China Plans A Single, Chilling Response To The Panama Papers

CONTRIBUTOR

I cover under-reported stories from Taiwan and Asia.

The Panama Papers, a collection of leaked documents covering the tax-sensitive offshore business of world political leaders, has prompted the prime minister of Iceland to resign and put his British peer David Cameron on a Q&A defensive. The papers point also to China, suggesting that family members of eight current or former senior Communist Party leaders have offshore companies set up by the document aggregator, Panama-based law firm Mossack Fonseca. The brother-in-law of Chinese President Xi Jinping is among those named. The legal and financial records emerge as China tries to stop corruption. With that irony closing in, the criticism-wary country ruled by a single party has responded as it usually does to slaps from offshore: angry rejection. “In China, Web postings are taken down, foreign publications blocked, Communist Party media blames the West, and leaders act as if nothing had happened,” says Gordon Chang, an author on Chinese affairs.

Chinese President Xi Jinping, left, at the Great Hall of the People in Beijing on April 8, 2016. (KENZABURO FUKUHARA/AFP/Getty Images)

That response shows that the Panama Papers will change China in just one plain way: Communist leaders will pick up their politically reliable tune that foreigners are out to get them, and to amplify it they may strike back at someone with economic weaponry.

The 11.5 million documents collected by a law firm that works with 15 locations known as tax havens threaten the Communist leadership’s most convincing effort to curb graft, a way of stoking its stubborn economy and building trust with an ever-wary public. Lavish banquets and bribery have been squelched since Xi became president in 2013. People with rank-and-file government jobs even feel a pinch now where they never noticed one before. So the Communist Party isn’t about to tell people that the leaked documents name top officials.

“Therefore, those in the Party ruling groups…will intensify repressiveness to keep the truths about system corruption revealed by the Panama Papers out of China,” says Edward Friedman, China specialist and professor emeritus at the University of Wisconsin in the United States. “They also will understand the Panama Papers to be another item in a supposedly endless effort of the West to undermine Communist Party rule. Ruling groups will tell the Chinese people that the Panama Papers are a Western invention aimed at making China weak and dependent on the West.”

Lines like those have resonated with the public since the late Qing Dynasty more than 100 years ago, when eight Western governments took concessions in China and outraged the Chinese. A nationalistic call to arms raising the specter of foreign domination still rallies a lot of Chinese people around the flag and eases any discontent they may feel toward the Communists. China increasingly backs up its wrath by taking something away, which it can easily do as the world No. 2 economy keenly pursued by states and companies almost everywhere.

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When The New York Times NYT +0.74% reported in 2012 that the family of former Chinese Premier Wen Jiabao had massed wealth despite claims of humble origins, its website was blocked, a potential threat then to the paper’s China readership. When in 2010 the Nobel Peace Prize committee gave an award to Chinese political dissident Liu Xiaobo, China fumed at the committee’s host country Norway and persuaded some of its allies to boycott the awards ceremony. A pair of European researchers found in 2010 that China would punish governments economically for an average of two years if they hosted Tibetan leader-in-exile the Dalai Lama, who Beijing calls a separatist. And sinceTaiwan elected a president that rejects today’s conditions for dialogue with Beijing, travel agents and officials in Taipei have reported a decline in tourist headcounts from China.

China blames Western media for making the Panama Papers a sensation. Some 300 journalists were involved in investigating the documents, says an April 5 commentary by China’s Global Times online (it avoids mentioning what the papers say about Chinese leaders). The report ropes China’s perennial favorite blame target the United States, as well. “The Western media has taken control of the interpretation each time there has been such a document dump, and Washington has demonstrated particular influence in it. Information that is negative to the U.S. can always be minimized, while exposure of non-Western leaders…can get extra spin,” the commentary says. Watch for Beijing to make it harder than it already is for Western journalists to operate in China.