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Originally published June 6, 2012 at 7:48 PM | Page modified June 7, 2012 at 6:35 AM

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China cracks down on officials who appear poised to flee country

The Communist Party's top disciplinary body is enacting an "anti-flight" program to keep people in place.

Los Angeles Times

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A lot of my friends have business in China, and all of them say coruption is way of... MORE
Ahhhh .... but Singapore has money-laundering laws. On one hand, our central bank... MORE
CORRECTION: S$5mn = US$4mn (not US$6.2mn). My apologies indeed. MORE

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BEIJING — When anticorruption investigators started probing China's high-speed rail program, they discovered that one of the Railway Ministry's chief engineers owned a five-bedroom, five-bath Mediterranean-style house in Los Angeles County.

Zhang Shuguang had bought the $840,000 house in the city of Walnut nine years earlier when he was reportedly earning just $365 a month. His wife and daughter had moved there, which led investigators to suspect he intended to skip out of China to join them.

That made Zhang, 56, what the Chinese call a luo guan, or "naked official." The term refers to an official who has sent his family and money abroad and is poised to make a getaway himself. The communist government has been trying to put officials on a shorter leash since 2007, amid a flurry of scandals in which public funds were squandered on mistresses, luxury villas, cars and gambling.

The issue of official corruption has risen to the top of the government agenda this year with the ouster in March of Politburo member and Chongqing party secretary Bo Xilai. Among the myriad accusations swirling around Bo is that his wife moved the couple's money out of the country through trading companies set up abroad with an Englishman, Neil Heywood, whom she is accused of killing. In addition, the couple's son, Bo Guagua, was sent overseas to school, first to Harrow, then Oxford and more recently Harvard's Kennedy School, where he graduated last month.

The practice has become so endemic in China's officialdom that the Communist Party's top disciplinary body is enacting an "anti-flight" program to keep people in place. The Central Commission for Discipline Inspection last month reviewed ways to keep people from moving abroad, including confiscating passports and registering family members living overseas as a way to monitor who might be kept out of high positions.

Chinese prosecutors say 18,487 officials, including executives from state-owned companies, have been caught during the past 12 years while allegedly trying to flee overseas with ill-gotten gains, according to this week's issue of China Economic Weekly. The magazine described the typical "naked official" as a man in his 50s who was approaching retirement and had accumulated at least $13 million.

The People's Bank of China last year inadvertently made public a confidential study stating that 800 billion Chinese yuan ($126 billion at today's exchange rate) had been siphoned overseas by thousands of officials in the government and state-owned companies from the mid-1990s until 2008.

Another report by the Washington-based watchdog Global Financial Integrity, which tracked illicit outflow of money by all people, not just officials, found China led the world with $2.7 trillion (five times as much as runner-up Mexico) illegally taken out of the country from 2000 to 2009.

The top destinations for stashing cash were the United States, Europe, Australia, Canada, Singapore, Malaysia and Thailand. Within the United States, Los Angeles topped the list.

Zhang was one of the senior officials developing China's bullet trains, a program riddled with cost overruns and allegations of kickbacks. He was fired in March 2011 for what the state media said were "severe violations of discipline," which is often shorthand for corruption, shortly after the sacking of his boss, Railways Minister Liu Zhijun.

The state media announced last week that Liu had been expelled from the Communist Party for taking "huge bribes," but they have not reported yet what has happened to Zhang.

Until the 1980s, it was difficult for any Chinese citizen to go abroad because the government feared many wanted to defect. Now, middle- and upper-income Chinese are fixtures on the tourist circuit, filling the Hermes and Chanel stores in most European cities. Chinese officials, including executives of state-owned companies, often have two passports, one for business and the other for personal travel.

"It's very hard for the government to control this. They might hold your official passport, but most people will have a private passport as well, and they can slip out of the country with that," said He Jiahong, a corruption expert at People's University in Beijing.

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