An internal Communist Party directive bars senior officials from
owning property abroad or stakes in overseas entities, whether directly or
through spouses and children
China’s President Xi
Jinping; Communist Party restrictions on overseas assets are meant to insulate
top officials from potential future Western sanctions.
May 19, 2022 6:39 am ET
HONG KONG—China’s Communist
Party will block promotions for senior cadres whose spouses or children hold
significant assets abroad, people familiar with the matter said, as Beijing
seeks to insulate its top officials from the types of sanctions now being
directed at Russia.
The ban, outlined in an
internal notice by the party’s powerful Central Organization Department, could
play a role in Chinese leader Xi Jinping’s efforts to increase his influence at
a twice-a-decade leadership shuffle scheduled for later this year.
Issued in March, the
directive prohibits spouses and children of ministerial-level officials from
holding—directly or indirectly—any real estate abroad or shares in entities
registered overseas, the people said.
Senior officials and
members of their immediate families would also be barred from setting up
accounts with overseas financial institutions unless they have legitimate
reasons for doing so—such as study or work—the people said.
It isn’t clear if the rules
apply retroactively, but family members of some senior officials have sold
shares in overseas companies in order to comply, the people said. It isn’t
known if the directive will be made public.
The directive came as Mr.
Xi seeks to minimize geopolitical risks for the Communist Party amid concerns
that officials with overseas financial exposure could become a liability if the
U.S. and other Western powers impose sanctions against Chinese leaders and
their relatives, similar to what was done against Moscow following Russia’s
invasion of Ukraine, the people said.
“Leading cadres, especially
senior cadres, must pay attention to family discipline and ethics,” Mr. Xi told
the party’s top disciplinary agency in January. Officials must “lead by example
in managing their spouses and children properly, being a dutiful person and
doing things in a clean way,” he said.
The Central Organization
Department didn’t respond to a request for comment.
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Officials must sign pledges
declaring compliance with the new rules, a requirement that would give Mr. Xi
more leverage over the political elite ahead of the party’s 20th national
congress, which is set to take place late this year.
Mr. Xi is expected to
secure a third five-year term as party chief at the congress while packing his
leadership bench with more trusted associates, in an effort to shore up his
status as China’s most powerful leader in decades. The compliance pledges would
give Mr. Xi leverage over any official found violating the overseas-assets
rules, as the offending cadre would become liable for serious offenses like
disloyalty and dishonesty to the party.
Since taking power in 2012,
Mr. Xi has waged a high-profile campaign to fight corruption and curb displays
of extravagance among officials, saying that the party faced an existential battle
against moral decay within its ranks.
In 2014, the party said it
discovered some 3,200 “naked officials” who sent spouses and children abroad and
stashed financial assets overseas and demoted about a third of them, citing
their seniority and their families’ refusal to return to China. Beijing has
also gone after offshore assets linked to economic fugitives, as part of its
“Fox Hunt” and “Sky Net” campaigns against alleged white-collar criminals and
corrupt officials.
The party has demanded
greater financial disclosure from its cadres over recent decades, albeit only
to internal monitors. The requirements still fall short of a so-called sunshine
law, as advocated by some scholars, which would require officials to publicly
declare their personal assets. The party introduced rules in 1995 that required
leading cadres to report their income and has since added regulations asking
officials to disclose more personal and financial information, including
details of their spouses’ and children’s employment, as well as real estate and
investment holdings.
In the early 2010s, public
debate over wealth-disclosure requirements for officials evolved into a series
of protests by activists demanding greater transparency into the
family assets of senior officials. Authorities later arrested many members of
the campaign.
China’s mounting tensions
with the West have fueled concerns that any financial exposure that senior
Chinese officials have overseas could be used as leverage against Beijing,
particularly after seeing how the U.S. and European governments unleashed
far-reaching sanctions against Russia after its Ukraine invasion, some of the
people said.
China doesn’t prohibit its
citizens from setting up or investing in offshore firms, which can serve
legitimate purposes but have also been used to evade taxes and funnel illicit
funds abroad. Relatives of party officials are known to have used offshore
companies to hold assets.
In 2016, the International
Consortium of Investigative Journalists issued a report that linked the relatives of two
senior party leaders—both
since retired—to offshore commercial activities conducted through law firm
Mossack Fonseca & Co., citing a leaked trove of documents known as the
“Panama Papers.”
The consortium reported the names of members of elite party families identified as directors or shareholders of offshore companies, including a brother-in-law of Mr. Xi, as well as relatives of Mao Zedong, former party chief Hu Yaobang and former Vice President Zeng Qinghong. The report didn’t accuse any individual or organization of wrongdoing.
The U.S. has imposed sanctions
on a number of Chinese officials in recent years, including freezing any
U.S.-based assets they may control, citing their alleged roles in directing rights abuses in the northwestern region of Xinjiang and
suppressing civil liberties in Hong Kong. Targets included two members of the
party’s 25-member Politburo, specifically Wang Chen, a senior official in
China’s legislature, and Chen Quanguo, the Xinjiang party chief from 2016 to
2021.
In April, U.S. Deputy
Secretary of State Wendy Sherman said she hoped Beijing “takes the right lessons out of
the Russia-Ukraine crisis,” suggesting that the West would impose heavy
sanctions on China should it use military force against the democratically self-governed
island of Taiwan, which Beijing claims as its territory. Chinese Vice Foreign
Minister Le Yucheng insisted that “China won’t be scared” by the threat of
sanctions similar to those applied against Russia.
“What kind of storms
haven’t we weathered in the more than 70 years since the founding of ‘new
China,’” Mr. Le told a forum. “Not only has China not collapsed, but it is
still thriving and developing at a rapid speed. What else should we be afraid
of?”
Write
to Chun Han Wong at chunhan.wong@wsj.com
https://www.wsj.com/amp/articles/china-insists-party-elites-shed-overseas-assets-eyeing-western-sanctions-on-russia-11652956787
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