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Sun, sand and lots of hot money

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It's a balmy Friday night on the Caribbean island of Tortola and the Dove wine bar is heaving. The sharp-suited crowd sipping espresso martinis and imported beer aren't tourists, but tax and trust lawyers who frequent the island's tiny courthouse next door.

Mostly British expatriates, the money they're spending on drinks comes from the advice they give to international clients looking for ways to hide their corporate identities.

Set in the east Caribbean sea, Tortola is the administrative centre of the British Virgin Islands. Overseen by Britain, the archipelago of 36 islets boasts a zero tax rate and corporate secrecy laws that effectively shield the true ownership of the 900,000 companies registered here.

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The BVI, as it's called, used to rely on European and US clients, but increasingly it has become wealthy clients from mainland China who park proceeds from such things as export sales and share offerings here and later often send them back home disguised as foreign investment to avoid tax.

The upshot is that since 2006, the BVI has ranked No2 behind Hong Kong as the biggest provider of foreign investment on the mainland.

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It's a development that has implications for managing the mainland economy and is spurring Beijing to clamp down on the BVI connection.

'Mainland China has been a massive boost to our business,' says a British tax lawyer based on Tortola. 'Our [Chinese] clients say that you haven't really arrived if you don't have at least one BVI company to your name.'

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