May 26th 2012 BEIJING
Moving the family abroad
Hedging their bets
Officials, looking for an exit strategy,
send family and cash overseas
THE phrase “naked official”, or luo guan, was coined in 2008 by a bureaucrat and blogger in Anhui province, Zhou Peng’an, to describe officials who have moved their family abroad, often taking assets with them. Once there, they are beyond the clutches of the Communist Party in case anything, such as a corruption investigation, should befall the official, who is left back at home alone (hence “naked”). Mr Zhou says the issue has created a crisis of trust within the party, as officials lecture subordinates on patriotism and incorruptibility, but send their own families abroad.
You do not have to be corrupt to be “naked”, however. Sending your family abroad is simply a state of maximum readiness. It does not suggest huge confidence in a stable Chinese future. Many wealthy businessmen have also been preparing exit strategies. One of the most common legitimate routes involves immigrant-investor programmes in America, Canada or Hong Kong, typically requiring an investment of up to $1m. Chinese nationals have rushed to apply for these. Three-quarters of applicants for America’s programme last year were Chinese.
The less well-heeled obtain passports from other countries—in the South Pacific, Africa or Latin America—at more affordable prices (as low as $20,000). Li Chengyan, director of the Centre for Anti-Corruption Studies at Peking University, says countries that do not have an extradition treaty with China are particularly popular among corrupt officials. One crooked former governor of Yunnan province was found to have five foreign passports. “No need to wait for a visa if they have to run,” says Mr Li.
For senior officials the usual first step to getting naked is to send children overseas to study. Perhaps the most famous example is the recently purged party chief of Chongqing, Bo Xilai. Mr Bo’s son, Bo Guagua, is a graduate student at Harvard University, after attending Harrow School and Oxford University in Britain. Mr Bo’s wife, Gu Kailai (now detained on suspicion of murdering a British businessman in Chongqing), has lived abroad, and their broader family is worth more than $100m, according to the New York Times.
The government has done little to stop the emigration. It began formally to monitor the whereabouts of officials’ families and assets only last year, and then only by asking officials to fill in forms. In 2011 the central bank published an estimate on its website, attributed to the Chinese Academy of Social Sciences, that up to 18,000 officials had fled the country between 1995 and 2008 with stolen assets totalling 800 billion yuan ($130 billion at today’s exchange rate). The bank then claimed the figures were inaccurate, and scrubbed them from its website (though not from the memories of those who had read them). The chief prosecutor, Cao Jianming, says that in 2011 foreign governments helped arrest 1,631 Chinese fugitives for “work-related crimes” (including officials and employees of state-owned firms) and to recover 7.8 billion yuan in stolen assets.
Some senior officials have pushed for reform. In January Guangdong province in southern China announced that officials whose families have emigrated will be barred from high-level posts. But this is an exception. Officials who can afford to send their families abroad are usually the most powerful, and the most aware of China’s problems. Says Mr Li of Peking University, “They know better than anyone that the China model is not sustainable and that it’s a risk to everybody.”
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