During his campaign, Donald Trump garnered the support of Rust Belt constituents in part by criticizing China’s business practices and the manner in which it handles domestic trading policy. At a campaign stop in New Hampshire in June 2016, Trump criticized past administrations’ dealings with China, saying that “[The Chinese] are like grand chess masters. And we are like checkers players. But bad ones.” Unfortunately for Trump, it appears that his own administration is now unwittingly playing against a Chinese tycoon with the data of the entire U.S. midstream energy market on the line. Checkmate, Mr. President?
On July 14, 2017, Reuters announced that Hong Kong investment firm ZZ Capital International (8295.HK) agreed to buy U.S. mid-stream energy market intelligence provider Alerian in a deal valued at up to $812 million. This benign announcement garnered little press, surprising not only for the size of the transaction, but also because of the sector of the acquired company and, most importantly, the relative obscurity of the acquirer. Further analysis of the transaction reveals that through a complex web of offshore structures, Xie Zhikun, the mysterious and politically connected Chinese tycoon with affiliations to both the Communist Party leadership and Chinese President Xi Jingping, has orchestrated to take control of all data concerning the U.S. mid-stream energy market.
Alerian and Master Limited Partnerships (MLPs)
Dallas-based Alerian is an independent provider of Master Limited Partnership (MLP) and energy infrastructure market intelligence. MLPs are corporations that are both governed and taxed differently than other organizations—a benefit that is due to the fact that these firms limit themselves to handling natural resources and minerals. There are four basic MLP businesses focused on the transportation, processing, storage, production and mining of energy commodities like crude oil, natural gas, coal, and frac sand. Importantly, the largest segment of MLPs are the North American pipelines for oil and natural gas.
Founded in 2004, Alerian is owned and controlled by billionaire brothers Gabriel and Daniel Hammond. Former Goldman Sachs banker Kenny Feng is the current president and CEO. In addition to deep market intelligence of the MLP sector, the Alerian MLP Index is the leading gauge of energy Master Limited Partnerships (MLPs) with a market-cap of over US$300 billion and with over $18 billion being directly tied to the Alerian Index Series through exchange-traded funds and notes, separately managed accounts, and structured products.
Ownership of Alerian will provide access to all data of mid-stream U.S. energy companies. The location of pipelines, the routes of trucks laden with oil, as well as all energy development projects throughout the United States are compiled as part of Alerian’s process. The owner of Alerian would have the pulse of all energy movements and developments throughout North America at their fingertips.
ZZ Capital International
ZZ Capital International (ZZCI–8295.HK) is a Hong Kong listed company created in 2011 and is the flagship international alternative investments platform for Zhongzhi Enterprise Group (ZEG), the privately-owned corporation founded by Xie Zhikun that claims to be one of China’s leading asset management firms. While relatively unknown outside of China, ZZCI’s sister organization, ZZ Capital, has faced significant scrutiny from Chinese regulators and is currently being investigated by the China Securities Regulatory Commission (CSRC) for multiple offenses.
According to Forbes.com, Xie Zhikun, who has an estimated net worth of US$2.2 billion, started out as an entrepreneur in the timber business and real estate in the 1990s before switching to the financial services industry. While there is very little available concerning Zhikun in the public domain, his family ties show strong political connections in China.
Xie Zhikun’s older brother, Xie Zhichun, is currently Chairman of China Fortune Financial Group Limited. Previously, Zhichun was Deputy General Manager of China Everbright Group and prior to that was Deputy Manager of China Investment Corporation, China’s sovereign-wealth fund.
More importantly, however, Xie Zhikun’s wife, Mao Amin, is a Chinese singer known by the “honorific title” of Dajieda (“Big Sister”) and is one of China’s most famous female pop stars. In 2001, she was one of 36 Chinese athletes and entertainers who were depicted on a series of postage stamps issued in support of Beijing’s bid for hosting the 2008 Olympic Games. The political connection is, however, most powerful: Mao Amin frequently shares the stage each year during Chinese New Year celebrations with her former singing partner Peng Liyuan —the wife of the current Chinese President Xi Jinping.
Sun Tzu, 5th-century author of The Art of War, stated, “If you know the enemy and know yourself, you need not fear the result of a hundred battles.” Xie Zhikun is close to having all knowledge of the U.S. midstream energy market at his fingertips—for what purpose no one knows. As Donald Trump once famously tweeted, “China is neither an ally or a friend—they want to beat us and own our country.” If the Trump administration doesn’t move quickly, the entire data of the U.S. energy sector may be a first step for China to achieve the goals President Trump himself has warned against.
Kate Bohner brings 25 years of management, media and marketing experience to her advisory firm, Bohner Bespoke. She advises clients in areas such as finance, marketing and business planning across a diverse range of investment services and distribution channels, including regulatory compliance, brand positioning, strategic marketing, crisis communications, content creation, product and business development. She co-authored Trump: The Art of the Comeback with President Donald J. Trump, which hit #1 on the Wall Street Journal Bestseller’s List.