Michael Forsythe and Eric Lipton

Through interviews, industry filings and government documents from both countries, The New York Times found that the Chaos, and by extension McConnell, prospered as the family’s shipping company developed deeper business ties in China. Along the way, one of the company’s boosters was Elaine Chao, who now oversees efforts to promote America’s own maritime industry, which is in steep decline as China’s shipping sector rises in global dominance. Here are five takeaways.

— The Chao family’s connections to the Chinese state go back decades

James S.C. Chao, 91, Elaine Chao’s father, studied navigation at a university in Shanghai before fleeing the mainland ahead of the Communist takeover in 1949. His schoolmate for a time was Jiang Zemin, who would become China’s president.

As China was emerging from decades of turmoil in 1984, the Chao family took a stake in a state-owned Chinese manufacturer of marine electronic equipment, documents show. The company targeted sales to China’s military, among other sectors, and was closely affiliated with a ministry run by Jiang. After Jiang came to lead the Communist Party a few years later, James Chao met with him at least six times, including in August 1989 in Beijing — inside the party’s secretive leadership compound. Chao family members said they could not recall this investment.

— The family shipping company is centered on China

Foremost Group, the New York-based shipping company founded by James Chao in 1964, landed its first big contract with the U.S. government, shipping rice to Southeast Asia during the Vietnam War.

Now, it builds most of its ships in state-owned shipyards in China, with some financed by Chinese government loans. In at least two instances, those Chinese-backed, Chinese-built ships entered long-term contracts to deliver iron ore for a state-owned steel-maker.

More than 70% of Foremost’s freight goes to China, and most of that is iron ore, according to recent shipping data. The cargo helps feed China’s industrial machine, which manufactures steel products that are a point of dispute in the deepening trade war between China and the United States. The company describes itself as a small international business and says it does not have a particular focus on China, beyond what most dry bulk carriers have in a world dominated by Chinese manufacturing.

— Budget cuts targeted America’s shipping sector as the Trump administration’s commitment under Chao is questioned

The Trump administration has left little doubt that the federal government is willing to use its clout to boost certain American industrial sectors, including coal and steel. Those efforts have not extended to the maritime industry under Elaine Chao’s leadership.

The Transportation Department budget during her tenure has repeatedly called for cuts for programs intended to support the depressed system of U.S.-flagged ships. The agency budget has also called for scaling back plans to replace up to five academy ships to train a new generation of U.S. mariners.

Agency officials noted that many of the cuts were forced on the department by the White House, and that some of the same programs had been previously targeted, only to see the money restored by Congress, as happened again with the Trump cuts.

With the action by Congress, the plans to build the new training ships are now back on track, and overall maritime spending is up. But the proposed cuts have led to bipartisan questions about the Trump administration’s commitment to shipping.

Transportation Department officials say that Elaine Chao has been a champion for the U.S. maritime system, and that her actions as the head of the agency have nothing to do with her family’s business in China. In China, the Chao family has for decades offered scholarships to students training to join the fast-growing shipping industry there.

“My family are patriotic Americans who have led purpose-driven lives and contributed much to this country,” Elaine Chao said in a statement.

— Elaine Chao’s family ties to the shipping company and her dealings in China raise ethical issues

Elaine Chao hasn’t held a formal position at Foremost since the late 1970s, but she has repeatedly used her connections and status to boost the company’s reputation and visibility.

As transportation secretary, she attended a Foremost contract-signing ceremony in New York in 2017. The other party to the contract, the Sumitomo Group of Japan, was subject to Transportation Department oversight for transit projects. Two months later, she canceled a China trip after officials at the U.S. Embassy in Beijing raised ethical concerns when her office asked to have family members from the shipping company participate in events.

The Transportation Department provided no reason for the trip’s cancellation, though a spokesman later cited a Cabinet meeting President Donald Trump had called at the time.

At her confirmation hearing, Elaine Chao did not mention her family’s extensive ties to the Chinese maritime industry. She also did not disclose several accolades she had received in China — including a role as an international adviser to the city of Wuhan — though the Senate questionnaire requires nominees to list all honorary positions. An agency official described that as an oversight.

Marilyn L. Glynn, a former general counsel at the Office of Government Ethics, said Elaine Chao should recuse herself from decisions that broadly impacted the shipping industry. “She might be tempted to make sure her family company is not adversely affected in any policy choices, or it might even just appear that way,” Glynn said.

The department spokesman denied the existence of any conflict, saying that “the family business is not in U.S.-flag shipping.” Angela Chao, Foremost’s chief executive, said her sister Elaine attended Foremost events “as a family member.”

— McConnell benefited from his marriage into the Chao family

Elaine Chao and McConnell married in 1993, but her campaign donations, along with those of her parents, sisters and brothers-in-law, began flowing years before the wedding. The first $10,000 came in June 1989. In the 30 years since, 13 members of the extended Chao family have given a total of more than $1 million to McConnell’s re-election campaigns and his leadership committees. In 2008, James Chao gave the couple a gift of as much as $25 million, vaulting McConnell into the ranks of the richest senators.

In a statement, McConnell said he was proud to have his family’s support.

This article originally appeared in <a href="https://www.nytimes.com/2019/06/02/us/politics/transportation-secretary-elaine-chao.html" id="ea5747cc-cbe7-3ce4-a9fa-cbf812792418">The New York Times</a>.

For the Chao family, deep ties to the world's 2 largest economies

The family of Elaine Chao, the transportation secretary and wife of Sen. Mitch McConnell, R-Ky. and the Senate majority leader, has high-level political connections not only in the United States but also in China. That gives the family unusual status in the world’s two largest economies.

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Michael Forsythe and Eric Lipton

Articles written by the author

For the Chao family, deep ties to the world's 2 largest economies