What is a "Naked Official"? 

Officials, looking for an exit strategy, send family and cash overseas,Moving the family abroad and Hedging their bets

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 totaling 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.”

Examples of "Naked officials"

  • Pang Jiayu's wife and son emigrated to Canada in 2002. Pang, formerly vice chairman of the provincial committee of the Chinese People's Political Consultative Conference in Shaanxi Province, was sentenced in 2008 to a 12-year prison term for bribery and dereliction of duty.
  • Zhou Jinhuo's wife had emigrated to the United States, and he tried to join her in June 2006 while under investigation for corruption. Zhou was formerly director of the Industry and Commerce Bureau of Fujian Province.

Beijing to Officials: Hand in Your Passports

New measures taken to try to prevent corrupt officials from fleeing China after a year in which over 350 Officials were detained at Beijing International Airport with $4.9 Billion USD.
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In order to avoid corrupt officials fleeing the country Beijing has recently tightened the restrictions on officials traveling abroad, requiring them to hand in their passports, according to state news media outlets.

The Beijing Municipal Organization Department recently published a new rule that division-level or higher-level officials are not allowed to travel abroad for personal reasons in normal conditions. In special situations, the officials may apply to higher level leaders for approval to travel, following strict procedures.

All leaders serving in significant positions in state organizations, such as managers in charge of human resources, in financial departments, with access to confidential files, and so on—must face a strict examination in order to get approval for going abroad.

The new rule also requires officials to return their passports to the human resource department to keep upon returning from other countries, the report says.

The Beijing Communist Party’s Municipal Organization Department has also strengthened the supervision system that monitors officials suspected of planning to flee. Once actions indicating an official may flee are detected, officials in the organization must report level by level up to the Central Organization Department within 48 hours.

The new restrictions follow a crackdown earlier this year on Chinese “naked officials” whose spouse and children have immigrated overseas (usually taking some of the official’s wealth with them). In January, the central authorities released a rule that says officials whose spouse and children have immigrated overseas won’t be considered for promotions.

The flight of corrupt officials has become an urgent issue in recent years. In 2013, 762 officials were captured in flight, with over 10 billion yuan ($US1.6 billion) in illicit money and goods recovered, according to the Supreme People’s Procuratorate.

The overseas Chinese-language news website Boxun quoted officials at the Civil Aviation Administration that in 2012 over 350 officials who attempted to flee were captured at the Beijing airport customs, with over 300 billion yuan (US$4.9 billion) recovered from them.

In order to restrain and avoid corrupt officials fleeing China with capital, the Chinese Communist Party has begun inspecting naked officials in all provinces this year.

Only Guangdong Province has published the number of naked officials it has, 2190. Over 10 provinces have claimed that “the specific number of naked officials is not convenient to reveal.” Many other provinces have kept quiet over the issue.

Zhang Xixian, professor at the Central Party School, told Chinese media that the provincial authorities are likely staying silent because the number of naked officials is so high that the authorities worry about a negative political impact if it is revealed.

 

NAKED OFFICIALS UNDER FIRE

AS CHINESE PRESIDENT’S ANTI-CORRUPTION INTENSIFIES THROUGHOUT THE COUNTRY, MANY OF CHINA’S “NAKED OFFICIALS” ARE UNDOUBTEDLY NERVOUS ABOUT THEIR IMMINENT FATE. IN THIS ISSUE, CHINA DIGEST LOOKS AT WHAT CONSTITUTES A NAKED OFFICIAL AND WHAT CHINA IS DOING TO COMBAT SUCH UNDRESS.

USING EMIGRATION AS SUBTERFUGE

While many government officials have children Naked officials, or luoguan in Chinese, are those Communist Party of Chinaofficials who remain in China while their spouses and children live abroad with foreign citizenship.

THE TERM “NAKED OFFICIAL” is one that conjures a litany of images, very few of them flattering. The very idea of embattled Toronto mayor Rob Ford sans clothing is enough to make most run for the hills. But in China, the term carries a very different meaning. Naked officials, or luoguan in Chinese, are those Communist Party of China officials who remain in China while their spouses and children live abroad with foreign citizenship. They have been a subject of much controversy in China in recent years, as the public’s collective discontent regarding graft and other forms of corruption has grown.

