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World

Xi Seen as Easily Surviving Revelations in Panama Papers

Behind the party's habitual secrecy and reflexive desire to control, lies the recognition that corruption remains a volatile issue

Foreign Ministry spokesman Hong Lei, photo: Andy Wong
2 years ago

For graft-busting Chinese Communist Party leader Xi Jinping, the Panama Papers revelations that show his brother-in-law and relatives of two other members of the party’s elite inner circle owned offshore companies, often referred to as tax havens, might have been highly damaging.

Instead, Xi will likely emerge unscathed as a result of his personal hold on political power, controls over free speech and the media, and a sense both among the public and potential rivals that all leading families are tainted to some degree, analysts say.

With the latest reports still just days old, however, lingering impacts can’t be ruled out entirely. Damage to Xi’s reputation might show up in unexpected difficulties in putting in place a new team for when he assumes a second five-year term as leader of the ruling Communist Party next year and for setting in place a succession plan for 2022. Challenges to his leadership of a bevy of offices and committees, or to his sweeping anti-corruption campaign, might also be signs of weakness.

HOLD FOR USE WITH OFFSHORE ACCOUNTS CHINA POLITICS In this photo taken Thursday, March 3, 2016, Chinese President Xi Jinping, attends the opening session of the Chinese People's Political Consultative Conference (CPPCC) in Beijing's Great Hall of the People. Chinese President Xi Jinping has made graft-busting a hallmark of his three years in power, so reports based on leaked documents from a Panama-based law firm showing his brother-in-law opened three offshore tax havens might have been highly damaging. Instead, Xi’s tight hold on political power and the ruling Communist Party’s institutional controls over the media, free speech and a rubberstamp legislature seem sufficient to allow him to emerge largely unscathed.(AP Photo/Ng Han Guan)

Chinese President Xi Jinping has made graft-busting a hallmark of his three years in power, so reports based on leaked documents from a Panama-based law firm showing his brother-in-law opened three offshore tax havens might have been highly damaging. Instead, Xi’s tight hold on political power and the ruling Communist Party’s institutional controls over the media, free speech and a rubberstamp legislature seem sufficient to allow him to emerge largely unscathed. Photo: AP/Ng Han Guan

The latest report by the International Consortium of Investigative Journalists, known as the ICIJ, says Xi’s brother-in-law Deng Jiagui purchased one offshore company through Panama-based law firm Mossack Fonseca in 2004 and two more in 2009. All three had been dissolved or become dormant by the time Xi became party leader in 2012, the ICIJ says citing a stash of 11.5 million leaked Mossack Fonseca documents — dubbed the Panama Papers — that discuss cases involving politicians, celebrities and business people from around the world.

Analysts say the revelations shed little new light on the Xi family’s financial doings, further limiting their impact. Xi’s case is also helped by the fact that he has shown no fear in taking on high-profile targets in his anti-corruption campaign and has been seen in past as reining in his family’s illicit activities by having them sell off their interests and by telling provincial leaders personally that they did not act in his name, they say.

“I would have suspected that many of those who follow elite politics already believe that Xi’s extended family is like many — if not most — elite families in that some of them have managed to cash in on China’s economic boom. I think, however, he still gets credit for cracking down on high-level corruption,” said Georgia State University political scientist Andrew Wedeman, who has extensively researched corruption in China.

The investigation does however provide new information about how members of the Chinese elite use international law firms and shell companies registered overseas in ways that could facilitate the concealment and protection of fortunes whose provenance may be unknown.

The other two current Politburo Standing Committee members named in the ICIJ report are Zhang Gaoli, whose son-in-law was named as a shareholder of three companies incorporated in the British Virgin Islands, and Liu Yunshan, whose daughter-in-law was the director and shareholder of a company incorporated in the British Virgin Islands in 2009.

Having such accounts is not illegal, and no specific functions, asset amounts or allegations of wrongdoing were made in any of the cases. Like Xi, none have responded directly to the reports.

While the leaked documents also revealed hidden dealings by politicians in Western-style democracies, Xi is shielded from the kinds of scrutiny his Western counterparts must contend with. Along with its muzzled press, China permits its national legislature to meet in full session just once a year and then only to debate and approve proposals sent them by the government.

HOLD FOR USE WITH OFFSHORE ACCOUNTS CHINA POLITICS In this photo taken Saturday, March 5, 2016, Chinese President Xi Jinping arrives for the opening session of the annual National People's Congress in Beijing's Great Hall of the People. Chinese President Xi Jinping has made graft-busting a hallmark of his three years in power, so reports based on leaked documents from a Panama-based law firm showing his brother-in-law opened three offshore tax havens might have been highly damaging. Instead, Xi’s tight hold on political power and the ruling Communist Party’s institutional controls over the media, free speech and a rubberstamp legislature seem sufficient to allow him to emerge largely unscathed.(AP Photo/Ng Han Guan)

Chinese President Xi Jinping arrives for the opening session of the annual National People’s Congress in Beijing’s Great Hall of the People. Photo: AP/Ng Han Guan

Nor does China permit public protests of the type that confronted Iceland’s leader Sigmundur David Gunnlaugsson before he stepped aside Tuesday amid outrage over revelations he had used a shell company to shelter large sums while Iceland’s economy was in crisis.

While the personal lives and finances of Chinese leaders are strictly off-limits to Chinese media, international outlets have frequently sought to plumb the truth of perceptions that the country’s opaque politics and booming economic growth provide a rich environment for corruption. Previous reports, particularly one by Bloomberg News in 2012, have not implicated Xi, his wife or their daughter and have had no discernable impact on his political fortunes.

They do show, however, that Xi’s extended family accumulated investments and stakes in companies worth millions of dollars at a time when he was rising in the party and government.

As the children of famed communist revolutionary Xi Zhongxun, he and his siblings enjoy privileged status as members of what is sometimes called China’s “red aristocracy,” with unique access to circles of power and inside information that can be leveraged for personal gain.

China’s censors have blocked, deleted or heavily edited all reports about the ICIJ reports to prevent any mention of Xi, or the relatives of seven other current or former members of the party’s all-powerful Politburo Standing Committee reported to have owned overseas tax havens. On Tuesday, Foreign Ministry spokesman Hong Lei described the reports as “groundless” and said he would refuse to comment on them further.

Even that brief exchange was struck from the transcript of Tuesday’s briefing posted on the ministry’s website.

Behind the party’s habitual secrecy and reflexive desire to control, lies the recognition that corruption remains a volatile issue. Anti-graft sentiments were a driver behind student-led pro-democracy protests in 1989 and since then, more than a half-a-dozen serving or retired members of the party’s elite inner circle have been brought down over corruption allegations

However, the perception that all leading families are corrupt to some degree also acts as a form of “MAD (mutually assured destruction) deterrence,” said Steve Tsang, senior fellow at the University of Nottingham’s China Policy Institute. Criticism, if it comes, is more likely to emerge from “outside the top echelon of the leadership in China,” Tsang said.

Chinese officials are also sheltered by public disclosure rules that require only that they declare their assets internally. The public in most cases never knows what is in such declarations, nor how carefully they are audited. Calls for changes have fallen on deaf ears or in some cases met with reprisals.

Wealth among members of the legislature, the National People’s Congress, is even easier to hide, one reason why the body is known as the richest parliament in the world.

Despite the political obstacles, some Chinese continue to complain about the public’s inability to supervise and push for greater transparency in their leaders’ financial dealings.

“If well implemented, asset declaration should be a good way to fight corruption and ensure the integrity of public officials,” the official newspaper Ningbo Daily said in a March 31 article.

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