The Panama Papers are out and they’re not looking so good for China.
It’s the biggest data leak in history. An anonymous source leaked eleven-and-a-half million documents from the world’s fourth biggest offshore law firm, Mossack Fonseca, based in Panama.
Wikileaks? Just a drip at 1.7 GB. Edward Snowden’s 60 GB? More like snowed in—by the avalanche of data coming out in the Panama Papers. Contained in 2.6 terabytes of data.
The Panama Papers reveal a wealth of information about the wealth of some of the wealthy people in the world.
They tell us that at least 140 politicians, including 12 national leaders, their families, or friends have used Mossack Fonseca to dump their money into overseas tax havens. The Guardian calls it, “offshore pandemonium.”
The process is technically legal. It allows people and companies to take advantage of low or nonexistent tax rates in places like Panama and the Cayman Islands, so they don’t have to pay as much in taxes at home. Tax havens are also great places to hide money, since there’s very little transparency.
And don’t worry! You benefit from tax havens, too. Ever use Amazon, Apple, or Google? They all use them. And since you’re watching this on YouTube, which Google owns, you’re taking part in the wonderful web of tax havens right now.
Yes, capitalism is great! And perhaps no one knows this as well as… the Communist Party of China.
The Panama Papers revealed that one third of Mossack Fonseca’s business came just from China, including Hong Kong. They have more offices in China than in any other country.
At least 8 family members of current and former members of China’s supreme ruling body, the Politburo Standing Committee, have been exposed in the Panama Papers.
Jackie Chan got in on the action, too!
But again, this is all technically legal. Tax havens just make sure that wealthy people don’t have to pay as much in taxes. Because if wealthy people give their money to the government, it might be spent on wasteful things, like education, healthcare, and social services.
But unlike in other countries, in China, the wealthy and powerful aren’t just trying to avoid taxes. They have another reason for using offshore accounts, too. As Willy Lam, a political analyst with the Chinese University of Hong Kong told the BBC, it’s “simply because there is very little faith in the future of the Party.”
In other words, even the families of top Chinese leaders don’t want all of their money stored in China—where it could be seized in a corruption investigation, or the political system could simply just implode.
And this is all a bit embarrassing for Chinese leader Xi Jinping. Especially because it comes in the midst of his anti-corruption campaign; and especially because he just came out with his Three Stricts and Three Earnests slogan, which Party mouthpiece Xinhua describes as “a series of requirements for officials to improve their lifestyles and work. It refers to being strict in morals, power and discipline, as well as honest in decisions, business and behavior.”
But especially because his own brother-in-law was named in the Panama Papers.
So is it hypocritical of Xi to be talking about anti-corruption when three of the most powerful men in China have had family members who’ve used offshore accounts?
Yes, but that’s besides the point. Because as I’ve said many times, Xi’s anti-corruption campaign was never really about stopping corruption. It’s about using these corruption investigations to eliminate his political rivals, like now purged Bo Xilai and Zhou Yongkang.
So obviously the Panama Papers have become fairly politically sensitive in China. How are authorities dealing with it? Denial. When Chinese Foreign Ministry Spokesman Hong Lei was asked to comment, he simply said, “We will not comment on such groundless accusations.” And of course, censorship. They’re even purging the word “Panama” from the Chinese Internet.
So while some Chinese netizens are lost, others have created a workaround: Using homophones for “Panama”—that is, different characters with the same sound.
What we know so far about the Panama Papers is only the tip of the iceberg. The leaked documents themselves haven’t been made public, so we don’t know the extent of what’s in all of those floppy disks. And Mossack Fonseca is only the fourth largest offshore law firm. There’s plenty more that we don’t know.
One thing is clear though: Wealthy Chinese are increasingly moving their money out of China, which is not a good sign.
What do you think about the Panama Papers? Leave your comments below.