions played the roles he claims – and I have no reason to doubt him – I do wholeheartedly believe he is describing the way business got done in China during the years he talks about,” added Guajardo.

“[Shum’s] book reeks of authenticity,” according to Jerome Cohen, a renowned scholar of Chinese law at New York University. “Enough is known by various people outside China to verify some aspects of what Shum has written, and he has been known, if not admired, over the years by many people available to evaluate it.”

Cohen added, “There’s lots to learn about intra-leadership friction and rivalry here. As an incidental benefit, the book tells a lot about the influence of a [Hong Kong] public education on a young Chinese as well as the more obvious long-range effect of undergrad education in America. Most interesting is the insight into male-female relations in today’s PRC. I expected lots of insight into elite interaction regarding business, but [the emphasis on] marital relations was a bonus.”

Shum’s description of the dynamics among political factions of China also resonates with experts on Chinese elite politics. Within the ruling class, the gaping chasm between the privileges enjoyed by princelings with “red bloodlines” and officials with humbler roots, especially those rising through the ranks from the Communist Youth League, are particularly chilling. The red aristocrats got the sweetest of all deals, including access to monopoly business: While Deng Xiaoping’s relatives landed billion-dollar exclusive deals with the Ministry of Railways with the snap of a finger, Wen, in theory number three in the party hierarchy from 2002 to 2012 but lacking CCP lineage, “couldn’t be relied on to step in” even if his family’s deals went south.

As Whitney Duan’s business unraveled, it became clear that the political cover offered by Wen, her patron, only “had shock value on paper.” Duan self-deprecatingly referred to herself as the “infantry slugging it out in the trenches” for the Wen family, as she hustled to expand Wen’s wife’s (“Auntie Zhang’s”) sphere of business practices. But when rivals closed in on their foot soldiers, the Wen family could do little to help. Instead, Wen’s wife and children were forced to “donate” all their assets to the state in exchange for the tacit guarantee that they would not be prosecuted.

Even when the red families were prosecuted for taking bribes, they got more lenient treatment. Juxtaposing the death sentence of disgraced airport boss Li Peiying with the lighter jail term for a party immortal’s son, who illegally took in double the amount of Li, Shum concluded, “Red aristocrats got a prison sentence; commoners got a bullet in the head.”

“Mr. Shum’s account of elite politics is consistent with media reports from the 2000-2015 period, as well as academic research on elite politics,” said Victor Shih, a Chinese politics expert at the University of California San Diego. “The business activities of Wen’s family are known broadly, but Shum’s account added many interesting and largely believable details to them.”

According to Shih, Shum’s description of factional affiliations and the support of princelings as crucial variables driving promotions is consistent with findings in social sciences literature. A related empirical paper by Hong Kong scholars Ting Chen and James Kai-sing Kung, for instance, found patterns of local leaders paying princeling-affiliated real estate developers with cheap land in order to obtain promotions, although Xi’s anti-corruption campaign reduced such corrupt payments.

The dramatic fall of Whitney Duan, as Shum documented in the book, also followed the pattern of other financiers to China’s ruling elite, most notably Xiao Jianhua. Duan’s fate was a harbinger of the sweeping crackdowns that would engulf other tycoons who had leveraged political connections for lucrative business opportunities. A former guest on Duan’s private jet, Xu Jiayin, is battling to save his debt-mired real-estate conglomerate. Jack Ma’s coterie of political allies in Beijing’s top decision-making echelons is also backfiring, as layers of opaque investment vehicles have been peeled back to reveal beneficiaries linked to former President Jiang Zemin and former Politburo Standing Committee member Jia Qinglin – both are considered potential political challenges to Xi Jinping.

Now, the empires these tycoons built are being scrutinized, restructured, or dismantled, as Xi sends the clear message that the era of runaway growth spurred on by unbridled capitalism is over. China is rewriting the rules of business, and private entrepreneurs not aligned with the party’s priorities are expendable.

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Observers may conclude that to some extent, Shum’s account justifies Xi Jinping’s anti-corruption campaign and the more recent initiative to crack down on “disorderly expansion of capital.” While Shum might agree with Xi’s diagnosis, he turned a jaundiced eye to Xi’s claim that the campaign was meant to stamp out malfeasance within CCP ranks and “shore up party unity.” As the prominent Jiang loyalist Chen Liangyu was purged from his Shanghai party chief post, Han Zheng, another Shanghai bureaucrat whose family members were found to have stashed $20 million in an Australian account, remained unscathed. Unlike Chen, Han was forgiven and even promoted to the Politburo Standing Committee. “Political alignment and loyalty trump everything,” concluded Shum.

Shum also revealed the hypocrisy of the tenor of the communist economic and political doctrines. Even as Xi moved to strengthen the role of state-owned enterprises (SOEs) and argued for their merits, Wang Qishan, Xi’s vice president, once revealed in private conversations with Whitney Duan that China’s moribund system was like a giant game of musical chairs and that state-owned enterprises couldn’t thrive in the long term. Put aside capital and “get the bullets ready,” Wang advised Duan, so that “when it was time to pull the trigger” she would have ammunition ready. It is not clear how representative Wang’s view is among party elites, but his words belie the CCP’s claim of confidence in its own economic system.