 While many government officials have children studying abroad – even Chinese President Xi Jinping’s daughter studied in the U.S. at Harvard University – the concern lies with those officials whose families have emigrated abroad, thus giving them the means to act as a final destination for ill-gotten monies to be funneled.

  A CHINESE REALTOR LEADS A TOUR OF CHINESE REAL ESTATE BUYERS AROUND THE CALIFORNIAN CITY OF PALO ALTO. ONE PART OF BECOMING A NAKED OFFICIAL IS THE PURCHASE OF REAL ESTATE ON FOREIGN SOIL, A PLACE TO FLEE TO WHEN THE KITCHEN GETS TOO HOT.

A CHINESE REALTOR LEADS A TOUR OF CHINESE REAL ESTATE BUYERS AROUND THE CALIFORNIAN CITY OF PALO ALTO. ONE PART OF BECOMING A NAKED OFFICIAL IS THE PURCHASE OF REAL ESTATE ON FOREIGN SOIL, A PLACE TO FLEE TO WHEN THE KITCHEN GETS TOO HOT.

Andrew Wedeman, a professor of political science at Georgia State University whose research expertise includes China’s political economy and corruption, says that the transition from corrupt official to naked official to wealthy immigrant is “a graduated process”.

“The pattern, if we can say there is one, seems to be that after graduating from a Western university or graduate program, the child seeks employment abroad and obtains residency, which can then be strengthened by having children abroad who qualify for citizenship by right of birth. Once the child is established, the property is purchased and the wife begins to spend more and more time abroad – taking care of the grandchildren, of course,” Wedeman says.

 “I think it is when a house is bought and the wife de facto emigrates that an official becomes ‘naked’. As the official gets closer to retirement, the suspicion begins to build that he is planning to emigrate and he must have the illicitly-obtained sufficient wealth to enjoy retirement abroad.”

Guangdong gets tough,DEMOTED FLIES AS TIGER RETIRES

IN 2011, A REPORT from the People’s Bank of China estimated the number of naked officials to have jumped ship from the mid-1990s to 2008 at between 16,000 and 18,000, taking with them some 800 billion yuan ($128.4 billion to today’s exchange rate).

Perhaps one of the more high profile cases involving naked officials happened in 2012 when Wang Guoqiang, then Party chief of Fengcheng, a city in China’s northeastern Liaoning Province, fled China with an estimated 200 million yuan (then equal to $31.5 million) after possibly being tipped off to a corruption investigation to come. The Wang case set in motion a number of reforms designed to discourage officials from sending their families abroad so to act as a conduit for their embezzled funds, the culmination of these reforms taking place in Guangdong Province in early June after the Central Commission for Discipline Inspection (CCDI), the Communist Party’s anti-corruption watchdog, carried out a province-wide investigation into government officials, asking officials to declare properties owned, as well as the occupations and travel records of family members.

  WANG GUOQIANG (SECOND LEFT) WAS ONCE PARTY SECRETARY OF FENGCHENG IN LIAONING PROVINCE. NOW, HE LIVES IN THE U.S. WITH HIS WIFE AFTER LEAVING IN 2012 WITH A REPORTED 200 MILLION YUAN (THEN WORTH $31.5 MILLION).

WANG GUOQIANG (SECOND LEFT) WAS ONCE PARTY SECRETARY OF FENGCHENG IN LIAONING PROVINCE. NOW, HE LIVES IN THE U.S. WITH HIS WIFE AFTER LEAVING IN 2012 WITH A REPORTED 200 MILLION YUAN (THEN WORTH $31.5 MILLION).

While the exact number of naked officials investigated was not made known, most reports state that around 1,000 officials were told to either have their family members return home or face demotion. Of the estimated 1,000 investigated, 866 chose (including nine at mayoral level) to accept demotion, transfer, or early retirement instead of asking their respective family members to return to China.

The biggest “tiger” (referring to the much publicized terminology of “tigers and flies” used to denote both high-ranking and low-level government officials) netted by the Guangdong sweeps was Fang Xuan, the deputy Party chief of Guangzhou. As a result, Fang was forced to retire around five months before his age-60 October retirement date. There has been no mention about where Fang’s family has emigrated to or if any further punishment will be forthcoming. However, if there was evidence of graft behind Fang’s removal from office, he should consider himself lucky that early retirement is all he got stuck with.

