Photo illustration by John Lyman

World News


The Panama Papers and Chinese Political Hypocrisy

The Chinese ruling Communist Party is “secretly” panicked as international scrutiny of the leaked documents from what is known as the Panama Papers grows and implicates many of the party’s senior officers who sought offshore tax havens to hide personal riches. The CCP, through censorship and criminalization, is pressuring channels not to transmit relevant information to domestic internet users.

While the Panama Papers led to mass protests in Iceland and the subsequent resignation of its prime minister, are similar resignations even remotely possible in China? The answer seems to be no.

According to the New York Times, the Panama report reveals that relatives and close business associates of at least eight current or former Chinese Communist Party (CCP) senior officers established offshore bank accounts and shell companies in tax havens including the Cayman Islands and the British Virgin Islands through Mossack Fonseca law firm in Panama. Among the eight CCP officers, at least three serve on China’s highest political committee, the Politburo Standing Committee.

Chinese President Xi Jinping’s brother-in-law, China’s propaganda chief Liu Yunshan’s son and daughter-in-law, Vice Premier Zhang Gaoli’s son-in-law were all reported to be Mossack Fonseca’s wealthy clients.

The CCP can cunningly argue that the act of opening offshore businesses is by itself not illegal and the accusations derived from the leaked documents are nothing more than a systematic Western attack to sabotage Chinese leadership and solidarity. However, framing it as a legal issue conceals more sinister realities surrounding Chinese political elites.

The CCP’s apparent double standards on corruption are hypocritical. The Xi Jingping administration has, since Xi took power in 2013, launched a crusade to prosecute corrupt government officers. The far-reaching anti-corruption campaign which cracked down on dozens of high-profile party members and created a national atmosphere of fear now ironically faces the predicament revealed in the Panama Papers. After all, Xi himself is not immune from what he personally despises. Many aspects of the anti-corruption campaign indeed held political objectives in CCP’s long-standing factional struggles.

The regime’s contrasting stands on capital mobility tests are also hypocritical. From 2013, the Chinese government has tightened its control on financial outflows by capping Chinese citizens’ annual capital remittances at fifty thousand dollars. There is also a quantitative limit on how much Chinese tourists can spend overseas with their Chinese credit cards. So how did all these implicated family members of CCP leaders transfer their wealth?

Capital is not footloose in a Chinese sense, but political power is. Practice and theory do not support democratic changes in China as evidenced by the government’s response to the “Panama Papers crisis.” The CCP has imposed harsher censorship on the internet, taken down suspicious web postings and blocked foreign media outlets.

Various political theories on democratization attest to the stubbornness of authoritarian regimes, especially those similar to the Chinese regime. One example is offered by political scientist Adam Przeworski’s quantitative analysis, which observes that dictatorships tend to survive when a country’s income per capital surpasses six thousand dollars. By official account, Chinese income per capital satisfies this threshold.

Another theory of authoritarianism is offered by Barbara Geddes who finds that single-party authoritarian governments are less likely to democratize than personalist or military regimes because of the former’s institutional complexity. Or as the late Samuel Huntington asserted, what matters is not the form of the government but its degree.

China is a single-party regime.

The Panama Papers must be understood in connection with the global phenomenon of Chinese buy-outs. Both the New York Times and Bloomberg have reported recently that the top one percent of Chinese powerful and rich have been sweeping Vancouver, Canada buying real estate and contributing to a 40 percent increase in home prices over the past five years.

Many questions remain unanswered. How did the rich move their money? How much did the economic elites collude with the political leaders to protect their powerful interests in China? Will the CCP employ its old tricks of scapegoating, scratching the surface and shifting the blame to resolve mounting inquiries about its link to the Panama Papers?

For now, one thing is clear. As long as the hypocrisies are still institutionally protected and the ruling elites block challenges to their status quo, positive political and social changes are highly unlikely in China.