Here’s another trend that could result in longer lines at consulates for American emigrants & their descendants seeking to give up U.S. citizenship. For the past several months, China has been conducting a large-scale search for “naked officials” — those whose immediate family members all reside abroad — by making all public employees fill out self-reports about their families’ possession of foreign citizenship and/or permanent residence.
Now they’re moving on to stage two: getting the officials to bring their family members back home and give up their foreign status, and punishing those who refuse. No time to do a complete translation, but here’s some excerpts from yesterday’s extremely lengthy New Beijing News report:
|哪些人要填写这份“报告表”？各省份都将排查的覆盖面，定位在囊括乡镇、街道和企事业单位在内的所有国家工作人员，即所有“吃财政饭”的人员。例如浙江湖州市吴兴区教育局就要求，全区各学校、幼儿园在编教职工，局机关、直属事业单位全体工作人员，都要填表。也就是说，幼儿园教师也要上报配偶、子女国籍。||Which people have to fill in this report form? The provincial investigations cover all national employees, including those in town and village, subdistrict, and public enterprises and institutions — that is to say, all employees who “eat government rice”. For example, the Education Department of Wuxing District, Huzhou City in Zhejiang Province has demanded that all employees teaching at at any school or kindergarten, as well as all personnel of organisations under the Education Department, fill out the form. In other words, even kindergarten teachers have to report their spouse’s & children’s citizenship.|
|摸底排查后，各级组织人事部门还要跟“裸官”逐一“个人谈话”，让其在“接回家人”和“接受调岗”之间，作出“二选一”选择。选择接回家人的，还需填写《自愿放弃外国国籍、国(境)外永久居留权或长期居留许可承诺表》，注销外国国籍，并上交移居国家出具的注销手续凭证；拒绝接回家人的，则被调整出中组部规定的5类岗位。||Following the exploratory investigation, personnel departments at all levels will then have to conduct “individual discussions” with all “naked officials”, to give them a choice between either “bringing home family members” or “accepting reassignment”. They will also have to fill out a “Pledge to Voluntarily Renounce Foreign Citizenship and Foreign/Territorial Permanent Residence or Long Stay Permit”, cancel foreign citizenship, and submit a certificate issued by the country of emigration attesting to the cancellation; those who refuse to bring home their family members will be transferred out of five types of posts listed by the [Communist Party’s] Organisation Department.|
As we previously discussed here, mainland Chinese are the world’s most enthusiastic users of the U.S. EB-5 investor permanent residency programme — possibly as many as 1 out of every 29 HNWIs (3.4%) in mainland China bought an EB-5 green card between 2009 and 2013, compared to 1 in 86 South Korean HNWIs (1.1%), 1 in 163 Taiwanese HNWIs (0.61%), and 1 in 2,520 HNWIs from the rest of the world (0.039%).
Some commentators attribute mainland China’s enthusiasm for EB-5s to factors such as air & food pollution, social instability, poor infrastructure, and similar quality-of-life issues. Yet HNWIs in other lower-income countries which share those problems go for EB-5s at tiny fractions of the Chinese rate — fewer than one in a thousand Indian, Indonesian, and Latin American/Caribbean HNWIs obtained EB-5 green cards in the past five years.
In reality, what apparently drove many rich Chinese officials to acquire EB-5s for themselves and/or their loved ones was the idea that they could hide their family members and shadily-earned assets abroad in the U.S., and then — if push came to shove — fool Washington into protecting them from corruption crackdowns in China such as this one by making false claims to credible immigration officials that “Red China” is targeting them for political reasons. In contrast, HNWIs from India, Thailand, and other developing countries which have less antagonistic relations with Washington, generally realise that the U.S. judiciary and public would be less sympathetic to such attempts to shield themselves from similar crackdowns in their respective homelands.
How to get information: by asking for it
|动作最快的是广东，其次是浙江和安徽。||Guangdong, Zhejiang, and Anhui have been the quickest to act.|
|广东今年2月被中央巡视组指出“裸官”问题突出后，3月底就已启动“裸官”排查，5月底已完成清理，866名“裸官”被调岗。浙江和安徽分别于4月下旬、5月初启动；福建、辽宁、贵州、江西、湖南、四川、河北、河南、江苏、内蒙古、甘肃、陕西等近20个省份，也于6月开始摸底排查。||In February, the [Communist Party Central Commission for Discipline Inspection’s] Central Inspection Group pointed out Guangdong as having particularly serious problems with “naked officials”, and by late March the province had already begun its investigations of “naked officials”. Their cleanup was completed by the end of May, and resulted in the reassignment of 866 “naked officials”. Zhejiang and Anhui started in mid-April and early May, respectively, while in June, a total of 20 provinces including Fujian, Liaoning, Guizhou, Jiangxi, Hunan, Sichuan, Hebei, Henan, Jiangsu, Inner Mongolia, Gansu, and Shaanxi began exploratory investigations.|
|各省摸底排查“裸官”的方式，都是填写“配偶已移居国(境)外的国家工作人员情况报告表”。||The method which each province has used to conduct exploratory investigations of “naked officials” has been to require them to fill out a “Status Report for National Employees with Spouses Residing In Another Country (Territory)”|
|新京报记者获得的一份安徽省宿州市“报告表”显示，要填写的内容共计14项，包括“工作单位及职务”、“职级”等个人信息；如果配偶、子女移居，须填写“移居人姓名”、“与本人关系”、“移居国家(地区)”、“移居类别(外国国籍、永久居留权、长期居留许可)”、“移居时间”、“移居人现居住城市及从事职业”等。||A report form from Suzhou City, Anhui Province obtained by a New Capital News reporter had fourteen items that needed to be filled in, including “Work unit and post”, “rank”, and similar personal information, and if the spouse or children have emigrated, more items including “Names of emigrants”, “Relationship to yourself”, “Destination country (territory)”, “Class of emigration (foreign nationality, permanent residence, long stay-permit”, “time of migration”, and “Emigrant’s city of residence and profession”.|
The IRS could learn something from how the Communist Party is getting this information: by simply asking people for it directly in a clear, comprehensible, and well-publicised manner. Beijing no doubt understands that not everyone will give honest answers on all this paperwork; however, they have not tried to use that as an excuse to force foreign banks and governments to get the information for them.
