12/16/2014, 00.00
CHINA
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China loses US$ 1.25 trillion to tax evasion and corruption

According to a report by Global Financial Integrity, illicit outflows from the mainland grew exponentially over a ten-year period. Tax evasion and corruption are the main reason. This makes China the biggest loser among 151 developing nations.

Beijing (AsiaNews/Agencies) - Mainland China lost US$ 1.25 trillion between 2003 and 2012 to illicit outflows including tax evasion, crime and corruption, the largest loss of money among 151 developing nations surveyed, according to Global Financial Integrity, a Washington-based advocacy group that tracks such activities.

This number was described as "highly conservative" as it did not include cash settlements, common among drug dealers and money launderers, some analysts wrote.

"After a brief slowdown during the financial crisis, illicit outflows are once again on the rise, hitting a new peak of US$ 991.2 billion in 2012", ten times the amount those countries received in official development aid, report authors Dev Kar and Joseph Spanjers wrote.

Indeed, the mainland won the Oscar for the biggest outflow in 2012 with US9.5 billion, up 53 per cent on 2011. The second-largest cumulative outflow was in Russia, which lost an estimated US$ 973.8 billion between 2003 and 2012. Mexico and India were third and fourth, losing US4.2 billion and US$ 439.5 billion respectively.

As a continent, Asia accounted for 40.3 per cent of unauthorised financial flows from the developing world during the period. "Not all illegal money movement is money laundering," said risk consultant Julian Russell.

In China, capital control rules "encourage an underground economy for people providing a facilitation service to move money", he added. In many cases, laundered money ends up reinvested in the mainland as tax-free foreign investments.

This is a major problem in China where President Xi Jinping, when he came to power, launched a campaign against corruption and petty officialdom against "tigers" and "flies," i.e. powerful leaders and lowly bureaucrats.

Yet, despite arresting and quickly trying high-profile figures, many analysts believe that such a campaign is a way for Xi to use corruption as an excuse to get rid of internal opponents.

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