Leaks on Offshore Wealth Expose Some of China’s Elite

January 23, 2014 Updated: January 22, 2014

New revelations by an international group of journalists show that members of the Chinese communist elite have used offshore tax havens to stash away billions of dollars over the last decade. 

A series of articles published by the International Consortium of Investigative Journalists (ICIJ), based in Washington, D.C., demonstrates how Chinese Communist Party officials and their family members have used countries like the British Virgin Islands and the Cook Islands to set up shell companies in which assets and cash can be secretly held. 

ICIJ said that the reports come from a massive set of data it received—260 gigabytes, or 160 times the quantity of WikiLeaks cables—on a hard drive mailed anonymously in 2012. After laboriously cleaning and processing the data, ICIJ published its first set of articles in early 2013. 

It kept back the China portion until now, and said that nearly 22,000 Chinese clients of companies dealing in offshore structures were identified in the files now under discussion. More Chinese names will be published in a database on Jan. 23, ICIJ said.

Not all uses of such offshore companies are illegal, and in many cases corporate lawyers advise their clients to use offshore structures in doing business in China and Hong Kong. The impression gained from the preponderance of evidence discussed by ICIJ, however, is that Chinese elite—the “red nobility”—has stashed billions in ill-gotten wealth overseas. 

Violators identified by ICIJ include most notably members of the families of Xi Jinping, the current chief of the Chinese Communist Party, Wen Jiabao, the former Chinese premier, and Hu Jintao, the former Communist Party leader, as well as a number of other families with deep Party or military backgrounds.

There are also striking absences from “Who’s Who” of the leaks that the ICIJ compiled. None of the family members of Jiang Zemin, the communist leader before Hu Jintao, and his associates—such as Zhou Yongkang, the troubled former security czar, and Zeng Qinghong, a former top Party powerbroker—are implicated in the revelations. This faction has been involved in an intense, behind the scenes struggle for power in the Communist Party with Xi Jinping, Wen Jiabao, and Hu Jintao.

The families of Jiang Zemin, Zhou Yongkang, and Zeng Qinghong have controlled China’s most profitable industries, including petroleum, for over a decade, and are believed to have made huge fortunes for themselves by stealing from those industries. 

The anecdotes about the escapades in wealth of the sons of Jiang Zemin and Zeng Qinghong are legendary in China circles. For instance, Zeng Wei, Zeng Qinghong’s son, once bought a nearly $30 million house in an exclusive part of Sydney, and sought to knock it down to build his own, with a waterfall.  

There is no way to verify the wealth held by these families, but the accounts and anecdotes that have for years circulated about their activities would indicate that they are far wealthier than those exposed in the current leaks.

ICIJ said that the data it used relates almost entirely to the Singapore-based Portcullis TrustNet and the British Virgin Island-based Commonwealth Trust Limited, and does not purport to capture all offshore dealings by the Chinese elite. 

Wen Zhao, a commentator on Party affairs who appears regularly on a segment in the program “Decoding Mainland News” on the New Tang Dynasty Television network, said in a Skype interview that it was possible that the files obtained by ICIJ were part of the batches alleged to have been leaked to Western media during the fractious political warfare that characterized 2012, before current leader Xi Jinping was installed as general secretary in November.

“It’s already an open secret,” Wen said. “Everyone knows that high level communist officials are moving their assets overseas.”

In that year both Bloomberg News and The New York Times published blockbuster exposes of the wealth said to have been amassed by the families of Xi Jinping and Wen Jiabao respectively. The reporters and news organizations said their information all came from publicly available sources (though they decline to make any of the records public) and deny claims that documents were leaked to them. 

The head of ICIJ, Gerard Ryle, would seem an unusual choice for advancing a Chinese factional battle. Before joining ICIJ in Washington, D.C., he built a career breaking investigative reports in Australia, where he was once deputy editor of The Canberra Times. 

ICIJ on its website does not appear to speculate on who may have sent them the files. Though they indicate that a large number of the documents included clients from Greater China, famously wealthy people from other countries have also been ensnared in the over one-dozen reports about offshore wealth. 

According to a business consultant based in Hong Kong who has associated with Chinese officials for a number of decades, it’s common for particular groups of Chinese officials to deal with their own group of financial brokers. So the absence of records relating to Jiang Zemin’s network and family could be explained by the possibility that they used other offshore brokers to those touched on by ICIJ’s data.

That still leaves the ultimate source of the files a mystery.