Why China is torpedoing the G20’s corruption initiative

While China is engaged in a determined push to root out corruption at home, it has wavered on addressing the issue at the G20.

Global anti-corruption efforts have been dealt a blow, as an agreement Australia hoped to unveil at this weekend’s G20 summit looks set to be torpedoed by China.

The proposal sought to create a public ownership register to prevent people from hiding their financial affairs through shell companies and other opaque practices.

China’s last-minute disruption of the anti-corruption scheme is peculiar given the enthusiasm with which it pursued the issue just days ago at the APEC summit in Beijing.

China’s graft-busters have been applying pressure to countries such as the US, Canada, New Zealand and Australia to help them repatriate corrupt officials and their ill-gotten loot.

According to China’s central bank, over 18,000 officials have made off with more than $US123 billion since the mid-1990s -- and that’s a conservative estimate.

Given that Global Financial Integrity, a non-profit organisation based in the US, estimates that about $US2.8 trillion was siphoned out of the middle kingdom between 2005 and 2011, it’s not hard to see why the Chinese government would like to claw some of that back.

Beijing is now even offering to share up to 80 per cent of forfeited assets with countries that help recover funds that have been illegally transferred out of the country.

At the APEC summit in Beijing this week, China managed to corral member states to sign up to an “ACT-NET” initiative aimed at facilitating information sharing on corruption.

Under the agreement, the network will be headquartered with the CCDI, the widely feared discipline watchdog of the Chinese Communist Party.

The highly secretive extra-legal body answers only to the Communist party leadership and has no formal right to arrest or press charges. The CDDI’s internal disciplinary processes, known as ‘shuang gui’ are notorious for involving torture and abuse.

To get APEC member countries to sign up to the network was quite the coup for China’s authoritarian leaders. By obtaining the imprimatur of APEC member states, the CDDI was given a whole new level of legitimacy on the world stage.

But much to the chagrin of the CDDI, the most-favoured destinations for corrupt officials -- the US, Canada and Australia -- don’t have extradition treaties with China due to their distrust of the country’s legal system.

In Beijing this week, Foreign Minister Julie Bishop says Australia is now considering signing up.

Kerry Brown, the head of the University of Sydney's China Studies Centre, told China Spectator that agreements like these are fine as long as there is a common understanding of corruption between the two countries.

“Corruption corrodes Australian interests in China, and we should cooperate where legitimate,” he said.

“But Australia better have a pretty clear sense of the division between an anti-graft campaign and a political purge, and most experience in China shows the line between these is feint and shifting.”

The fact is that the anti-corruption campaign Xi Jinping has been waging since late 2012 has been as much about preserving Leninist single-party rule as it has been about genuinely rooting out corruption (China’s anti-corruption drive is a party tactic to preserve power, 31 October).

According to a Voice of America report, as at September 2014, all of the 48 most senior ‘tigers’ caught in the corruption campaign hail from humble backgrounds and none are princelings or offspring of senior party leaders.

In other words, Xi Jinping’s own faction has been spared, while their rivals have been vanquished.

And therein lies the reason Beijing was so keen to push its own anti-corruption agenda at APEC, but is shying away from alternative proposals at the G20.

Maggie Murphy, a senior advocate with the global corruption watchdog Transparency International, and who heads the organisation’s advocacy work at the G20, told China Spectator that the G20 proposal would actually help the Chinese international anti-corruption crusade dubbed ‘Operation Fox Hunt’.

“If G20 Leaders adopted enhanced transparency measures on the issue of company ownership, it would contribute towards Operation Fox Hunt since it would be easier to track down and identify the source of illicit funds leaving the country,” she said.

But as an investigation by the International Consortium of Journalists found at the beginning of this year, relatives of China’s political elite have been stashing huge amounts of cash in offshore accounts (Chinese leaders linked to secret offshore haven, 22 January).

Among those implicated in the leak were the brother-in-law of President Xi Jinping, the son and son-in-law of former premier Wen Jiabao, a cousin of former president Hu Jintao and the son-in-law of China’s late ‘paramount leader’ Deng Xiaoping.

According to estimates reported by ICIJ, between $US1 trillion and $US4 trillion in untraced assets have left China since 2000 -- much of that via opaque corporate methods.

Simply put, a rigorous corporate transparency regime would mean that China’s top leaders would be exposed themselves.