Chinese leader Xi Jinping last year summoned dozens of leaders from the nation's top private companies to a rare meeting, calling on them to help China navigate economic difficulties.
Sitting with luminaries such as Alibaba's Jack Ma and DeepSeek founder Liang Wenfeng, according to state media, was a 55-year-old man named Chen Jianhua, founder of a company called Hengli Group.
To the outside world, Hengli -- which in Chinese means "eternal strength" -- may not ring a bell. But inside China, it has become an industrial juggernaut. With operations spanning petrochemicals, textiles and shipbuilding, it employs more than 300,000 people and records revenue north of $100 billion a year -- more than Tesla or Boeing -- according to the company's website.
It has also become a major importer of illicit Iranian crude, according to industry analysts, shipping brokers and the U.S. Treasury, which sanctioned the company's refinery business earlier this year, saying it bought billions of dollars' worth of Iranian petroleum. Hengli's other businesses weren't sanctioned.
U.S. officials say Hengli is one of the biggest players in a vast ecosystem of "teapot" refineries in China that for years have been buying sanctioned oil.
China's purchases of Iranian oil -- mainly thanks to teapots -- topped more than $30 billion last year, soaking up nearly all the country's exported petroleum and bankrolling Iran's theocratic regime, according to a March report by the U.S.-China Economic and Security Review Commission.
Hengli and other similar Chinese companies are able to buy the oil at a steep discount to market prices, boosting profits.
Hengli didn't reply to requests for comment. It has previously said it complies with relevant regulations in the regions where it operates, has never engaged in any trade with Iran and that its suppliers have provided similar assurances.
In a bond prospectus, Hengli said its crude oil is mainly sourced from the Middle East, including from Saudi Aramco and other companies it didn't name.
Chen, Hengli's founder and chairman, is now one of China's richest men, with an estimated fortune of $20 billion, up from $2 billion around a decade ago, according to Forbes. His wife, Fan Hongwei, who chairs the petrochemical and refining business, has a net worth of over $5 billion.
People familiar with the company's operations say Hengli has been buying sanctioned oil since at least late 2020, with purchases expanding after Russia's invasion of Ukraine in 2022. It turned to cheaper sanctioned crude in part because its petrochemical business has a heavy debt load, they said, and relies heavily on Russian and Iranian crude, sometimes buying at up to a 25% discount to market prices.
China's Commerce Ministry publicly told companies in May not to comply with the U.S.'s blacklisting of several Chinese refineries, including Hengli, over alleged purchases of Iranian oil.
The oil Hengli buys is a drop in the bucket for China, which has imported more than 4 billion barrels annually in recent years. Still, it illustrates the big opportunities for businesses that are willing to circumvent international sanctions.
Purchases by Hengli and other teapots also explain how China continues to provide a financial lifeline to Tehran. Unlike China's better-known state-owned firms, which generally steer clear of sanctioned oil to maintain access to the U.S.-led global financial system, China's more than 100 teapot refiners have minimal need for dollars -- and therefore less to lose if they get sanctioned.
Iran's oil exports have been greatly reduced after the U.S. imposed naval blockades of Iranian ports, though it is unclear how long that will remain the case.
The Chinese government didn't reply to requests for comment. China's Foreign Ministry has previously said it is unaware of any oil trade between China and Iran.
It has also said it firmly opposes what it considers to be "illegal and unreasonable unilateral sanctions," and would do whatever is necessary to protect China's energy security.
Empire building
Chinese state media has attributed Hengli's accomplishments to Chen and Fan, saying they transformed a small textile factory into the country's third-largest privately owned company through hard work and business savvy.
In interviews with state media, Chen described how he grew up poor in a silk-weaving town in eastern China, where he dropped out of school at 13, unable to pay the fees. He said he later got into silk trading, often sleeping in communal beds with other people as he traveled from town to town buying and selling fabric. Along the way, he met his wife, an accountant at a state-owned textile mill, state media said.
Eventually, they were able to buy a bankrupt silk-weaving factory, Chen said in a speech last year, turning it into a thriving business.
A longtime Hengli employee told a state-owned newspaper that Fan, who handled the finances, was so busy that she sometimes skipped meals. She also avoided drawing attention to herself. Once, after a worker dyed her hair blonde, she rushed back to the hairdresser to make it black again, worried she would look out of place at the company, the worker said.
