Wednesday, January 22, 2014

Chinese Corruption

Income inequality is a mounting issue in China, a consequence of the country's rapid growth. The country's 100 richest men are collectively worth over $300bn, while an estimated 300m people in the country still live on less than $2 a day. The amassed wealth and alleged corruption among China's political elite has been a topic of growing interest not only in the Western media, but also — to a limited extent — within China itself.

Family members of China's top political and military leaders are making use of offshore companies based in the British Virgin Islands, leaked financial documents reveal.

The brother-in-law of China's current president, Xi Jinping, as well as the son and son-in-law of former premier Wen Jiabao are among the political relations making use of the offshore havens, financial records show.

Deng Jiagui, the husband of the older sister of Xi Jinping, China's president, who has cultivated a public image as an anti-corruption campaigner. According to the BVI records, Deng, a real-estate developer and investor, owns a 50% stake in the BVI-incorporated Excellence Effort Property Development. Ownership of the remainder of the company traces back to two Chinese property tycoons, who last year won a $2bn real estate bid.

 In November, the New York Times reported that a consultancy firm operated by Wen's daughter, who often goes by the name Lily Chang, had been paid $1.8m by the US financial services giant JPMorgan.  Her consulting firm, Fullmark Consultants was set up in the BVI by Chang's husband, Liu Chunhang, in 2004, and he remained as sole director and shareholder until 2006, when he took a job in China's banking regulation agency. Nominal ownership of the firm was transferred at that time to Zhang Yuhong, a Wen family friend, who the New York Times reported had connections with the Wen family's business interests. The company established for Chang's brother Wen Yunsong, with the aid of Credit Suisse, was dissolved in 2008, with little hint as to its purpose or activities in the two years it was operational. One purpose for such companies is to allow for the establishment of bank accounts in the company's name, a legal measure that nonetheless makes tracing of assets a more complicated task.

Other "princelings" — a widely-used term for the families of China's political elite — with offshore ties include: Li Xiaolin, a senior executive in one of China's state-owned power firms and the daughter of former premier Li Peng; Wu Jianchang, the son-in-law of China's late "paramount leader" Deng Xiaoping; and Hu Yishi, a cousin of former president Hu Jintao.

 At least 16 of China's richest people, with a combined estimated net worth in excess of $45bn, were found to have connections with companies based in the Virgin Islands jurisdiction. In total, the database — which covers just two of the BVI's numerous incorporation agencies — lists more than 21,000 addresses in China or Hong Kong as directors or shareholders of offshore companies, demonstrating the country's status as one of the premier buyers of offshore services.

Among those was Huang Guangyu, the founder of China's largest electronics retailer and once the country's richest man. Huang and his wife had a network of more than 30 companies in the BVI, according to the ICIJ records. Huang subsequently fell from grace and was in 2010 sentenced to 14 years in prison for insider trading and bribery. Despite his imprisonment, Huang's offshore network is not standing idle. In 2011, one of his BVI firms made an unsuccessful bid for the Ark Royal, the retired aircraft carrier which was once the flagship of the British navy. According to press reports, Huang planned to turn the carrier into a shopping mall, but navy officials decided instead to scrap the ship.

A Chinese academic and activist, Xu Zhiyong, inspired a "New Citizens' Movement" in the country — an informal civil society group which among other goals aims to increase the financial transparency of the country's elite and curbing corruption. The movement, however, has faced strong opposition from Chinese authorities. Numerous participants in the New Citizens Movement have been arrested at public gatherings, while its founder Xu is in prison facing charged of "gathering a crowd to disrupt public order", and faces up to five years in prison. Meanwhile, international journalists who have reported from within the country on the wealth of China's political elite have faced immigration difficulties from the government, or trouble with authorities.
From here

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