It wasn’t easy for Fang Fang, JP Morgan Chase’s vice chairman of investment banking in Asia, to get a toehold in the business. After getting an MBA at Vanderbilt University on a full scholarship, he said he fell flat in dozens of investment bank interviews before finally acing a meeting with Merrill Lynch that earned him his first job. With 40 or 50 interviews under his belt, “I realized I could predict their question before they finished it, he said in a June 2011 interview with Zhonghua Yingcai (“China’s Talents”) a Communist Party-sponsored magazine that features profiles of prominent members and citizens.
While Fang didn’t have many of the usual connections that often lead to Wall Street, he did—like many of the top Chinese executives now working at Western companies and investment banks—have powerful party ties that stretch back to his days as an undergraduate, when he was the 28th president of Beijing’s Tsinghua University’s student union, which is run by the school’s party committee.
Now Fang and the next generation of the party’s elite are entangled in a potentially crippling scandal at JPMorgan, which is being investigated by the US Securities and Exchange Commission for allegedly violating corruption laws by hiring the daughters and sons of connected Communist Party officials in order to win deals with state companies. As much as any Wall Street executive in China, Fang epitomizes the intersection of capitalism and Communist ideology that has led to decades of unparalleled economic growth in China. That system is now the subject of unprecedented scrutiny as China’s leadership cracks down on corruption on one hand, and US regulators look into whether party members’ children were used as conduits for influence peddling that may have violated the US Foreign Corrupt Practices Act.
A JP Morgan spokeswoman said the bank and its executives could not comment on any questions related to the investigation, except to say that the bank is cooperating with regulators’ requests. Fang has not been accused of any wrongdoing, and has not been named as a target of the investigation.
After joining JP Morgan in 2001 in Hong Kong, Fang was quickly promoted, becoming the bank’s co-head of investment banking in China in 2005 and chief executive of JP Morgan China in 2007. In 2010 he also became a member of the National Standing Committee of the All China Youth Federation, a coalition of youth groups led by the Communist Party. In 2011 he was named to the Chinese People’s Political Consultative Conference, the country’s top political advisory body, which draws members from a wide range of parties and professions.
The political advisory role can provide access to the most powerful people in China and yield insight on the country’s strategic plans, Fang told the Financial Times in 2011:
It opens doors to the country’s top leaders because … delegates can send their proposals to any ministry or provincial government and request meetings with relevant officials, and that government entity is evaluated on how responsive they are to such proposals and requests … There is an enormous machine working behind the scenes to ensure CPPCC requests and suggestions are all taken seriously and answered by the relevant authorities.
Cultivating relationships within the Communist Party while working in the bastion of capitalism that is a Wall Street bank may be a paradox, but it’s also a common one. Most of the Wall Street banks active in China count party members and party advisers among their senior executive ranks, including Deutsche Bank, HSBC and Goldman Sachs. Executives at Wall Street banks say that membership status is a bit like religion or sexuality, something that isn’t addressed directly but that colleagues assume about each other.
When applying for a job at a Western bank, “it’s not something you put on a resume,” said one banker.
As Quartz has reported, many Wall Street banks have also hired the Communist Party progeny known as “princelings.” Executives from outside JPMorgan say the bank wasn’t even the most aggressive to pursue the practice. Nevertheless, the SEC has secured evidence that JPMorgan started a program in 2006 called “Sons and Daughters” to address the “friends and family of China’s ruling elite were clamoring for jobs at the bank,” as the New York Times reported. The bank even had a spreadsheet that linked individual hires to specific business goals, Bloomberg reported.
“Sons and Daughters,” regardless of its legality, doesn’t appear to have given JP Morgan Chase much of an overall edge over its competitors in China. The investment bank ranked 4th among the top 10 M&A investment advisers in China in 2007 and 2008, according to data from Thomson Reuters, and then bounced around between 5th and 8th place in the years to 2012, except for 2011, when it didn’t make the top 10. On equity underwriting, JP Morgan ranked 9th in 2006, 8th in 2007 and then didn’t place in the top 10 investment banks from 2008 to 2012.
That may be because many of the big banks were hiring well-connected Chinese nationals during the same time period, part of a Wall Street push in China and around the globe to hire managers and decision-makers locally, rather than shipping over executives from the US or UK.
Fang is one of the most high-profile, though. He has more than 440,000 followers on Sino Weibo, the Chinese-language microblogging site, where he writes about his university experiences and entrepreneurship, among other topics. Fang has often appeared as the face of the bank’s China operations in recent years, as a regular commentator and frequent conference speaker, speaking about topics that are now of interest to regulators. He spoke to Bloomberg (video) on the bank’s “selective hiring” in March of this year. He’s also been a frequent commentator on the difficulties Western companies have doing business in China, including comments at a March panel discussion at Hong Kong University that now seem especially prescient.
“The overlap of business and politics is something that foreigners would not understand and it takes effort to explain this to the business partners,” he said.
Additional reporting by Ivy Chen
An earlier version of this article misstated one of Fang’s titles. He is vice-chairman of investment banking in Asia, not vice-chairman of Asia.