Embezzlement seen widespread in China

KAIPING, China -- In this city and many others in China, senior officials are embezzling tens of millions of dollars and fleeing overseas with their families.

They are seldom caught, and the stolen loot is recovered even less frequently. According to the latest official count, some 4,000 senior Chinese officials and managers of state-owned businesses have fled abroad over the past two decades with as much as $50 billion in embezzled money.

China's government-controlled media call the corruption "staggering," and the matter is an Achilles' heel for China's rulers, who repeatedly announce campaigns against graft. With some regularity, corrupt officials are given lengthy jail terms, or even executed. But much of the citizenry doubts that the ruling Communist Party is making any headway.

"People become kind of numb to these campaigns because they bring few results," said Yang Fan, an economist at the China University of Politics and Law in Beijing.

In the latest pilot program, special teams are now interviewing some senior officials as they prepare to travel overseas, quizzing them about motives for trips and the whereabouts of family members, according to the official Xinhua News Agency.

"Many of them are thought to have sent their family members to study or live overseas before skipping the country themselves," the Xinhua report said.

If there's any good news, specialists say, it's that some embezzled assets make a U-turn and return to China, the world's fastest-growing major economy. That's one reason for an explosion of Chinese-controlled companies in the Bahamas, the Cayman Islands, the British Virgin Islands, Samoa, and other offshore banking havens.

The tiny British Virgin Islands, an overseas territory of the United Kingdom where just 22,000 people live, are now the second-largest source of foreign direct investment in China, after Hong Kong. Last year, the British Virgin Islands pumped $5.78 billion into China. Reasons for using the offshore corporations, Chinese specialists say, include tax avoidance, concealing ownership, and hiding assets stripped from state companies.

Such financial trickery means little to the residents of Kaiping, a city on the banks of the Tan River about 100 miles west of Hong Kong, in one of the most industrialized regions in southern China.

The gleaming 21-story Bank of China building along the river is a symbol of the local corruption. The bank's former president, Yu Zhendong, and several other managers pillaged $483 million, the government charges.

Local residents are furious over the rip-off. "There is no cure for corruption in China. There is no hope," said Zhou Chung, the Hong Kong-raised owner of the Flowers and Grass florist shop.

Feng Qiling, a 20-year-old medical student, said she expected severe punishment for Yu when his capture was announced in the United States, where he'd fled.

"I hoped he would get the death sentence," Feng said.

But Yu, who was returned from Nevada on April 16, will serve the same 12-year sentence for fraud and using an illegal visa that he was given by a Nevada state court.