Corruption In China: How Public Officials Took $120 Billion, And Ran

A report by China’s central bank found that thousands of Chinese government officials have smuggled billions out of the country and fled, mainly to the U.S., highlights "the corruption within a corrupt system".

Corrupt Chinese officials tend to send their families abroad, and join them later. (Ivan Walsh)

By Xin Haiguang
经济观察报E.O./Worldcrunch

BEIJING - Just how many corrupt Chinese government officials have fled overseas? How much money have they stashed away? And how did they manage to transfer such colossal sums abroad?

Last week the Bank of China published a report entitled “How corrupt officials transfer assets overseas, and a study of monitoring.” The report quoted statistics based on research by the Chinese Academy of Social Sciences. Since 1990, the number of Communist Party and government officials, public security members, judicial cadres, agents of State institutions, and senior management figures of state-owned enterprises fleeing China has reached nearly 18,000. Also missing is about 800 billion yuan (more than $120 billion).

The Bank of China emphasized the fact that nobody, up to now, has been able to provide an authoratitive figure of the exact sum pilfered, and the recent figure of 800 billion yuan is only an estimate. It is nonetheless an astronomical sum. It is equivalent to China’s total financial allocation for education from 1978 to 1998. Each official stole, on average, an estimated 50 million yuan (more than $7 million). Precisely because this is only an estimate, one can imagine the real numbers are actually much bigger. Some media have reported that the wife of the Deputy Chief Engineer of the Ministry of Railways, Zhang Shuguang, recently caught for corruption, owns three luxury mansions in Los Angeles, and has bank savings of as much as $2.8 billion in America and Switzerland. This gives a glimpse of the broader picture.

The number of corrupt officials fleeing China is a sign of the seriousness of the government’s attempt to tackle corruption. But if corruption, dereliction of duty and the abuse of power are the norm, then this escape of corrupt officials represents the corruption within a corrupt system. It highlights multiple embarrassments in China’s anti-corruption campaign.

From the initial corruption to organizing the smuggling of large sums of money abroad takes some time. For someone to be corrupt during this time without being caught, this is the first embarrassment.

Next, when a corrupt official prepares his flight, he usually starts by sending his wife and children overseas, and stays alone in China as a so-called “naked official.” To have such “naked, yet unexposed" officials makes for a second embarrassment.

In a country where capital outflow is strictly controlled, how on earth do these people manage to transfer their money overseas successfully? This is the third embarrassment.

And the fourth embarassment? How they manage to change their identity. These crooks usually hold multiple passports and use many identities. For instance, the former Governor of Yunnan Province, Li Jiating, had five passports, all real.

How they escape punishment adds the fifth embarrassment. Extradition involves the political and judicial systems of two countries, each with its own concept of law enforcement. The judicial procedure is often complicated and tedious. Extradition is very often obstructed by the fact that a person condemned to death in absentia cannot be extradited for human rights reasons. In addition, China has not signed extradition treaties with the main destinations, the U.S. or Canada, so once the official has run away, the chance of catching him and putting him on trial is near zero.

Even if they do get caught, the stolen funds are rarely recovered. This is the sixth embarrassment. The United Nations Convention Against Corruption sets out the principle of returning illegal assets, but in practice the procedure is difficult. Not only does China have to show that it owns the assets, it also has to share some of the money with all countries participating in the joint action. After deductions here and there, there won’t be much left.

And, finally, the seventh embarrassment: the government officials who have managed to escape set an example for those still hiding at home. Some used to hold high positions with access to important state secrets, and were very likely bribed by hostile forces. This is a potential threat to China’s political, military and economic stability.

It is for these reasons that it is more important to stop corruption at the source than to catch the culprits after it has happened.

Policies combatting money laundering or obliging leading government employees to report their personal wealth will not solve this problem. Nor will the close monitoring of so-called “naked officials”. The efficient solution would be to establish a clean system where nobody dares to become corrupt. Certain media have suggested the implementation of a property declaration system. This would be like using anti-aircraft guns to fight mosquitoes. Still, at least it is a weapon that knows its target.

Read the original article in Chinese.

Photo - Ivan Walsh

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