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China's Elite Hide Wealth Offshore

  • VOA News

FILE - 100 Yuan notes are seen in this illustration picture in Beijing.

FILE - 100 Yuan notes are seen in this illustration picture in Beijing.

Relatives of China’s top leaders, including president Xi Jinping and former premier Wen Jiabao, as well as members of the country’s business elite have been helped by Western banks to hide their wealth in tax havens according to a team of investigative journalists.

The report, by the International Consortium of Investigative Journalists (ICIJ), is the latest probe into the wealth of some of China's most powerful individuals, including so-called princelings, those tied by blood or marriage to China's revolutionary leaders.

Journalists focused on leaked documents

The journalists spent months combing through some 2.5 million leaked documents before publishing their findings Wednesday.

The news comes as one of the country's most vocal proponents of financial transparency within China's politics faces trial on charges relating to his advocacy for government officials to disclose their assets.

Banks leaked documents

The confidential documents were leaked by two banks based in Singapore and the British Virgin Islands. The ICIJ has published the results of their investigations since April, but this is the first time the group disclosed details on the nearly 22,000 offshore clients with addresses in China and Hong Kong.

“As the country has moved from an insular communist system to a socialist/capitalist hybrid, China has become a leading market for offshore havens that peddle secrecy, tax shelters and streamlined international deal making,” the report read.

Incorporating companies offshore is not illegal in China, where the tax system has loopholes that allow companies to sell their products through subsidiaries located abroad and report lower profits inside China.

Chinese public sensitive to corruption

But the convergence of extreme wealth and connections with political power remains a sensitive topic in China, where people are easily incensed by the visible marks of officials' corruption.

Jean-Pierre Cabestan, a political scientist at Hong Kong Baptist University says wealthy Chinese, especially those with blood links to China's political elite, might choose to incorporate companies abroad for tax reasons as well as political ones.

“They do not want the money in the same basket, they want to put the money in a safe place for their old days, or if anything happens.” He said, “it shows that they do not fully trust the system and the future of the current political system.”

High Officials in China allegedly involved in offshore companies

Among the ICIJ's findings are details about offshore companies set up by relatives of at least five current or former members of the Politburo Standing Committee, China's highest decision making body.

On the list is President Xi Jinping's brother-in-law, Deng Jiagui whose family's wealth was exposed by a Bloomberg's article in 2012.

According to the ICIJ, Deng, who made a fortune in real estate and electronics, owns 50 percent of a company called Excellence Effort Property Development located in the British Virgin Islands.

The ICIJ also connected records of a number of British Virgin Island companies to the son, daughter and a family friend of former premier Wen Jiabao.

It is not the first time that Wen's family has come under scrutiny for its secretive wealth.

In 2012, The New York Times reported that while Wen was in power, his relatives accumulated billions of dollars in hidden assets.

Before the ICIJ published its findings, Hong Kong media reported that Grandfather Wen, as the ex premier is affectionately called in China, defended himself in a December letter to a Hong Kong newspaper columnist.

Wen wrote that he had never been involved in any deal abusing his power for personal gain because “no such gains whatsoever could shake his conviction.”

Some Hong Kong media have reported that Wen himself might be under investigation in the mainland.

Chinese leaders aware of public discontent

Aware of the popular discontent against mounting corruption, politicians in China have promised to deliver a clean government by cracking down on all levels of graft.

In the past year, an increasing number of high ranking officials have been put under investigation, but authorities remain wary of media reports that disclose the finances of senior politicians and their families.

According to the ICIJ, a mainland Chinese news outlet working in partnership with the ICIJ on the bank documents discontinued the investigation after warning from authorities not to publish any of the leaked material.

The ICIJ website, which carried a translation of the report in Mandarin, was blocked in the mainland shortly after the report went online and searches for the document on China's microblog services were also censored.

News about off shore wealth always gets out

Cabestan said that even though reports on the wealth of well-connected families are blocked in China, news always trickles in. In the long term, he says, that might generate more popular resentment against the privileged.

“But whether they [people in China] are in a position to change and put pressure on their leaders and change the system is another story. We have to be careful there because the political system is pretty strong,” he said.

The ICIJ said it will continue to publish stories in the next few days, and it will provide a list of names connected with offshore accounts on Thursday.

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