Pitchforks Come Out As Chinese Bust Kleptocrats

 

Unlike in the West, being a kleptocratic crook in China is now becoming a higher risk proposition. One gets the sense that as the credit monster collapses in China, and as auntie’s wealth management product is shown to be a loss, out will come the pitch forks. Seizures, arrests and even executions will become the order of the day.  

It is not too difficult to understand how these kleptocrats stuffed an estimated $1 to 4 trillion into overseas banking accounts, which I’ve dubbed “the ratline.” In the real estate part of the equation, first corrupt local officials seize the land of farmers. The windfall extraction occurs when the land is effectively rezoned for building ghost buildings and cities. Then, in an greatly expanded version of the U.S. savings and loan fraud of the 1980s, cronies in Chinese banks make shady  loans to “developers.” In turn, the developers construct pie-in-the-sky projects. It’s a facade to collect fees and soft dollars, leaving the largely unsecured debt to be dealt with by other cronies and friends in government. The end result of this loot and extraction is aptly described by David Stockman in”China’s Monumental Ponzi.”

The story around the Zhou racket is illustrative: “Chinese authorities have seized assets worth at least $14.5bn from family members and associates of retired domestic security chief Zhou Yongkang, who is at the centre of China’s biggest corruption scandal in more than six decades, according to Reuters news agency. More than 300 of Zhou’s relatives, political allies, proteges and staff have also been taken into custody or questioned in the past four months.”

As some examples, such as Li Peiying, are executed and the Chinese economy implodes, it is even more imperative for kleptocrats to get their ill-gotten gains and banal personas into the global offshore ratlines.

In recent years, one of those ratlines was in Canada, but that country has grown weary of the inflated, high-end real estate bubble prices and the behavior endemic of kleptocratic criminals and decided to pull the plug [see South China Morning Post] on its investor visa scheme. More than 45,500 waiting in the queue will need to seek other destinations aka refuge.