“[What I chronicled was] before the financial crisis, a very different period of time. Everything changed and cascaded downward from the financial crisis onward. [The debate in the Chinese leadership] used to be not about whether we were going to be more like the West. Instead, it was more about at what pace we were going to go on to be more like the West,” said Shum. “[Back then,] it was a common perception that nobody was fixing this enormous underlying problem of China. At some point this just cannot last.”

“Now it’s all one voice. What Xi Jinping did to the system was a shocker. But looking back over the last few years as I read and reviewed things for the book, I have come to realize what China is. It’s the problem with the system. The system is the issue, not Xi Jinping — he’s just the symptom.”

The most damning revelation in Shum’s book is that few in the party hierarchy, not even Xi’s top lieutenants, believed the official line that corruption only infected a few scoundrels inside the party and that by “turning the blade inward” to gouge out the pustules, the party would restore its purity and glory. Even in the throes of Xi’s anti-corruption campaign, Chen Xi, the former college dormitory bunkmate of Xi Jinping and a trusted ally, privately predicted that Xi would wind it down, as people might realize that “it wasn’t just a few bad apples; the whole system was rotten to the core.” Scraping “poison off the bone” was not enough, as corruption runs in the blood of the party. Despite public declarations of loyalty, Shum opined that Chen was doing Xi’s bidding purely out of fear and self-interest, since to do otherwise would have cost him dearly.

A vivid portrait of the splashy lifestyles of China’s business and political elites, Shum’s book is not without its limitations. Second- and third-hand accounts from Ms. Duan and Auntie Zhang should be taken with a grain of salt.

For example, Shum’s account of how the dramatic downfall of Bo Xilai unfolded during a Politburo Standing Committee meeting offered a rare peek into the most crucial moment cementing Xi’s ascension to power, but it was narrated through the lens of Wen’s wife, who might not be an impartial observer.

A source who has interacted with both Whitney Duan and Wang Qishan disputed the book’s account of the role Duan played in the promotion of Zhou Liang, Wang’s top aide, as well as the closeness of Duan’s relationship with Wang. Duan is known for her prodigious charisma and skill for the 3D chess of networking, but her kingmaker role is likely exaggerated, cautioned the source.

Shum disputed the notion that he had inflated Duan’s importance. “She was a trusted adviser of those officials. They valued her judgment and believed her advice. But she has never come close to a kingmaker,” said Shum.

Auntie Zhang’s claim that the Pulitzer-winning journalist David Barboza’s New York Times expose of Wen’s family wealth came from Bo Xilai loyalists who “handed over boxes of documents to Barboza in Hong Kong” was also repeatedly denied by Barboza.

The most controversial aspect of Shum’s book is the suggestion that Wen’s family members could cash in on the premier’s political influence without his direct knowledge or implicit support. Shum believed Wen did not become fully aware of the extent of his family members’ business dealings until the New York Times’ investigations were made public. The revelation led to a dramatic response from Wen, who expressed his desire to file for divorce and relinquish all worldly concerns and convert to Buddhism. Wen’s plan was only dropped after central party leadership intervened.

Shum insisted on his confidence in Wen’s lack of knowledge of his family’s business dealings. He recalled that he and Duan were never able to call the office of the premier to ask him to intervene on their behalf. Shum added, “Because Auntie Zhang didn’t have the backing from her husband, she was very reluctant to offer endorsement. At that time, [Whitney and I] were actually complaining about how little direct support we got from Auntie Zhang.”

“When she came to our dinners, she would never say ‘support this company’ or ‘support these two guys.’ Instead, she would always drop hints like, ‘Oh these are good people who are very trustworthy, smart and successful.’ From all these personal dealings with Wen’s family members, I am pretty sure the premier wasn’t aware. He knew the family was in business, but he had no idea how big the business had been,” said Shum.

The future fate of Wen remains a topic hotly debated among longtime China watchers. Taking down Wen Jiabao would be Xi’s most dramatic flex of political muscles to date, as Wen’s support hammered the final nail in the coffin of Xi’s erstwhile greatest rival, Bo Xilai. The party would also risk reputational damage, as the downfall of the beloved “premier of the people and for the people” would disillusion many ordinary Chinese.

Though the scope of “Red Roulette” is constrained by the author’s own experience and by no means a comprehensive account that spans all of China’s power-money coordinates, Shum deploys his piquant sense of detail and offers a rare glimpse into the webs and knots of China’s political and business royalty.

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Due to the information vacuum created by the party’s powerful censorship apparatus, outside observers’ writings about the Chinese elites are filled with anecdotes, partial truths, and outright fabrications. Shum’s unique vantage point was from the inside. Beneath Shum’s deeply personal memoir are the profound political and economic tectonic shifts that foreshadowed Xi Jinping’s second term of office. Shum’s book is invaluable for cracking open the vault of the Communist Party’s guarded secrets and revealing the sinister underbelly of China’s era of ebullience.

“Red Roulette” also undercuts Xi Jinping’s claim that the party is duty-bound to deliver common prosperity. As the princeling families and their business associates continue to wheel and deal their way to billion-dollar fortunes, Xi’s calling for having faith in the party rings hollow.

This piece has been updated with comments from Desmond Shum.