The Most Disturbing Part Of The JPMorgan News Is That It's Not Shocking At All

No one who has spent more than a little time in China can be shocked by the latest blockbuster from The New York Times about the means through which the family of former Premier Wen Jiabao traded access to power for personal gain.

The company at the center of this most recent story makes for particularly compelling reading: JPMorgan Chase, the ultimate "too big to fail" institution, lately embroiled in enough scandals to make Goldman Sachs look like Mother Theresa. The same bank still accounting for its craven abuses in mortgage markets, its London Whale derivatives debacle, and its manipulation of the key index known as Libor now stands accused of essentially funneling funds to Wen Jiabao's only daughter to win business in China, bringing a federal probe.

Yet the takeaway here merely reinforces a truth that has long been evident to those paying attention to the pungent interplay of money and power in China: Despite the prattling of global business leaders that their presence in China is a wholesome boon to justice and right, elevating Chinese business standards and adding transparency to a system laced with corruption, they have frequently enriched themselves by engaging in the very dirty doings they claim to disdain.

When foreign companies enter China -- the world's largest potential market for damn near everything -- they tend to adapt to local conditions. They figure out quickly that, three decades of market-embracing reforms notwithstanding, China's economy remains dominated by state-owned enterprises controlled by the Communist Party. That puts the party and its connected officials in control of who can sell into the market and who buys what. When the government is the customer, government officials are liable to get bought.

Given sundry legal annoyances at home -- the American Foreign Corrupt Practices Act and European statutes barring bribes paid to secure overseas business -- Western companies have had to indulge their creativity to both rack up sales in China and stay on the right side of the law. They have forged sophisticated means of delivering money where it needs to land so their goods and services get bought, while keeping themselves in possession of a seemingly plausible story that they have done something other than bribe the buying agent.

In my years in China -- 2001 to 2006 -- executives for major global brands sometimes confided (never for attribution) how this game works. Major technology and pharmaceutical companies hired "public relations" outfits in the name of boosting their brands, understanding full well that these companies would throw lavish banquets for key party officials, pay journalists to cover their companies and put cash and gifts in the hands of buying agents at major state-owned companies -- sometimes even delivering paid female companionship.

Other middlemen outfits established college scholarship funds that sent children of party officials to prominent campuses in the United States and Europe. Still other entities financed by global brands took connected officials and executives on cultural exchanges to foreign locations -- often with stops in the gambling halls of Las Vegas and the luxury shopping streets of Rome and Paris.

The right people were well-fed, enriched and endowed with snapshots of themselves next to the gondolier at the Venetian. Coincidentally, deals got secured by the brands that picked up the tab. And if any irritating soul happened to ask about a possible quid for all that quo -- a journalist, an auditor, a government investigator -- this money was just going to promote public relations or cultural awareness or education.

This seems to be the thinking at work at JPMorgan. The company reportedly employed a consultancy overseen by Wen Ruchun, the premier's only daughter, who used an alias for the business -- Lily Chang. If anybody asked, JPMorgan Chase was just making use of her expertise as it secured for itself the role of underwriter for the China Railways Group, whose 2007 initial public offering raised some $5 billion. That her father effectively controlled the levers of Chinese economic and commercial policy was just happenstance.

As the Times reported last year in a Pulitzer prize-winning investigation, Wen's family amassed a multibillion-dollar fortune in the years after he gained that authority over the commercial domain.

The latest disclosures about JPMorgan's role underscore the degree to which plausibly deniable lucrative malfeasance has become a core competence of Western brands operating in emerging markets. This is how apparel makers and electronics brands proceed in contracting with local factories in places like China and Bangladesh. By not owning the factories themselves, they shield themselves from liability when uncomfortable questions get posed. They can claim ignorance when another deadly fire kills hundreds of workers who have been toiling in demonstrably unsafe conditions.

Back in the early years of the last decade, American banks like JPMorgan Chase paraded into China with billions in investment money in hand, taking what they called "strategic stakes" in China's state-owned banking giants. This money came wrapped in promises that the presence of financial paragons like Bank of America and Citigroup would teach China about modern banking, improving risk controls and eradicating the cronyism that often dictates who can borrow from state-owned lenders.

That condescending narrative got muted once the American housing bubble collapsed. American finance had in fact been operating much like a Ponzi scheme, handing out mortgages to anyone with a pen and then peddling piles of atrocious loans to other equally reckless institutions while securing slices of the spoils. In the worst hours of the resulting financial crisis, American banks began selling off their China stakes while begging Chinese lenders for cash infusions to spare them from collapse.

So this latest turn in the story, the word that JPMorgan's behavior is little different from most global companies in China in paying a powerful person reportedly in pursuit of deals, merely brings home what has been clear for a great while: Much as gambling went on in Casablanca, lubricants are required -- and delivered -- by those who seek business in China.