BEIJING — Members of the Chinese elite, including some of the country’s most politically connected figures, have set up a large number of offshore companies that allow them to conceal billions of dollars abroad, according to a
report released Wednesday by the International Consortium of Investigative Journalists, a Washington-based group that works with a number of news organizations around the world.
The report’s authors say it is based on leaked documents concerning tens of thousands of tax-haven clients. The report names more than a dozen of China’s wealthiest citizens, as well as relatives of top officials, including those of the country’s president, Xi Jinping; the former prime minister Wen Jiabao; and descendants of the governing Communist Party’s revolutionary founders.
The report was released at an awkward time for Mr. Xi, who has made cracking down on corruption and reining in officials’ displays of wealth among his top priorities since taking charge of the Communist Party in 2012. The combination of wealth and power illustrated in the report could become a political liability for the government at a time when the Chinese public is showing increasing concern about official privilege.
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Li Xiaolin, the daughter of a former Chinese prime minister, was named in a report. Bobby Yip/Reuters
During a regular news briefing, a Foreign Ministry spokesman who was asked about the report dismissed it as “hardly convincing” and suggested that those who had leaked the documents had ulterior motives. Censors blocked access to the consortium’s online report in much of China on Wednesday, and the Chinese news media made no mention of it.
Offshore bank accounts, trusts and shell companies are not in and of themselves illegal. The Chinese government allows Chinese investors and executives to hold stakes in domestic companies like the Internet giants Baidu and Tencent through offshore investment vehicles. And foreign banks and private equity firms have often encouraged Chinese investors to hold some assets offshore, especially stakes in companies that plan to list their shares in Hong Kong or New York.
“It was us, the foreigners, that imposed this,”
Rocky T. Lee , the head of Greater China corporate practice for the law firm Cadwalader, Wickersham & Taft, told the consortium about the practice. “It had to do with the foreign investors’ general discomfort with Chinese rules and regulations.”
But offshore companies can also be used to launder money, avoid taxes and hide an individual’s stake in a company.
China’s widening wealth gap has thrown into stark relief the windfalls enjoyed by the country’s well-connected elite, especially the relatives of people in powerful posts. The potential for embarrassment is likely to grow as the consortium releases more data and analysts tease apart the strands of previously opaque financial arrangements. The consortium said it would publish a database of tax-haven documents on Thursday.
The Chinese government does not require its officials to disclose their financial assets publicly.
The thousands of names disclosed in the report include more than a dozen scions of China’s so-called red nobility, the hallowed revolutionary figures who played pivotal roles in establishing the People’s Republic. Those named include Deng Jiagui, a wealthy businessman who is the brother-in-law of Mr. Xi, and Li Xiaolin, the daughter of the former prime minister Li Peng. Others cited in the report include Wu Jianchang, the son-in-law of Deng Xiaoping, the reformist leader who ushered in China’s embrace of market economics.
Also included are the son, the daughter and the son-in-law of Mr. Wen, the recently retired prime minister, whose family’s immense wealth was the subject of a series of articles in The New York Times in 2012. The Times investigation found that relatives of Mr. Wen held at least $2.7 billion in assets, often through hidden stakes in Chinese financial, telecommunication and jewelry companies.
The records released by the consortium on Wednesday show, for instance, that in 2004 Mr. Wen’s family registered Fullmark Consultants, a British Virgin Islands company. Last year, J. P. Morgan turned over documents to federal investigators in the United States showing that between 2006 and 2008, the bank paid $1.8 million in consulting fees to Fullmark for work done by Mr. Wen’s only daughter, Wen Ruchun, who worked for J. P. Morgan under the name Lily Chang.
In its report, the consortium said Fullmark was controlled by Liu Chunhang, Wen Ruchun’s husband. In 2006, according to the report, he became a government official at the China Banking Regulatory Commission and transferred his stake in Fullmark to Zhang Yuhong, a longtime Wen family friend and business partner.
The Wen family could not be reached for comment on Wednesday.
Other records released by the consortium
revealed that Mr. Xi’s brother-in-law was a half-owner of Excellence Effort Property Development, a British Virgin Islands company. The records say the other half is owned by another company based there, which in turn belongs to Li Wa and Li Xiaoping; the consortium described them as “property tycoons who made news in July by winning a $2 billion bid to purchase commercial real estate in Shenzhen.”
The report was released hours before the opening of a trial in which Xu Zhiyong, a legal scholar, is accused of “assembling a crowd to disrupt order in a public place.” Mr. Xu is one of several activists who have called for the public disclosure of officials’ assets. Several other members of their group, the New Citizens Movement, are expected to
stand trial in the coming days in what is widely seen as an effort by the government to shut down their grass-roots anticorruption campaign.
The report says that PricewaterhouseCoopers, UBS and other Western banks and accounting firms act as middlemen to help Chinese clients set up trusts and companies in Samoa, the British Virgin Islands and other offshore centers sometimes associated with hidden wealth; for instance, the giant Swiss financial company Credit Suisse helped Mr. Wen’s son, who is also known by the name Winston Wen, create a company in the British Virgin Islands while his father was prime minister.
The files that undergird the report, part of a cache of 2.5 million documents leaked to the consortium, originated with two offshore firms that help clients create offshore companies, trusts and bank accounts: Portcullis TrustNet, based in Singapore, and Commonwealth Trust, based in the British Virgin Islands.
The consortium said that more than 50 reporting partners in Europe, North America, Asia and elsewhere had been involved in helping it sift through the cache of documents.
The consortium is a project of the Center for Public Integrity, which links journalists around the world for investigative reporting projects. Working with news media
organizations including
The Times , it has already published reports based on the leaked documents that identified a range of prominent figures in other countries who have benefited from overseas accounts. Those
include a former budget minister in France, a daughter of the former Philippine dictator Ferdinand E. Marcos and the family of Azerbaijan’s leader.
Files on people from China, Hong Kong and Taiwan — more than 37,000 names — formed the largest portion of the collection of tax-haven documents, the consortium
said . A reporting team spent six months looking through those files. A mainland Chinese news organization that originally participated in the reporting was forced to withdraw from the project after government warnings, the consortium said. It did not name the news organization “to protect journalists from government retaliation.”
The Guardian, a British newspaper,
said its website was partially blocked in China on Wednesday after it published a
report based on some of the leaked tax-haven documents.
