Chinese leaders have trillions offshore?

January 24th, 2014 at 12:00 pm by David Farrar

The International Consortium of Investigative Journalists writes:

Close relatives of ’s top leaders have held secretive offshore companies in tax havens that helped shroud the Communist elite’s wealth, a leaked cache of documents reveals. …

Chinese officials aren’t required to disclose their assets publicly and until now citizens have remained largely in the dark about the parallel economy that can allow the powerful and well-connected to avoid taxes and keep their dealings secret. By some estimates, between $1 trillion and $4 trillion in untraced assets have left the country since 2000.

The growing onshore and offshore wealth of China’s elites “may not be strictly illegal,” but it is often tied to “conflict of interest and covert use of government power,” said Minxin Pei, a political scientist at Claremont McKenna College in California. “If there is real transparency, then the Chinese people will have a much better idea of how corrupt the system is [and] how much wealth has been amassed by government officials through illegal means.”

China seems no different from other countries where leaders effectively do not face elections and do not have a free press.

Hat Tip: No Right Turn

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33 Responses to “Chinese leaders have trillions offshore?”

  1. aquataur (56 comments) says:

    A couple of other points relevant to this post.

    Whenever I want to send money overseas to a son studying, I have to go through hoops to prove I’m not money-laundering. Similarly, if I want to transfer money in excess of $10,000 into a family trust. Yet we allow wealthy mainland Chinese to buy homes here with no questions asked as to the source of their wealth, which I suspect is tainted in many cases.

    My source for this – an ex Ambassador to China from an OECD country. He made the point that a general in the PRA who was controlling the military in a province would have a salary of around $250,000. But in most instances, his family would have a net worth of somewhere in excess of $20m. This doesn’t come from savings !

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  2. anonymouse (716 comments) says:

    Given that the RMB is not fully fungible, to have that sort of offshore flow tends to imply that the Bank of China is officially or unofficially “looking the other way”,

    Sounds like a good article to run next to the one about the banged up Aston in Auckland:)

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  3. duggledog (1,557 comments) says:

    Then… let’s do business!

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  4. david (2,557 comments) says:

    People controlling that much wealth and being desperate to not be uncovered will make decisions that defy “economic rationality” as we understand it. Values will be distorted as there is no need for asset purchase decisions to conform to any requirement of returns, borrowing costs or productive value and this is the area that makes many, otherwise rational, New Zealanders concerned at the apparent ease with which Chinese (in particular) can bid up prices and reset the market.

    Reference anonymouse’s comment – who in their right mind buys an Aston Martin for his wife as a present while on holiday in another country? The answer can only be someone who places a low value on $350,000 and can afford to walk away from its loss.

    The other , rather bizarre, thing is that what we see as conspicuous consumption is actually secret money laundering. Depends on where you are looking at it from I guess.

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  5. dime (9,972 comments) says:

    And we wonder why housing markets worldwide are fucked.

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  6. Kea (12,841 comments) says:

    China seems no different from other countries where leaders effectively do not face elections and do not have a free press.

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  7. Kea (12,841 comments) says:

    And we wonder why housing markets worldwide are fucked.

    dime, stop wondering. It is because the financial institutions flooded the market with artificially cheap debt and unaffordable loans.

    That girl has changed you dime ;)

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  8. Kea (12,841 comments) says:

    China seems no different from other countries where leaders effectively do not face elections and do not have a free press.

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  9. kowtow (8,475 comments) says:

    ……but,but ,but,they have a free and open economy……

    the New Zealand government was the first in the world to say so!

    Kowtow,kowtow.

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  10. virtualmark (1,528 comments) says:

    Where’s Cactus Kate? :)

    There’s no surprises that her line of work is in demand in Hong Kong.

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  11. virtualmark (1,528 comments) says:

    And all that money channelled to the BVI isn’t just sitting in bank accounts. It’s being put to use buying assets like real estate and shares. It’s a big factor in the strong real estate prices in Auckland, and Sydney, and Vancouver, and (on and on it goes).

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  12. nickb (3,687 comments) says:

    It’s a shame that groups like the corrupt chinese see everyone using offshore structures labelled a crook, moneylaunderer or tax evader.

    Edit: Wait until NZ’s lawyers and accountants become subject to our Orwellian new AML laws and see how much it is to get a conveyancing done then

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  13. virtualmark (1,528 comments) says:

    until now citizens have remained largely in the dark about the parallel economy that can allow the powerful and well-connected to avoid taxes and keep their dealings secret

    Not sure that’s quite right. I suspect China’s citizens have long known there is a parallel economy whereby the powerful and well-connected avoid taxes and siphon money off. But this latest development just highlights the scale of that parallel economy, and how it’s structured.

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  14. stephieboy (3,078 comments) says:

    Kea (9,768 comments) says:
    January 24th, 2014 at 12:51 pm

    Would I be right in surmising that you place little value on things like the fact of heavy Internet filtering , media censorship and the very concept of an open society like we enjoy here.?

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  15. edhunter (547 comments) says:

    Well bury me arse up in the sand & call me a bicycle stand.
    These investigative reporters are good aren’t they? Who’d have thought there’d be a Chinese Elite Class saying do as I say not as I do.

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  16. Kea (12,841 comments) says:

    Would I be right in surmising that you place little value on things like the fact of heavy Internet filtering , media censorship and the very concept of an open society like we enjoy here.?

    stephieboy, NO.

    But that was not the topic so I am puzzled why you raised it.

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  17. labrator (1,850 comments) says:

    I thought communism was supposed to end poverty?

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  18. Kea (12,841 comments) says:

    labrator, I have very strong views about some of the methods used by the communist Chinese and the appalling events of the Cultural Revolution and Great Leap Forward.

