Thu, Jan 23, 2014 - Page 1 News List

Data probe links Chinese elite to offshore tax havens

FAMILY SECRETS:The International Consortium of Investigative Journalists found links to many ‘princelings’ while analyzing documents leaked from two BVI firms

The Guardian, NEW YORK

More than a dozen relatives of China’s top political and military leaders are making use of offshore companies based in the British Virgin Islands, leaked financial documents revealed.

The brother-in-law of Chinese President Xi Jinping (習近平), as well as the son and son-in-law of former Chinese premier Wen Jiabao (溫家寶) are among the political relations taking advantage of the offshore havens, financial records show.

The documents also disclosed the central role of Western banks and accountancy firms, including PricewaterhouseCoopers (PwC), Credit Suisse and UBS, acting as middlemen in the establishing of companies.

For example, the Hong Kong office of Credit Suisse established the British Virgin Islands (BVI) firm Trend Gold Consultants for Wen Yunsong (溫雲松), the son of Wen Jiabao, during his father’s premiership — while PwC and UBS performed similar services for hundreds of other wealthy Chinese individuals.

The disclosure of China’s use of secretive financial structures is the latest revelation from Offshore Secrets, a two-year project by the International Consortium of Investigative Journalists (ICIJ), which obtained more than 200GB of leaked financial data from two firms in the BVI, and shared the information with the Guardian and other global news outlets.

In all, the consortium’s data reveals more than 21,000 clients from China and Hong Kong have made use of offshore havens in the Caribbean, adding to mounting scrutiny of the wealth 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. It is estimated that between US$1 trillion and US$4 trillion in untraced assets have left China since 2000.

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 100 richest men are collectively worth more than US$300 billion, while an estimated 300 million people still live on less than US$2 a day.

The Chinese government has made efforts to crack down on citizens’ movements aimed at promoting transparency or accountability among the country’s elite.

The confidential records obtained by the ICIJ relate to the incorporation and ownership of offshore companies, which is legal, and give little if any information as to what activities the businesses were used for once established. Offshore companies can be an important tool for legitimate Chinese businesses, especially when operating overseas, due to restrictions and legislation in the country.

One Chinese political family whose financial affairs have not escaped scrutiny — at least in the West — is that of Wen Jiabao. In November last year, the New York Times reported that a consultancy firm operated by Wen’s daughter, Wen Ruchun (溫如春), who often goes by the name Lily Chang, had been paid US$1.8 million by the US financial services giant JPMorgan.

The payment has become one of the targets of an inquiry by US authorities into the activities of JPMorgan in China, including an examination of the firm’s hiring practices, which are alleged to have included the deliberate targeting of relatives of influential officials.

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