Leaked documents reveal substantial funds in "offshore centers usually associated with hidden wealth"
On Jan. 23, anyone with an interest in the intersection of power and money in the People’s Republic will receive an early Chinese New Year gift: the names of nearly 22,000 mainland Chinese and Hong Kong citizens with funds in offshore tax havens in places like the Caribbean and the South Pacific.
The trove of leaked documents originates from two firms that help clients move their money offshore. After gaining access to these secret records, the International Consortium of Investigative Journalists (ICIJ) gathered more than 50 reporters around the world, who spent months combing through the files before they are released to the public. ICIJ has uncovered what it believes to be piles of wealth stashed overseas by “red nobility,” as relatives of China’s communist leaders are known:
Among them are some of China’s most powerful men and women — including at least 15 of China’s richest, members of the National People’s Congress and executives from state-owned companies entangled in corruption scandals … PricewaterhouseCoopers, UBS and other Western banks and accounting firms play a key role as middlemen in helping Chinese clients set up trusts and companies in the British Virgin Islands, Samoa and other offshore centers usually associated with hidden wealth, the records show.
ICIJ reports on a real estate company, part owned by Chinese President Xi Jinping’s brother-in-law, that was registered in the British Virgin Islands (BVI), as well as on firms also set up there by the son and son-in-law of former Premier Wen Jiabao.
In the case of Wen’s son, the creation of his BVI-based company was facilitated by Credit Suisse while his father was still in office, according to ICIJ’s investigation. In addition, ICIJ says records show “that relatives of at least five current or former members of [the now seven-man Standing Committee that rules China] have incorporated companies in the Cook Islands or British Virgin Islands.”
Earlier investigations into the wealth accrued by the families of President Xi and former Premier Wen were conducted by the New York Times and Bloomberg. Both organizations, along with other foreign media, have had their websites blocked by Chinese censors. They also faced hassles late last year when it came time to renewing the visas of their China-based correspondents. A Chinese media organization that had been working with ICIJ in tracking China’s offshore money flows pulled out of the project in November, saying it was facing Chinese-government pressure.
In a society supposedly based on communist ideals, the fortunes of China’s political elite have prompted public outrage. To assuage such anger, Xi has launched an anticorruption campaign targeting wayward officials, pledging to net both high-ranking “tigers” and lowly “flies.” As a result, China’s online community has gorged on a regular diet of financial scandals involving communist cadres who, despite low official salaries, have somehow acquired luxury watches, lavish homes and even funds to send their children to expensive overseas schools.
Yet the pace of such online exposés has slowed in recent months. Some whistle-blowers have been silenced by China’s courts. Despite a public outcry, Chinese officials are still not legally obliged to disclose their personal assets, which would be a basic step in combating graft. On Jan. 22, the closed-door trial began of Xu Zhiyong, a lawyer who spearheaded a grassroots campaign to compel cadres to come clean about their wealth. He is charged with “disturbing public order.” Human-rights groups say the case is politically motivated, with Amnesty International labeling him a prisoner of conscience.
The nation’s capital flight, which ICIJ says involves “every corner of China’s economy, from oil to green energy and from mining to arms trading,” should worry its leaders, particularly as the nation’s economic growth slows to its most sluggish in years. After all, what does it say about confidence levels when the very people who profited most from China’s great economic expansion are parking their cash abroad? Wang Huiyao, head of the Center for China and Globalization in Beijing, which on Jan. 22 released a report on China’s international migration patterns, cites research that found that Chinese with around $1 million in assets had transferred $465 billion overseas in 2011.
Wang says since China began its economic reforms, 9.3 million Chinese have emigrated. Unlike previous generations of Chinese who left home for menial jobs abroad, the new crop of émigrés tends to be wealthy. A survey released this month by the Hurun Report, which tracks China’s moneyed class, found that 64% of surveyed millionaires had either emigrated or had plans to do so.
In several surveys, China’s wealthy have listed concerns over domestic environmental pollution, food safety, health care and the pressure-cooker education system for prompting their flights abroad with their families. But, says Wang, “we can’t rule out the reason some people move overseas is to protect their personal assets.” Given all the questionably sourced fortunes in China today, it’s no wonder tiny offshore tax havens have proved so alluring.
— With reporting by Chengcheng Jiang / Beijing