  FANG XUAN, FORMER DEPUTY PARTY CHIEF OF GUANGZHOU AND THE LARGEST “TIGER” (HIGH-RANKING OFFICIAL) CAUGHT IN THE RECENT GUANGDONG NAKED OFFICIALS INVESTIGATION, WAS FORCED INTO EARLY RETIREMENT AS HIS PUNISHMENT.

FANG XUAN, FORMER DEPUTY PARTY CHIEF OF GUANGZHOU AND THE LARGEST “TIGER” (HIGH-RANKING OFFICIAL) CAUGHT IN THE RECENT GUANGDONG NAKED OFFICIALS INVESTIGATION, WAS FORCED INTO EARLY RETIREMENT AS HIS PUNISHMENT.

AN OBVIOUS TELLTALE

 SO WHY DO IT? Why do the so-called naked officials send their families abroad as it would appear to be a sure-fire way for the relevant watch-dog organizations to discover fraudulent behavior? As Yang Jianwei, vice-director of the Guangdong Communist Party School, told The Irish Times while acknowledging that not all officials that had overseas are corrupt “You have moved your families abroad, how could we not think that although you are living in China, you are planning to escape?”

Having a child attending an expensive overseas institution does not equate to corruption, but it does raise eyebrows. Chinese officials do not make exorbitant amounts of money, so how can these officials afford schools such as Papplewick School, Harrow School, Oxford University Harvard University, and Columbia Law School (all schools attended by Bo Guagua, son of former Party leader Bo Xilai)?

For years, their [Chinese government officials] children have been going abroad to study. It is always claimed that the costs were substantially reduced by “scholarship.” I have no doubt that many of the kids are bright and that some get scholarships, including some which may be awarded because a university sees the son or daughter of a high-ranking official as a worthwhile “investment’,” says Wedeman.

“But financially pressed Western universities look at Chinese students as “cash cows”, a source of revenue. They may, therefore, give a student a discount in the form of a scholarship but they are not going to let them go for free. Even if a student has a substantial scholarship, there are still the living costs.”

Luoguan official’s PUBLICIMAGE

DESPITE THE ONGOING CRACKDOWN on corruption, the general public in Chinaremains skeptical of the motives of Chinesepoliticians once in office. The Chinese Academyof Social Sciences released a document titledThe Research Report on Image Crisis Response (2013-2014) on June 18 which outlines the fiveimage crises in China today: public safety, socialorder, pollution, public services, and the image ofgovernment officials.

According to Xinhua News Agency, the report lists Guangdong, Beijing, and Henan as the three most “problematic” regions. With the Guangdong Province investigations now over, some observers have wondered aloud if Beijing is the next regarding the investigation of naked officials. But what can be done to discourage naked officials, graft, and the overall environment of corruption? More importantly, how can the Chinese Government fix the public perception concerning government officials?

“How much the number [of naked officials in recent years] has risen and how many naked officials there really are is anybody’s guess. I would hazard that it is probably less that most people might think. But reality is secondary to perception. If the public thinks that most officials are naked, then the regime has to act as if they are,” Wedeman says.

As reported by the The Wall Street Journal, Damian Ma, a fellow at The Paulson Institute in Chicago and co-author of In Line Behind a Billion People, told journalists at a February 2014 meeting ““How do you get rid of vested interests? You arrest them.”

And perhaps that needs to happen. No more demotions, no more barriers to promotion, no more transfers to remote villages. Instant expulsion from the Party and arrest, instead. Now, maybe not enough evidence could be found on any of the 886 naked officials in Guangdong to warrant expulsion or arrest, but it seems as though not a hard enough stance is being put forth. More like a slap on the wrists instead of a life in exile.

  ZHANG SHUGUANG SITS DURING HIS 2013 TRIAL FOR CORRUPTION. ZHANG, THE FORMER DEPUTY CHIEF ENGINEER OF CHINA’S MINISTRY OF RAILWAYS AND RIGHT-HAND MAN OF MINISTRY HEAD LIU ZHIJUN, ADMITTED TAKING BRIBES, BRIBES THE PROSECUTION PUT AT 47.55 MILLION YUAN ($7.7 MILLION). ZHANG BOUGHT A CALIFORNIA MANSION IN 2002 DESPITE BEING ON A MONTHLY SALARY OF 2,200 YUAN ($265 AT THE EXCHANGE RATE FOR THE TIME).