Hengli eventually expanded into other textiles, including polyester, which required petroleum-based raw materials such as purified terephthalic acid that China imported from abroad. Chen and Fan decided it would be better if Hengli made PTA itself -- which meant building its own major refinery.
"Only by not being controlled by others and not being chokeheld leads to sustainable development," Chen told the Chinese Newspaper Association, which published an account of his decisions.
Hengli picked the remote island of Changxing, in China's northeast, to set up operations. In a speech last year Chen recalled that he lived on the construction site, which initially had no electricity, water or cellphone signal, for four years.
Embracing the project, China's cabinet publicly called on local officials to help Hengli launch construction as soon as possible. In 2019, China's then-premier, Li Keqiang, visited the site and got a briefing from Chen on Hengli's future plans. "What do you need from us?" Li asked, according to a government blog post at the time.
Shifting fortunes
Hengli's investment was well-timed. For years, Beijing had restricted privately owned refineries from importing crude oil. Although teapots could source feedstocks domestically from state-owned powerhouses such as Sinopec and China National Petroleum, margins were thin and production capacity was low.
But in 2015, to enhance competition, Beijing started giving teapots more freedom to refine petroleum sourced from abroad. Many moved into buying Iranian oil after President Trump started tightening sanctions in 2018, analysts say.
Between 2017 and last year, China's imports of Iranian oil are estimated to have more than doubled to roughly 1.4 million barrels a day, according to Kpler, a commodity research firm. Practically all the country's Iranian imports were handled by teapots, the Treasury says.
The practice is widely discussed in the shipping industry. In a report published in March, the state-owned financial newspaper National Business Daily described how teapot refineries sourced cheap barrels from "special channels" and transported them to China via so-called "shadow fleet" boats, a group of ships which U.S. officials and industry analysts say use deceptive practices to hide their movements.
Such transfers have helped give independent refiners "a significant procurement cost advantage, which has also been a core means of survival for the industry for many years," the article said.
In April, the Treasury sanctioned Hengli's refining unit. By then, the company's petrochemical and refining industrial park on Changxing Island was one of China's five largest, spanning an area spanning 2.3 square miles, just shy of two Central Parks, with annual revenue of $30 billion.
Hengli blasted the move by the Treasury, saying it "resolutely opposes such groundless allegations" and "illegal unilateral sanctions" imposed by the U.S.
Buying sanctioned oil
The Treasury and brokers in the industry said Hengli has received Iranian oil cargoes from a host of shadow-fleet vessels, including three ships sanctioned by the U.S. that alone have delivered over five million barrels of Iranian crude oil since at least 2023.
One vessel, an oil tanker called Seeker 8, dropped cargo off at Hengli's refinery in January, ship-tracking data suggest. Earlier that month, Seeker 8 had received two million barrels of Iranian crude from another vessel, which had picked up its cargo at Iran's Kharg Island in December, according to Kpler.
Using data from Starboard Maritime Intelligence, a geospatial shipping analysis firm, The Wall Street Journal found that Seeker 8 approached Hengli's port on Changxing Island on the morning of Jan. 27. Then, from just before 7:30 a.m. that morning to about 1:45 p.m. on Jan. 30, it stopped transmitting its location, a common tactic used by shadow-fleet tankers to obscure their activities.
Less than five minutes after its location data resumed, the vessel reported a change in draft -- which measures how deeply a boat sits in the water -- of nearly 30 feet, which is consistent with a heavily laden tanker having unloaded its cargo, said Starboard analyst Mark Douglas and Jason Wang, chief operating officer of ingeniSPACE.
Three months later, in April, Seeker 8 was one of 19 vessels sanctioned by Washington for transporting Iranian oil and petroleum products. This summer, it began broadcasting the name Ruby, assuming the identity of a vessel scrapped in 2018 in an apparent effort to keep operating under the radar, Douglas said.
A Zhejiang, China-based company that manages the boat for its owner, according to data provider LSEG, didn't respond to requests for comment.
Expansion plans
As Hengli profits, the conglomerate keeps on growing.
In 2022, Hengli bought the assets of a Dalian shipyard -- once owned by a South Korean shipbuilding giant -- for around $300 million at current exchange rates. Since then, Hengli has transformed the shipyard into China's second-largest, according to Clarksons Research.
Just weeks after Hengli's refinery was sanctioned in April, Hengli's shipbuilding arm -- which isn't sanctioned -- closed over $2 billion in deals to build oil tankers and vessels for clients in Europe. Its order book is filled through 2030, with contracts surpassing $25 billion.
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