Court Papers Open Rare Window Into Role of Graft in China’s Overseas Lending

A cache of court documents, reviewed by The Wall Street Journal, shows how Dai also served himself, collecting millions of dollars in kickbacks in a case that sheds rare light on how corruption occurs within China’s financial industry, and the role that graft has played in Beijing’s efforts to use infrastructure lending to extend its influence across the Global South.

Corruption investigations in China usually unfold behind a shroud of secrecy, with authorities offering only terse accounts of the alleged wrongdoing.

In September, for example, the party said it had expelled Li Li, former head of the Beijing branch of the Export-Import Bank of China, or China Exim Bank, which is tasked with driving industrial development and foreign trade. The announcement of Li’s expulsion said only that she was accused of abusing her powers to help people acting as illegal intermediaries and taking large sums of improper commissions. Li couldn’t be reached for comment.

Dai Chunning’s story pulls back the curtain on a previous corruption case at China Exim Bank. Though the charges against Dai centered on activities dating back two decades—he was a senior executive at Exim Bank from the early 2000s to 2012—legal scholars say it illuminates issues that continue to frustrate authorities today, including how officials implement state policy in ways that provide cover for pursuing their own interests.

Dai played a leading role in arranging loans for developing countries in Africa and Asia—including Angola, one of Beijing’s biggest debtors. He was detained by graft investigators in late 2013, the year after Chinese leader Xi Jinping took power. At the time, officials and state media held his case aloft as an example of the new leader’s determination to root out corruption among China’s powerful financial institutions.

Dai was convicted in 2017, more than a year and a half after he first stood trial behind closed doors, on corruption charges including taking bribes. He denied some of the allegations against him and later lost an appeal against his conviction. He received a suspended death sentence, which—in line with usual practice for such a penalty—was commuted to life imprisonment in 2020. Chen Jiangang, a lawyer who represented Dai in his 2017 appeal, said he couldn’t reach Dai.

Documents from Dai’s case files—including his statements to prosecutors and his lawyer, his trial testimony, as well as copies of correspondence, commercial contracts and other papers—show how the executive and a circle of associates created a scheme to bribe officials and collect kickbacks from Chinese-backed infrastructure projects in African countries, using Beijing’s goal of cultivating influence on the continent as political cover.

Prosecutors said that Dai, acting by himself or with associates, solicited or took bribes worth more than 200 million yuan, the equivalent of more than $28 million at current exchange rates, and attempted to defraud the state of some $19 million in assets, according to court documents.

In China, “access money"—whereby business people pay officials for favors—fuels systemic risks and inequality. But it has also played a role in stimulating investment and economic growth, such as by facilitating state approvals and subsidies for development projects, according to Yuen Yuen Ang, a professor of political economy at Johns Hopkins University.

“Even in the U.S., regulators struggle to detect and eliminate ‘corruption’ in opaque financial sectors," Ang said. “This challenge of opacity is exacerbated in China’s political system."

In response to queries, China’s Foreign Ministry said the Chinese government takes an unswerving stance in fighting corruption, and has acted sincerely and properly in pursuing economic cooperation with Angola. The party’s top anticorruption agency and China’s Exim Bank didn’t respond to queries.

When Angola emerged from a nearly three-decade civil war in 2002, Western lenders were reluctant to extend loans to the African state. China stepped in, offering loans backed by Angolan oil as collateral. Between 2000 and 2020, Chinese banks provided Angola with some $42.6 billion in loans to build housing, roads and power plants—more than a quarter of China’s total lending to African countries during that period, according to data from Boston University’s Global Development Policy Center.

While commodity-backed loans weren’t a Chinese invention, experts say Beijing pushed this resource-for-infrastructure investment arrangement at scale in Africa and Latin America. This approach, known as the “Angola model," has helped China build influence in the developing world and created opportunities for Chinese contractors, political analysts say.

Chen, Dai’s lawyer, said his client was among the pioneers of the Angola model. Under this approach, Chinese institutions often “exploit corruption to economically penetrate Africa," Chen said.

