A two-year investigation into offshore bank accounts by the International Consortium of Investigative Journalists has revealed that more than 21,000 people in China and Hong Kong, including several family members of China's top leadership, are utilizing offshore companies. The extensive report was issued today and covered by the Guardian. Both the Guardian and the ICIJ site have subsequently been partially blocked in China. From the Guardian's report:
The disclosure of China's use of secretive financial structures is the latest revelation from "Offshore Secrets", a two-year reporting effort led by the International Consortium of Investigative Journalists (ICIJ), which obtained more than 200 gigabytes of leaked financial data from two companies in the British Virgin Islands, and shared the information with the Guardian and other international news outlets.
In all, the ICIJ data reveals more than 21,000 clients from mainland China and Hong Kong have made use of offshore havens in the Caribbean, adding to mounting scrutiny of the wealth and power amassed by family members of the country's inner circle.
As neither Chinese officials nor their families are required to issue public financial disclosures, citizens in the country and abroad have been left largely in the dark about the elite's use of offshore structures which can facilitate the avoidance of tax, or moving of money overseas. Between $1tn and $4tn in untraced assets have left China since 2000, according to estimates.
China's rapid economic growth is leading to a degree of internal tension within the nation, as the proceeds of the country's newfound prosperity are not evenly divided: 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 Chinese government has made efforts to crack down citizens' movements aimed at promoting transparency or accountability among the country's elite. [Source]
PricewaterhouseCoopers, UBS and other 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 records show. For instance, Swiss financial giant Credit Suisse helped Wen Jiabao’s son create his BVI company while his father was leading the country.
The files come from two offshore firms — Singapore-based Portcullis TrustNet and BVI-based Commonwealth Trust Limited — that help clients create offshore companies, trusts and bank accounts. They are part of a cache of 2.5 million leaked files that ICIJ has sifted through with help from more than 50 reporting partners in Europe, North America, Asia and other regions.
[…] The data illustrates the outsized dependency of the world’s second largest economy on tiny islands thousands of miles away. 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.
Every corner of China’s economy, from oil to green energy and from mining to arms trading, appears in the ICIJ data. [Source]
ICIJ also explains in a separate feature how they carried out the investigation in China:
The other challenge was the data itself. How to separate the extraordinary from the routine and find the public interest inside a maze of more than 37,000 offshore company holders? A first step was to build as many lists as possible of public figures: Politburo members, military commanders, mayors of large cities, billionaires listed in Forbes and Hurun’s rankings of the mega-wealthy and so-called princelings (relatives of the current leadership or former Communist Party elders).
Through painstaking database work, a reporter in Spain cross-referenced the lists of notable Chinese against the names of offshore clients listed within ICIJ’s Offshore Leaks data. The added difficulty was that in most cases, names in the offshore files were registered in Romanized form, not Chinese characters. This made making exact matches extremely hard, because Romanized spellings from Chinese characters tend to vary widely: Wang might be spelled Wong, Zhang could be Cheung, and Ye might be spelled Yeh. Addresses and ID numbers helped confirmed many identities but many others names were dropped because the reporting team could not be 100 percent sure that the person was a correct match.
A picture slowly began to emerge: China’s elites were aggressively using offshore havens to hold assets, list companies in the world’s stock exchanges, buy and sell real estate and conduct their business away from Beijing’s red tape and capital controls.
Among the offshore holders were at least 15 of China’s richest men and women, high-level executives at state-owned companies and relatives of some of China’s top current and former leaders. [Source]
Among those implicated in ICIJ's findings are the brother-in-law of President Xi Jinping, the son and son-in-law of former Premier Wen Jiabao, daughter of former Premier Li Peng, and son-in-law of former paramount leader Deng Xiaoping, all of whom served as directors of offshore companies. The New York Times and Bloomberg have both published extensive investigations into the wealth of the families of Wen Jiabao and Xi Jinping. A glowing profile of Li Peng's daughter Li Xiaolin, also named in the ICIJ report, in the official media has since been mocked by Internet users, according to the South China Morning Post.
And news circulating on Twitter indicates that there may be more to come:
ICIJ will release 37,000 Greater China names on its Offshore Leaks Database on Jan. 23 - http://t.co/29nJ4d6gMp O.o
— Heng Shao (@Hengshao90) January 22, 2014
Meanwhile, a number of activists are being tried this week for calling on government officials to disclose their assets.