• Tue
  • Dec 23, 2014
  • Updated: 8:52am

Crooked cadres in China prone to hide their dirty money in property

Luxury flats are a relatively easy and inconspicuous place to conceal dirty money

PUBLISHED : Thursday, 07 February, 2013, 12:00am
UPDATED : Thursday, 07 February, 2013, 4:42pm

Their titles vary and they come from around the nation, but there is one thing the 10 corrupt officials reported by whistle-blowers in the past two months have in common: each owned more than a dozen properties.

From local police heads to bank executives, officials who own an unusually large number of properties - in an extreme case, one is suspected of having 192 - have been reported to authorities in the wake of the new leadership's call for citizens to help in the fight against corruption.

Property, although relatively illiquid, is a favoured investment on the mainland because of the record high returns that it has delivered and the opportunity it provides to launder ill-gotten gains, economists say.

"Property has always represented wealth, especially so after China's housing reforms in 1982, which sent property prices soaring," said Professor Hu Xingdou, a political analyst at the Beijing Institute of Technology.

Under the reforms, property became merchandise for individuals to buy instead of housing assigned by an employer. Prices have been buoyant over the past decade as the rich and powerful snapped up investments and ordinary people scraped savings together to buy a place to live in.

In major cities like Beijing, Shanghai and Guangzhou, prices have risen by more than tenfold over the past decade.

In Beijing, luxury housing cost as much as 300,000 yuan (HK$373,000) per square metre in 2011 before regulators pegged back prices to avoid social unrest. Urban residents' annual disposable income was 21,810 yuan per capita that year.

"In big cities there are plenty of rich people and corrupt officials, so someone owning 10 or 20 properties is hardly noticeable," Hu said. "Property is a bribe less traceable than straight cash, which leaves clues in bank accounts."

Property is a bribe less traceable than straight cash, which leaves clues in bank accounts

Faking a hukou, or proof of residency, could easily make the real owner of properties less visible. Zhai Zhenfeng , a former director of the housing administration bureau in Zhengzhou in the central province of Henan , and three family members all had two hukou and between them owned 31 properties, it was revealed in December.

Reflecting robust demand for fake hukou, there was a thriving business in a county in Jilin , with a grass-roots police station charging 30,000 to 50,000 yuan for an extra hukou, according to Xinhua.

Yuan Gangming , a researcher at the Chinese Academy of Social Sciences and Tsinghua University, said housing has the characteristic of being valuable but not high-profile.

"More importantly, you cannot easily tell whether money used to buy property is clean or not, so it could facilitate laundering of illegal gains," he said.

The transfer of ill-gotten gains into property has been rampant on the mainland in recent years because the government condones it, Yuan added.

"The central government has been relying heavily on the real estate sector to drive economic growth, and thus it tolerates the plundering of wealth by the powerful," he said.

No official data exists for the number of vacant properties, which would be an indicator of the severity of the situation. There is also no nationwide tax on property ownership and no estate duty on inheritance. These factors make property ownership low risk and low cost.

Since November, a large amount of luxury housing has been dumped on to the market by sellers including government officials and senior managers of state-owned enterprises, spooked by the latest round of corruption busting, a source told The Economic Observer. Some 714 officials fled overseas between September 30 and October 7 last year, according to the Beijing newspaper.


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The article is a reflection of what is happening not just in China, but has been happening in Hong Kong as well. Just check how many properties here are owned by officials or their families from mainland. Even some Hong Kong people own multiple properties, automobiles through companies either registered locally or in some tax haven countries like the British Virgin Islands. Hong Kong is a great place for money laundering and that is part of the reason for the skyrocketing prices.
I did not see any "difficult sentences" in this post... The cancer of corruption is now showing its impact on society. The corrupt distort the real estate market, driving prices up, leaving apartments (and even office space) vacant in large quantities – then we are told there is "high occupancy rates" (of the ones on the market for rent!). Rental prices have gone up in Beijing as a result, making life very difficult for migrant workers who do not have the possibility to buy something (restrictions and too expensive). Service people are harder to get here as they cannot cope anymore with the rising costs. Restaurants are closing down as rents are too high. The corrupt not only rob the people, they also poison society. How can one still respect the officials if this is not cleaned up?
Was this story edited? I had to read some sentences several times to understand the meaning. The quality continues to sink at the SCMP.


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