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  • Dec 19, 2014
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British Virgin Islands leaks

On April 4, 2013, the International Consortium of Investigative Journalists (ICIJ) began leaking the details of 2 million emails and other documents naming prominent public figures from around the world who were concealing their wealth through the offshore tax haven of the British Virgin Islands. Based on this leak, the ICIJ released a report focussing on China's elite on January 22, 2014.

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ChinaLeaks: Exposé on Chinese elite’s offshore accounts comes at sensitive time

Family members of Deng Xiaoping and Xi Jinping, along with Tencent billionaire and China's richest woman, are among 20,000 people in Hong Kong, the mainland and Taiwan whose offshore holdings have been exposed

PUBLISHED : Wednesday, 22 January, 2014, 7:26am
UPDATED : Thursday, 23 January, 2014, 9:06am
 

Relatives of at least five current and former members of China’s top leadership have been exposed as having offshore accounts, as part of a revelatory report by investigative journalists.

The leak, part of a package of 2.5 million files obtained by the International Consortium of Investigative Journalists, points to nearly 22,000 offshore clients with addresses in mainland China and Hong Kong and 16,000 offshore clients from Taiwan.

"China has become a leading market for offshore havens that peddle secrecy, tax shelters and streamlined international deal-making,” the report said. “Every corner of China’s economy, from oil to green energy and from mining to arms trading, appears in the ICIJ data.”

The anti-corruption crackdowns in China may have accelerated such trends
Dali Yang, political scientist

While offshore accounts do not imply illegal behaviour per se, the report comes at a crucial moment in China’s ongoing debate on the wealth amassed by family members of China’s top leaders.

It coincides with the trial of Xu Zhiyong, the founder of the New Citizen Movement, a grass-roots campaign which has called for the declaration of assets by government officials. Xu and other members of the movement stand trial this week on charges of “assembling a crowd to disrupt public order”.

Previous reports by Bloomberg and The New York Times have revealed the wealth of the families of President Xi Jinping and former Premier Wen Jiabao, as company records and stock exchange filings made the obscure dealings of China’s elite more transparent. 

The ICIJ's revelations on Wednesday has shed further light into such family fortunes.

Deng Jiagui, brother-in-law of China’s President Xi Jinping, as well as Wen Yunsong and Wen Ruchun, two children of former premier Wen Jiabao, appear to have held offshore accounts, according to the ICIJ.

Other prominent names on the Cook Islands or British Virgin Islands accounts include relatives of Deng Xiaoping, former president Hu Jintao and former premier Li Peng.

For Dali Yang, a political scientist at the University of Chicago, these offshore bank accounts are the result of concerns over the world’s second-largest economy’s stability.

“The fact that some of China’s most politically well-connected families are implicated suggest that they are as worried about the safety and anonymity of their assets as many others,” he said.

“The anti-corruption crackdowns in China may have accelerated such trends,” he added, referring to an ongoing anti-corruption campaign under Xi's administration.

Earlier this month, the Communist Party’s Central Committee revised its guidelines on cadres, barring the promotion of so-called “naked officials" -- officials with direct family members abroad.

Last year, at least 1.2 million cadres would have been affected, according to an estimate by Chinese Academy of Governance professor Zhu Lijia.

“It’ll be a stumbling block for some of these people,” said Steven Lewis from Rice University in Houston, Texas. “But they’ll go to slightly more distant relatives.”

The business connection

The ICIJ report also mentions some of China’s most prominent entrepreneurs, pointing to how the political dynasties have developed close ties with the country’s business elite.

China’s richest woman, Yang Huiyan, the majority shareholder of property developer Country Garden Holdings, China’s richest man Pony Ma Huateng, founder of internet giant Tencent, and real estate billionaire Zhang Xin, who founded Soho China, are all reported to hold so far unreported offshore accounts.

As the rich get richer ... by using the world’s shadow financial system ... the middle class, the working class and the nation’s poor suffer
Clark Gascoigne, think tank spokesperson

It also includes names of officials who have been implicated in the ongoing graft investigation against China’s former security czar Zhou Yongkang, the nation’s highest-profile probe in recent history.

Many mainland companies have sold their products at low prices to their own offshore subsidiaries. The subsidiaries then, in such structures, resell the products at higher prices avoiding the payment of some mainand tax.

The subsidiaries can then repatriate the profits or opt to keep them abroad, avoiding China’s restrictive regime on cash outflows.

Around US$400 billion have been brought back to China through trade invoicing since 2006 just through Hong Kong, the Washington-based think tank Global Financial Integrity (GFI) estimated in a report released earlier this month.

