China’s elite, including the brother-in-law of President Xi Jinping, have used secretive offshore companies that helped hide wealth in tax havens, including the British Virgin Islands and Samoa.
That’s according to the International Consortium of Investigative Journalists in Washington, D.C. The group, whose website is now blocked in China, worked with reporters from Europe, North America, and Asia, sifting through leaked files from two offshore funds, Singapore-based Portcullis TrustNet and Commonwealth Trust Limited in the British Virgin Islands.
The documents, which are part of a larger cache of 2.5 million files obtained by ICIJ and analyzed with its media partners, provide information on nearly 22,000 offshore clients with addresses in Hong Kong and mainland China. Another 16,000 or so come from Taiwan, with the remainder from countries around the world.
“By some estimates, between $1 trillion and $4 trillion in untraced assets have left [China] since 2000,” says a story on the leaked files published on the group’s website.
The records in ICIJ’s possession include details on a BVI-registered real estate company half-owned by Deng Jiagui, the husband of President Xi’s older sister, and a multimillionaire property developer, whose wealth was first revealed in a Bloomberg News investigation in 2012.
The wealth of China’s rich, including that secreted offshore, “may not be strictly illegal” but often is connected to “conflict of interest and covert use of government power,” said Minxin Pei, a political scientist at Claremont McKenna College in California, quoted in the story on the leaked files. “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.”
President Xi, who has warned that out-of-control graft could bring down the Communist Party he heads, is presiding over a sweeping anticorruption campaign. In 2004 he admonished Chinese officials to “rein in your spouses, children, relatives, friends, and staff and vow not to use power for personal gain.”
The files also include information on the offshore holdings of Wen Yunsong, the son of former Premier Wen Jiabao. With assistance from the Hong Kong office of Credit Suisse (CS), the younger Wen set up a BVI-registered company called Trend Gold Consultants in 2006, while his father served as premier. The company appears to have been dissolved in 2008, ICIJ says.
Relatives of retired top officials, including former President Hu Jintao, former Premier Li Peng, and deceased paramount leader Deng Xiaoping, have possessed offshore holdings, according to the investigative consortium. All told, relatives of at least five current or past members of the Standing Committee of the Politburo, China’s top elite leadership body, have incorporated companies in BVI or the Cook Islands.
Who along with Credit Suisse has been helping hide the wealth? The audit firm now known as PricewaterhouseCoopers helped incorporate more than 400 offshore entities for clients from mainland China, Hong Kong, and Taiwan, while UBS (UBS) did so for more than a 1,000 customers from the same three markets, according to ICIJ. “Western banks and accounting firms play a key role as middlemen in helping Chinese clients set up trusts and companies in the British Virgin Islands, Samoa and other offshore centers usually associated with hidden wealth,” the story says.
Also documented: the offshore holdings of at least 15 of China’s richest people, including Ma Huateng, founder of Internet company Tencent (700:HK), members of China’s National People’s Congress, and the heads of state-owned companies involved in corruption scandals.
“The data illustrates the outsize dependency of the world’s second largest economy on tiny islands thousands of miles away,” the ICIJ writes. “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.”