THE Renminbi, the People's Money? If ever there was an illustration that on China's Orwellian farm some people's money is more equal than others' it is the fate of the official currency - not to mention the IOUs handed out to the peasantry.
Party boss Jiang Zemin has discovered that corruption could threaten Communist party rule in China. Clever fellow. What is he doing about it? It may be hard to discipline extortionate officials in rural Hunan. But has he been asking his men in Hongkong,Zhou Nan and company, to try to track down guilty parties and missing billions? The single most remarkable and almost totally ignored fact about China's economic situation is this: China has been the source of the most dramatic capital flight at least since that from Latin America circa 1980, and perhaps since the 1930s. This is notsomething which happened in the past two months because of the collapse of the yuan in the swap centres. That collapse was the effect not the cause of the capital flight.
Massive outflow from China was taking place long before the currency debacle. China statistics leave substantial margins for error. But they cannot disguise the bottom line: over the three years 1990-92 something between US$30 billion (HK$230 billion) and US$40 billion has been shifted out of China by enterprises and individuals. The arithmetic is simple. China recorded foreign direct investment which was not less than US$15 billion - and probably more as much from Taiwan via Hongkong goes unrecorded - and increased its foreign debt by some US$17 billion.
Over the same period, foreign exchange reserve rose by US$30 billion to US$47 billion. (Published reserves have recently been cut by US$20 billion to exclude the foreign assets of state institutions but this makes no difference to total flows.) Netting out these figures shows that outflow of capital was not less than around $35 billion. To this must be probably added unquantifiable sums accumulated offshore by under-invoicing of experts via Hongkong.
Part of the outflow has gone into well-publicised acquisition of Hongkong assets by Beijing-controlled companies such as China International Trust and Investment Corporation (CITIC). These investments are partly motivated by a desire to increase political clout in the territory through economic means. In the process they have driven up Hongkong asset values. It may make little long-term economic sense for a capital short nation to be buying high-priced Hongkong assets, but it is at least a result of a conscious state policy.
On the other hand large amounts of capital flight are attributable to the beneficiaries of corrupt deals, salting away new wealth in Hongkong or Swiss back accounts, or Hongkong or Californian condominiums.
EVEN bigger sums are traceable to mainland corporations and foundations which appear to be under the control of central or provincial government enterprises but whose actual beneficiaries are the well-placed individuals who operate them. The relatives ofwell-known figures have been acquiring assets at least as rapidly as did those of President Marcos, or China's own Soong dynasty in the 1930s. The purchase by CITIC chairman Larry Yung - son of Chinese vice-president, Rong Yiren - of the 335-hectare Birch Grove estate, once home of the British prime minister the late Harold Macmillan, is a case in point.