    However, the communist party has lifted hundreds of millions out of poverty in recent times. More so than democratic India. Credit where credit is due.

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  19. NK (1,244 comments) says:

    How much did a recent Prime Ministerial hopeful (Shearer) have in a secret US account?

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  20. labrator (1,850 comments) says:

    @kea it was a gentle dig at the redistributive idealogists that like to throw catch phrases around. China’s success, and thusly it’s decreasing poverty, has come about as a result of adopting more free market principles. To have such gross corruption highlighted, although still unverified, as an incredible juxtaposition against some of the nut jobs that think that John Key is corrupt because of incredibly transparent deals he’s made eg Sky City. We just have it so damn good here but all some people like to do is complain and all I want to do is ship them to China, or India, or any other number of places and see how long they last. I’d watch a reality TV show that featured Russell Norman & pals throwing the Tibetan flag at police on Tiananmen Square.

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  21. Reid (16,457 comments) says:

    I think it’s cultural. Bribery is endemic in Asia as in the ME, just another cost of doing business.

    OTOH just because you have democracy and a [purported] free press doesn’t mean you’re immune. Look at the States, where you have endemic corruption in the political system through the lobbyists and through the revolving door system whereby a huge number of military go straight into defence contractors who miraculously then procure lucrative govt business.

    And don’t pretend the lobbyists don’t offer bribes and congressmen don’t take them. That’s the height of naivety. Of course AIPAC goes one better and not only offer bribes but also sanctions, via its propensity to fund the opposing politician in the congressman’s district if they dare not to be sufficiently subservient.

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  22. kowtow (8,475 comments) says:

    The communist party has not lifted millions out of poverty.

    It was one little fella,Deng Xiao Ping who won an internal power struggle to run the party after Mao died.

    His policy and all that foreign investment (our factories and jobs).

    If it was down to the communist party as such China would still be stuck in the ’50’s.

    Make money there while you can ,it won’t last.

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  23. Kea (12,841 comments) says:

    kowtow, I will accept your claim Deng Xiao Ping led the party. But this is no different to any other party or system. You can not remove the success from the party and give it to one man.

    You have even got me defending commies now ! LOL ;)

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  24. Kea (12,841 comments) says:

    Very thought provoking this:

    http://www.ted.com/talks/eric_x_li_a_tale_of_two_political_systems.html

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  25. Reid (16,457 comments) says:

    Make money there while you can ,it won’t last.

    What’s going to stop it? Nothing, except a biological attack that wipes them out.

    Asians are a lot harder working than Caucasians, they also value education a lot more, they’re also ruthless by comparison to us in that they don’t seem to have the altruism gene to the extent we have it. Some do but most don’t. They also have this stupid concept they call face which makes them buy a beemer and wear their wealth so everyone thinks they’re “successful” even if they have nothing in the bank. All those traits combine to make them powerhouse capitalist consumers who can and are outstripping the US and all the rest of the Caucasian world at the game we hallucinate we invented. Frankly I don’t give a damn because people who are so spiritually superficial as to regard worldly possessions as being the only thing worth striving for haven’t learned a thing about life and who cares if they all become as rich as mammon?

    You just wait till Shanghai and Moscow become the new global financial trading centres replacing NY and London. It’s not that far away, twenty years.

    Unless they all get wiped out by a biological.

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  26. Kea (12,841 comments) says:

    Asians are a lot harder working than Caucasians, they also value education a lot more, they’re also ruthless by comparison to us in that they don’t seem to have the altruism gene to the extent we have it

    Reid, I agree.

    People are concerned about China becoming the leading global economy, but maybe that China will be a different one to the image we have formed from past association.

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  27. Reid (16,457 comments) says:

    maybe that China will be a different one to the image we have formed from past association

    No I don’t think it will. I think it will be like what the 19th century was like, except this time, we’re not the colonials, we’re the natives …

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  28. stephieboy (3,078 comments) says:

    Kea . Very thought provoking.?

    This from the comments section,

    “The only thing that he manages to prove is that Capitalism and Democracy are not the same thing, but that is something that any educated person already knows. In the West we have capitalism AND democracy. In China they have Capitalism and oligarchy. It’s a very different thing.”

    II still suspect that authoritarianism as per the Beijing regime has a strong resonance with you.?
    And it is everything to do with what this thread is about .

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  29. adamsmith1922 (890 comments) says:

    Trillions, really. I doubt, billions I will believe, trillions I find highly doubtful

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  30. stephieboy (3,078 comments) says:

    Reid , Bejing and Moscow will not become the new global finance centers until both are committed to working towards the open society of the kind we are familiar with and take for granted.

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  31. Reid (16,457 comments) says:

    stephie, how’s those wimmins studies going? (It’s just you’re obviously not reading geopolitics…)

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  32. SPC (5,619 comments) says:

    China lifted a billion people out of poverty because it was socialist (consider India where people still live without running water and sanitation) and because it was given access to the global market (whereas Cuba was not).

    The USA imagined in an act of Fukuyama hubris – the end of history, that by allowing China free trade, prosperity would democratise the government of China.

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  33. CharlieBrown (1,012 comments) says:

    “China seems no different from other countries where leaders effectively do not face elections and do not have a free press.”

    South Africa has elections… hardly call them a shining example of honest government. I hate it how people believe that having elections mean democracy, with the logic of alot of people, you could deny 40% of people the rights to own property and give them votes that only count half as much as the other 70% and because they have an election every 3 years it is fine and fair (doesn’t that sound like a small pacific country). Too many people are fanatics about this form of democracy in the same way islamist extremists are fanatics about their religion.

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