In statements to investigators, Dai said one of his key partners in his Angolan dealings was a Hong Kong businessman named Yu Tai Wai, who represented the Angolan government in talks to secure infrastructure loans from China.

Dai told investigators he was introduced to Yu by a long-term business associate in the early 2000s. Dai then put Yu in touch with a well-connected businessman, Leung Ping, who had befriended Dai by offering him gifts and helping him get acquainted with senior Chinese officials—in return for Dai doing business favors for Leung.

Leung told investigators that he, at Dai’s behest, teamed up with Yu to broker Chinese infrastructure projects in Angola and help everyone involved “make money together." He said Yu represented Angolan parties in talks to negotiate Chinese loans and consulting fees for the projects. Dai and his associates would take these fees as kickbacks for themselves and use a portion of them to pay bribes to Angolan officials, according to Leung’s testimony as cited in court documents.

“At the time, Yu Tai Wai was a very influential person in Angola, various ministries and the president all knew him and had good relations with him," Leung said. Yu would take a portion of the consulting fees, paid by Chinese contractors, and give it to people on the Angolan side as “benefit fees," according to Leung’s testimony, “and then the project can be signed off smoothly."

Prosecutors say Leung set up a company to receive benefit fees—disguised as consulting payments—from contractors for China-funded infrastructure projects. One Chinese state-run contractor, the hydropower engineering firm Sinohydro, paid Leung’s company benefit fees worth about 22.9 million yuan, the equivalent of about $3.6 million at the time Dai’s trial began, in relation to Angola projects, the documents said. Leung said he collected such fees on Dai’s behalf.

Court documents indicate that some of Dai’s conviction was connected to projects arranged as part of a 2004 China-Angola infrastructure lending agreement, including deals for Chinese contractors to build agricultural institutes and irrigation systems.

Sinohydro agreed to pay a Hong Kong-based company of which Yu is the sole director some $3 million in commissions for the agricultural institute and irrigation projects, according to a copy of a 2005 agreement between the two firms. Another document showed that Leung’s company collected more than $5.8 million in such payments from Sinohydro for brokering the irrigation and agricultural institute projects.

Sinohydro didn’t respond to queries.

Prosecutors said Dai’s corrupt activities stretched into the early 2010s, while he continued to win promotion. He became assistant president at China Exim Bank in 2011 before his appointment the following year as deputy general manager at Sinosure, a state-run insurer of export loans. It couldn’t be determined how authorities came to investigate him. Sinosure didn’t respond to queries.

Chinese investigators interrogated Yu about this role in Dai’s alleged schemes in 2014, on the premises of Hong Kong’s antigraft watchdog. Yu described himself to the investigators as an intermediary with senior Angolan officials, including the president and his inner circle—connections he started building while dealing in military supplies from 1997 to 2002.

José Eduardo dos Santos, Angola’s president from 1979 to 2017, died last year. His daughter Isabel declined to comment through a representative. A spokesman for the Angolan presidency didn’t respond to queries.

Yu, now 67 years old, left Angola by early 2005, according to statements by Dai and Leung. The Journal couldn’t find any indication that Yu faced legal consequences in China for his Angolan dealings. He has continued to run businesses in Hong Kong, according to local corporate records.

Yu didn’t respond to queries. A Journal reporter who visited a Hong Kong office registered to two of Yu’s companies was turned away by employees there. An employee at a Hong Kong company registered to Leung said he is currently serving a prison sentence, citing Leung’s family, who didn’t elaborate or respond to other queries about the case. Leung couldn’t be reached.

The troubles have continued at China Exim Bank. Li, the executive purged in September, ran an Exim Bank arm that superseded a department that Dai led in the 2000s. Caixin, a Chinese financial news magazine, reported in March that Li recently stood trial, though a verdict hasn’t been announced. The same month, the party announced a probe against Liu Liange, a former president of China Exim Bank and most recently chairman of the state-owned Bank of China, one of the country’s “big five" lenders. Authorities accused him of “severe violations of discipline and the law," an official euphemism for corruption. They haven’t provided details about the allegations. Liu couldn’t be reached for comment, while Bank of China didn’t respond to queries.