Clark Gascoigne, spokesperson for the think tank, which has been tracking global illicit money flows since 2006, said China is the world’s biggest exporter of illicit capital, ahead of Russia and Mexico. (Full story here)

“As the rich get richer through tax evasion and by using the world’s shadow financial system to shelter and multiply their illicit wealth, the middle class, the working class and the nation’s poor suffer,” he said, pointing to the government’s inability to tax those able to hide their wealth and to monitor bribes via offshore accounts.

The ICIJ report said it could substaniate evidence “that many Chinese companies and individuals have used offshore entities to engage in illicit or illegal behaviour”, citing offshore accounts by former officials of the now-dissolved Ministry of Railways and state-run shipping giant Cosco who have received jail sentences for graft in recent years.

Response to exposé

It is unclear who leaked the documents, which the ICIJ said came from two companies that help set up offshore accounts: Portcullis TrustNet in Singapore and Commonwealth Trust Limited in the British Virgin Islands.

The number of companies TrustNet established for clients in greater China more than tripled from 1,500 to 4,800 between 2003 and 2007, ICIJ said.

A dramatic decrease in company incorporations followed the ICIJ’s first release of company names in April last year. As of the end of September 2013 (the latest figures made available by the British Virgin Islands Financial Services Commission), new incorporations fell 14.4 per cent to 48,507.

At that time, 480,072 corporations were registered in the British overseas territory, which has a population of 23,000.

The first batch of files had already pinpointed some account holders in Hong Kong, but the consortium seems to have kept most of its China-related findings under wraps until Wednesday.

The ICIJ website was blocked in China as of Wednesday and comments on the report have been quickly deleted on Chinese social media.

“This is a continuing trend in a world where more and more information is now available covertly or overtly,” said Kerry Brown, professor of Chinese politics at the University of Sydney.

“Maybe Xi and his colleagues are being very pragmatic in admitting that the way parts of the political/business elite hid money in the past is no longer feasible: like it or not, it will be found out.”

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This article is now closed to comments

allan94
so the chinese elite are corrupt. what can we do about it? this report is like telling everyone their mother is a woman.
paul_w_s_lee
Most Chinese leaders and CCPC members have planned their escape decades ago. CCPC will end, but corruption, nepotism and cronyism will flourish under Chinese brand of fascist-capitalism. It's all about exploiting the resources and people in China to benefit the privileged few. There are plenty of greedy collaborators from JP Morgan, Goldman Sachs to UBS waiting for an opportunity to help corrupt officials and businessmen shelter their money in offshore accounts.
The socialist democratic experiment has failed absolutely.
lucifer
They learned this practice from their African dictator friends. One needs a safe place to squirrel away all the ill gotten gains in case it's necessary to flee. But, more importantly, its easier to hide them abroad where its conveniently more difficult to confiscate them as well.
andreaswagner
So the Chinese kleptocracy hides their ill gotten gains abroad. Wow, THAT is news....
hk.speaks
Why would a wrong doing become justified just because some Americans have committed the same wrong doing? I thought such behaviour is only found among kindergarteners - "He did that too.....!" Give me a break. These officials, princelings, extended affiliates and what have you are crooks, PERIOD!
pgrath1
When isn't it a "sensitive time" to expose Chinese corrupt, socialist/crony-capitalist/fascist leaders?
jeffrey.forsythe.52
The entire filthy CCP is run on corruption, brutality, brainwashing, torture and murder. Since1999, the heinous CCP has been attempting the genocide of the tens of millions of innocent Falun Gong practitioners by the use of torture, slavery, organ harvesting and murder. This is the true nature of the CCP. The West ignores the atrocities being committed by the blood-thirsty regime because of corporate greed. Thank you for your consideration.
Camel
Hilarious how you put this. What about all your so praised US friends like wannabe president Romney (who did have offshore accounts in the Virgins and Swiss) etc. to place money safe from the Inland Revenue Department? If you want to learn, then better learn from our US friends how to keep money safe and secret, well just in case.
And about the news, well what is new?
lucifer
First of all, I am certainly not American. However, I do read the news enough to know that Romney had offshore accounts and they were reported on his income taxes. Otherwise, he would have been jailed. Unfortunately for Americans, the government taxes world-wide income, so off shore accounts must be reported in case they earn taxable income. There are many reasons to have offshore accounts, especially for business purposes. Even a U.K. account is considered offshore to the U.S. government. OTOH Chinese officials use offshore accounts to hide money gained from corrupt means or that is outright stolen. One cannot explain tens of millions of Yuan with the snarly of an official. You are talking Apples and oranges, yet if you reach far enough back in time, I am sure you can justify the corrupt actions of China's leaders in many creative ways.
crbfile
this news means nothing. anyone with US$ 1000 can set up an offshore company. sorry, but there is nothing salacious here! where's the beef?
show tens of millions of assets and a hidden trail of ill-gotten gains, then maybe.
but right now, just - meh.....

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