Panama Papers expose Chinese elite's secret dealings

Close relatives of China's top leaders, including an in-law of anti-corruption crusader President Xi Jinping, have been hiding assets in offshore companies and accruing sometimes vast wealth, according to the latest revelations from the Panama Papers leak.

Family of eight current or former members of the country's most powerful ruling body, the Politburo Standing Committee, as well as prominent Chinese billionaires have newly discovered ties to shadowy corporations in places like the British Virgin Islands or Samoa.   

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It's no secret that many of the children and grandchildren of China's revolutionary heroes have found success in the business world. But the extent to which some of the country's most politically connected have tapped offshore financial networks to keep their assets hidden is not well known and has been suppressed by the Communist leadership, even as it vaunts a harsh anti-corruption operation.

The revelations about China's elite are just the most recent chapter to emerge from the so-called Panama Papers, a massive leak of business records from a Panamanian law firm that is among the planet's leaders in setting up and administering offshore shell companies. The records were leaked to German reporters, who shared them with the Washington-based International Consortium of Investigative Journalists.

The leaked documents reveal that among the law firm's high-flying Chinese customers is Deng Jiagui, the brother in law of China's paramount leader Xi. Deng acquired one offshore firm in 2004 and two more in 2009.

It is unclear what the companies were used for. The first was dissolved in 2007, and the other two had become dormant by the time Xi became Communist Party chief in 2012. Deng, a multimillionaire real estate developer and an investor in metals used in cellphones and other electronics, did not respond to a request for comment.

Another prominent client is the daughter of Li Peng, China's premier from 1987 to 1998. Li is best known internationally for overseeing the bloody military crackdown on the 1989 Tiananmen Square pro-democracy protests.

His daughter, Li Xiaolin, and her husband own Cofic Investments, a British Virgin Islands company incorporated in 1994. In internal emails, Li's lawyers say the firm's funds came from helping facilitate the export of industrial equipment from Europe to China.

The files show that ownership was cloaked for many years by use of so-called bearer shares, which are registered without names — if the bearer certificates for a company are in your hands, you own the company. Bearer shares have long been considered a vehicle for money laundering and other wrongdoing, and have been gradually disappearing worldwide as jurisdictions toughen regulations aimed at stopping flows of dirty money.

Mao's grandson-in-law implicated

The new generation of so-called red nobility seems to have learned about the offshore world at a young age. The granddaughter of Jia Qinglin, who served as the No. 4 member of the Politburo Standing Committee until 2012, has offshore assets. Jasmine Li Zidan became the owner of an offshore company called Harvest Sun Trading Ltd. in 2010 — when she was a first-year student at Stanford University.

Since then, Jasmine Li has built a large business for someone still in her 20s: Her two British Virgin Islands shell entities were used to anonymously set up two companies in Beijing with total registered capital of $300,000.

Other current and former Politburo committee members whose relatives are connected to offshore dealings are:

• Zhang Gaoli, a current committee member, has a son-in-law named Lee Shing Put, who was a shareholder of three companies incorporated in the British Virgin Islands.
• Liu Yunshan, a current committee member, has a daughter-in-law named Jia Liqing who was the director and shareholder of a company incorporated in the British Virgin Islands in 2009.
• Zeng Qinghong, who was vice-president of China from 2002 to 2007, has a brother named Zeng Qinghuai, who was the director of a company incorporated first in Niue and then re-domiciled in 2006 in Samoa.
• The late Hu Yaobang, who served as head of the Chinese Communist Party from 1982 to 1987, has a son named Hu Dehua who was shareholder, director and beneficial owner a company incorporated in the British Virgin Islands in 2003. Hu Dehua registered the company using his home address — the traditional courtyard home where his father lived while party chief.
• Mao Zedong, who led Communist China from 1949 to his death in 1976, has a grandson-in-law who incorporated Keen Best International Ltd. in the British Virgin Islands in 2011. Chen Dongsheng is the head of a life insurance company and an art auction house and was the sole director and shareholder of Keen Best.

'Groundless accusations'

China's Foreign Ministry did not respond to a faxed request for comment. Asked whether China plans to investigate any of the China-related companies or holdings revealed in the leaked documents, ministry spokesman Hong Lei told a regular media briefing in Beijing on Tuesday that he had no comment on the "groundless accusations."

Not all offshore dealings are illegal, but incorporations in the Virgin Islands and elsewhere can be used to obscure financial relationships between political elites and wealthy patrons, or to hide assets, evade tax and enable anonymous stock purchases.

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Along with politically connected princelings, Chinese with newly exposed offshore assets include the mega-rich such as Shen Guojun, who founded the Chinese shopping mall chain Intime, and heiress Kelly Zong Fuli, the daughter of billionaire soft drink magnate Zong Qinghou. She acquired a Virgin Islands company last year for the purpose of "investment in China," the leaked files show. Neither tycoon responded to requests for comment.

Assessing a previous leak of offshore financial data that exposed secret dealings by China's elite, Canada's former ambassador to Beijing, Fred Bild, said the discoveries could incense ordinary citizens in China, where senior Communist officials used to enjoy a modestly better living but nothing close to the extravagant wealth required to stash money in tax havens.

"Now, the income gap between the elite and the masses is huge.... You have hundreds of millions of people that are still living on very low income and they will be outraged," Bild said.

China's officials aren't required to disclose their assets publicly and until now its citizens have remained largely in the dark about the parallel economy that can allow the powerful and well-connected to avoid taxes and keep their dealings secret. By some estimates, between $1 trillion and $4 trillion in untraced assets left the country between 2000 and 2014.

It's a politically sensitive issue for China as the country's economy cools and its wealth gap continues to widen. The country's leadership has cracked down on journalists who have exposed the hidden wealth of top officials and their families as well as citizens who have demanded that government officials disclose their personal assets. It has also blocked websites, including that of CBC News, that report on the revelations in these kinds of data leaks. 

China: Who uses offshore tax havens?

A previous leak of financial records first revealed thousands of Chinese were involved in tax havens, among them relatives of the country's top leaders and some of China's wealthiest people. Click on their pictures below to explore their links to power and to the offshore economy.