Sheldon Adelson, the Sands casino magnate, is it a fair amount of trouble at the moment.Adelson is facing serious bribery accusations in Macau, the Chinese gambling enclave which helped propel him from the rich to the super-rich after he opened the first Western-owned casino in 2004.
To understand Adelson’s Macau situation, its worth considering the environment he was working in. He was conducting business in an alien and hostile environment (China’s mainland official bans gambling, and can control the amount of mainlanders who visit Macau). He needed someone with connections in Beijing. To use the Chinese phrase, he needed someone with guanxi.
Guanxi is a term used in China to describe the use of real-life social networks to one’s own advantage. While such a system exists to a certain degree in every society, it’s difficult to understate how important it can be in China. Here’s how Rupert Wingfield Hayes of the BBC described it in 2005:
Literally translated, guanxi means connections. But it is much more than having the same old school tie.
In Europe or America who you know might help you get a job, or get your child into a decent school.
In China who you have guanxi with can mean the difference between freedom and jail, justice or discrimination, wealth or poverty.
It’s an important system to understand for foreign investors in China, and considered by many a completely legitimate business practice (how-tos for business owners are often published).
Adelson hired a businessman called Yang Saixin to help with the guanxi aspect of Chinese business. Unfortunately for him, Yang’s guanxi may end up being a serious problem for Sands.
In a lengthy article about Yang and his connection to Adelson published today, the New York Times reports that Yang says his main job was “setting up meetings and making introductions”. He had links to the People’s Liberation Army and China’s state security apparatus, and apparently grew somewhat close to Adelson — his daughter took Mrs Adelson shopping during a visit to Beijing when she visited, for example.
Unfortunately, the line between guanxi (using personal connections for gain) and flat-out bribery (using money for gain) may have become blurred. The New York Times reports:
[Documents] show that the Sands paid out more than $70 million to companies tied to Mr. Yang for the trade centre and for a Chinese basketball team the Sands sponsored. But several million dollars appear to be unaccounted for after the projects were suddenly shut down by the company, The New York Times found.
What became of any missing money and whether any of it wound up in the hands of Chinese officials are amount the questions being examined by the Federal Bureau of Investigation, the Justice Department and the Securities and Exchange Commission.
Both Wang and Sands deny that any of this missing money went to bribes, of course, arguing instead that a swift termination of Wang’s contract in 2009 led to some money going astray. However the New York Times have dug up a lot of information that may lead you wonder. Quite who did what, and who knew what, remains to be seen.
It’s impossible, however, to think of Wang using his “guanxi” in Beijing, and not consider the Chinese princelings working in government, such as Bo Xilai, with wealth far above their official salaries.
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