Family members of China’s elite settled abroad are reportedly selling off their immovable assets acquired there after the Chinese Communist Party banned ownership to insulate the government from future economic sanctions by other countries, especially the United States.
The party is seeking compliance reports from its citizens abroad and many have sold off their shares in foreign companies and are in the process of divesting themselves of their real estate. Officials are being asked to sign pledges to the effect that they are complying with the order.
The directive says “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 sell-off clamour came about after the CCP’s Central Organisation Authority issued a notice a few weeks ago. It specifically “prohibits spouses and children of ministerial-level officials from holding — directly or indirectly — any real estate abroad or shares in entities registered overseas”.
The Chinese abroad are also “barred from creating accounts with overseas financial institutions unless they had immediate business in the area, such as schooling or work”, according to the Wall Street Journal which broke the story.
This is seen as a fallout of the Russia-Ukraine conflict and the subsequent western sanctions on Russia. China, already facing a slew of sanctions impacting its government, various organisations and individuals, is taking steps to ensure that any Chinese action deemed controversial by the west does not invite sanctions that weaken the communist government.
The western sanctions on Russia targeted “the funds of Russian officials, business people and oligarchs in order to punish leadership in Moscow for its attack on neighboring Ukraine”. The sanctions destroyed the economic credibility of the Russian elite living abroad, including those in the United Kingdom. The Chinese want the risk to be minimal in case they are the targets in future.
Western media has attributed this decision directly to President Xi Jinping. He has been quoted as saying to the party as early as this January that “leading cadres, especially senior cadres, must pay attention to family discipline and ethics,” and that top communist officials should “lead by example in managing their spouses and children properly, being a dutiful person and doing things in a clean way”.
As a follow-up of the order to relinquish foreign assets, the CCP has also decided to “block promotions for senior cadres whose spouses or children hold significant assets abroad”, according to western media reports emanating from Hong Kong.
The west sees the communist directive, outlined in an internal notice by the party’s powerful Central Organization Department, as a factor that 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”.
The logic of the American media is that the CCP would not have issued such an order if it had no intentions of carrying out actions that could be deemed controversial by the international community. That makes defense analysts suspect that China may be analysing the military nature of the Russian invasion of Ukraine. What immediately comes to their mind is Taiwan. That is the only reason why President Xi may want to seek to “minimize geopolitical risks for the Communist Party amid concerns that officials with overseas financial exposure could become a liability if the US and other Western powers impose sanctions against Chinese leaders and their relatives”.
There are internal, political repercussions of the order as well. The compliance pledges the CCP is asking overseas Chinese elite to sign “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”.
Xi has used his anti-corruption drive to purge his detractors and control the fates of rich Chinese individuals and companies. In 2014, the CCP identified around 3,200 Chinese it called “naked officials”.
“Naked” officials are generally senior officials who have sent their families abroad, often as a conduit transferring their ill-gotten assets abroad, and in preparation for their own flight. In 2015, the CCP demoted around a thousand such officials who held key positions and whose families effused to return to the mainland.
Subsequently, “the anti-graft spotlight fell on these officials, as a high-risk group; likely be stealing sizable amounts and — once they make their getaway — difficult to track down”. They were “banned from promotions and from ‘important and sensitive’ posts in areas like the military, diplomacy and national security. In later years, the “naked officials” were asked to “choose between accepting less sensitive posts or bringing their families back to China”.
It is a matter of speculation whether the CCP is now targeting the Chinese elite abroad in order to erase all possible dissent against President Xi. In which case, it is possible that the ruse of possible western sanctions is being used to neutralise them.