ZHANG SHUGUANG SITS DURING HIS 2013 TRIAL FOR CORRUPTION. ZHANG, THE FORMER DEPUTY CHIEF ENGINEER OF CHINA’S MINISTRY OF RAILWAYS AND RIGHT-HAND MAN OF MINISTRY HEAD LIU ZHIJUN, ADMITTED TAKING BRIBES, BRIBES THE PROSECUTION PUT AT 47.55 MILLION YUAN ($7.7 MILLION). ZHANG BOUGHT A CALIFORNIA MANSION IN 2002 DESPITE BEING ON A MONTHLY SALARY OF 2,200 YUAN ($265 AT THE EXCHANGE RATE FOR THE TIME).

ASSET DECLARATION the ANSWER?

ON JUNE 17, The China Youth Daily reported the results of a survey it conducted, asking 27,509 their thoughts on naked officials. Of the respondents, 93 percent said that the reality of naked officials has diminished their trust in the government, with 95 percent supporting national changes.

The most obvious way to return public trust in government officials is to have said officials subject to greater transparency of personal wealth and assets. As President Xi Jinping’s anti- corruption drive gets serious, the calls for the declaration of personal assets by government officials have grown louder.

  IN THIS CARTOON, THE PUBLIC IS ASKING “SINCE YOU HAVE A FANCY CAR HERE, WHY DO YOU NEED A HOUSE ELSEWHERE”, THE OFFICIAL’S POCKETS SAYING “MAKE PUBLIC” AND “ASSETS’. WHILE SLIGHTLY ABSTRACT, PERHAPS THE CARTOON IS HINTING AT THE GROWING DISPLEASURE OF CHINESE PUBLIC OFFICIALS BUYING PROPERTY ABROAD AND THE OPAQUE CHINESE ASSET DISCLOSURE SYSTEM OF GOVERNMENT OFFICIALS.

IN THIS CARTOON, THE PUBLIC IS ASKING “SINCE YOU HAVE A FANCY CAR HERE, WHY DO YOU NEED A HOUSE ELSEWHERE”, THE OFFICIAL’S POCKETS SAYING “MAKE PUBLIC” AND “ASSETS’. WHILE SLIGHTLY ABSTRACT, PERHAPS THE CARTOON IS HINTING AT THE GROWING DISPLEASURE OF CHINESE PUBLIC OFFICIALS BUYING PROPERTY ABROAD AND THE OPAQUE CHINESE ASSET DISCLOSURE SYSTEM OF GOVERNMENT OFFICIALS.

Back in February 2013, the People’s Daily published a commentary saying the China must restrict access to property records, saying that such records are “private affairs”. Now, that would be true if the property records concerned private citizens with no role in the governance of the country. However,public officials should be held to a higher standard as the Beijing News found out in late 2012 when they demanded via the newspaper’s Weibo that then-U.S. ambassador Gary Locke make his personal wealth public. Little did the editorial staff at the Beijing News know that all U.S. politicians are required by law to disclose such information, although the resulting sarcastic wrath of Chinese netizens soon informed them of that tidbit of information.

But in November 2013, the CCDI announced that it would be launching a pilot scheme requiring all newly-promoted government officials to report the employment status, personal assets, and international travel records of spouses and children.

In December 2013, China Daily reported that newly-promoted officials in Chongqing municipality would be required to report both their private assets and family members in line with the CCDI November announcement. In February 2014, such enforced declarations had spread to Guangdong Province, joined by Shaanxi Province in June. However, the one commonality among all these provincial schemes is that the declarations only apply to newly-promoted officials, not those “tigers” entrenched in senior positions throughout the country. However, it is a start.

Professor Wedeman, for his part, recognizes the efforts but is reserving judgment until a later date.“If you have to account for your family’s property and income, then in theory corruption would be exposed. But disclosure only works if there are mechanisms to check that disclosures were accurate. If an official simply has to fill out a form and nobody checks to see if, for example, he or she has listed all other real estate holdings and that they have correctly stated the value of those properties, then the process become meaningless,” Wedeman says.

 

“But even if the forms are audited, the auditors will not be able to detect improprieties if they don’t have access to proper property and financial records that reliably identify who owns what and the names of account holders. Finally, the system won’t work if those scrutinizing disclosure forms are not themselves accountable. If the scrutiny remains “in house”, officials will have both the means and incentives to cover up for each other. So asset disclosure is a first step, but there is a lot more involved in making asset disclosure an effect barrier to corruption.”