Economy

No hiding place

China unleashes Skynet against rogue officials

Terminator w

Skynet’s former enforcer

The Economist ran a lengthy profile of Wang Qishan a fortnight ago, declaring him to be “China’s second most powerful leader”. It likewise described the anti-corruption tsar as both admired and feared. But one key element of Wang’s biography that the magazine failed to mention is that he is childless.

That matters greatly in a country in which state corruption and nepotism often intersect. By having no heir, it is a little easier for the rank and file to believe that Wang is a clean politician himself.

There was another reminder of the links between graft and family last week when it was finally announced that former security chief Zhou Yongkang would be tried for corruption.

Zhou’s case – to be held in the high-profile city of Tianjin, a mere half hour by rail from Beijing – will see the former security chief accused of accepting “massive amounts of wealth from others”, according to the prosecutor’s office.

The New York Times alleges that much of the malpractice was facilitated through Zhou’s children. Its investigation suggests that his relatives accumulated assets worth Rmb1 billion ($161 million) as a result of their patriarch’s political power and influence.

There is no indication that Zhou’s downfall will end the anti-graft purge. In fact, Wang’s office has just ratcheted up its efforts. At least four ministries will coordinate their activities to target fugitive bureaucrats overseas, as well as the entities that help the exiles to transfer their ill-gotten gains offshore, in an enhancement of Operation Fox Hunt, the Wang-led push to bring back absconders from overseas.

The new multi-agency operation has been given the codename Skynet, a designation that has sparked much chatter online. Fans of Arnold Schwarzenegger will recall that Skynet was the rogue computer system that battled humanity in his cyborg movies. As popular blogger Zheng Wei noted: “Skynet has been launched, and the Terminator will follow soon.”

Whether the name was chosen with The Terminator in mind is disputed. Others have suggested that it relates to the Chinese idiom that ‘the sky may look thin, but you can never escape it’. Beijing Youth Daily reports that the Skynet team will go after those who have fled, and put in place new measures that make it harder for others to flee in future. The Party’s Organisation Department, the Supreme People’s Procuratorate, the Ministry of Public Security and the central bank will coordinate measures to make it more difficult for fleeing officials to use fake passports, for instance, while Skynet’s other targets include the underground banks and offshore companies that enable illegal capital flight.

Skynet may mean more bad news for gambling hub Macau. As WiC has commented before, some of the junket operators bringing the wealthy to gamble in Macau have been a route for money to leave the mainland, which is then converted into Hong Kong dollars in the casinos. The casino city is already suffering from a slowdown which has seen many smaller junkets go to the wall. If Skynet focuses on the remaining junketeers, fewer high-rollers may travel there in future.

Another target will be offshore companies with links to state-run enterprises. Illicit activity here includes subsidiaries over-invoicing their parent companies, with dodgy suppliers kicking back gains on wrongly-priced deals to corrupt executives via offshore accounts.

WiC suspects that if Skynet does get serious about this problem, it will likely focus more of its attention on Hong Kong too.

Back on the mainland, the next wave of investigations into the SOEs looks set to widen – having begun with oil giant CNPC, a state firm that was closely linked to Zhou.

The financial gains of top state executives – both legal and illegal – were also a talking point during China’s parliamentary get-together last month, especially when China Unicom’s chairman Chang Xiaobing waded into the debate during the gathering by claiming to make just Rmb8,000 a month after tax.

The comments led to much criticism in the media, especially when it was revealed that the figure excluded numerous incentives in Chang’s pay package. The telco’s annual report revealed he actually earned a total of Rmb1.07 million last year.

SOE executives can expect more scrutiny in the months ahead.


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