In contrast, when the IRS wants to know how much money you have in your local retirement or medical savings plans, first they make up incomprehensible terminology like “foreign grantor trust” which an ordinary person would never associate with a government-created-and-approved savings plan in the country where you actually live, then they refuse to give enough guidance for even an actual international tax lawyer to decide whether your savings plan really is a foreign grantor trust, and then they give you a six-page form to fill out, with thirteen pages of instructions, fifty-six questions written in a dialect of officialese with a vague resemblance to English, and a fifty-four hour annual time burden for you or your accountant or lawyer who charges by the hour.
And, for their pièce de résistance, the relevant departments don’t actually bother telling you about this form, but instead just put a vague note in small print in new passports about how you must pay taxes. Then when they unsurprisingly get a compliance rate of about zero percent, they complain that people are evading taxes by “hiding assets offshore”, and push pliable members of Congress to invade foreign countries to help them find all these alleged hidden trillions.
Why investigate officials with overseas relatives?
|江苏一地级市组工干部认为，各省暂未公布“裸官”摸底排查数据，并非特意“加密”，“一个原因可能是，摸底过程中遇到了一些特殊案例” …||A Jiangsu prefectural-level city working group cadre believes, although some provinces have not yet publicised the statistics on their exploratory investigations of “naked officials”, it’s not an indication of “secretiveness”. “One possible reason is that in the exploratory process, they’ve encountered some unusual cases.” …|
|上述组工干部也强调，每个人的家庭情况不同，因此摸底过程中肯定会遇到特殊案例，但如何处理，还是要“一碗水”端平，“标准统一，只要是‘裸官’，家属没有放弃外国国籍，就不能在重要岗位任职，没有例外。如此才有利于治理行动推进”。||The above-mentioned work group cadre also emphasised, every person’s family situation is different, and because of this the exploratory process may have encountered some unusual cases, but they will still be dealing with everyone in a uniform fashion. “The standards are the same: if you’re a ‘naked official’, and your family members have not given up foreign citizenship, then you cannot hold important posts, without exception. In order to improve governance, this is the only way to proceed.”|
Aside from obvious concerns over corruption and outright theft of government assets — with the proceeds hidden in overseas real estate — China has other reasons to investigate officials with family members abroad: people with foreign connections may be vulnerable to blackmail by foreign governments. This is precisely why the U.S. government pays such close attention to “foreign preference” and dual citizenship when issuing security clearances.
What neither China nor the U.S. seem to have realised yet is that FATCA and FATCA reciprocity increase the chance of such blackmail: each country is telling its geopolitical rival to set up an information dragnet and compile a massive database about local financial assets owned by foreigners and/or non-residents. Neither such database existed before — and any attempt at creating it purely as a domestic initiative, without international pressure, would have been rightly viewed with extreme suspicion.
And once such a database does get created, it is available not just to the foreign government which requested its creation, but to the local government which created it in the first place. In fact, the local government has more access to that database, since they have the power to censor or modify certain inconvenient entries before forwarding it to the “partner” government — or to decline to censor or modify those entries if the subject of those entries doesn’t cooperate with the government in some other way.
A crackdown on all multinational families, or just government officials?
|江苏一地级市组工干部对新京报记者说，按照中央的要求，如果没有接回家人、拒不接受调岗，可被免职、降职、给予纪律处分，“这次是动真格的，很严格，如果瞒报，终生仕途都会受到影响”。||A Jiangsu prefectural-level city working group cadre said to a New Beijing News reporter, according to the central government’s requirements, if you refuse to bring home your family members or to accept reassignment, you could be stripped of your post, demoted, or subject to administrative sanctions. “This time they’re serious. If you try to hide the truth, it could affect your whole career.”|
|各地都将注销外国国籍作为重要环节。甘肃、安徽的方案都注明，如果因法律等原因无法办理注销手续，则要上缴所有移居证件和因私出国(境)证件 … 上述规定意味着，表示要接回家人的“裸官”，不能以“不可抗力”暂时无法注销外国国籍作为借口。||Governments everywhere are making cancellation of foreign citizenship an important step. Gansu and Anhui’s programmes both specify that if due to legal reasons some people cannot carry out the cancellation procedures, then they must hand over all their foreign residency cards and individual travel documents [to the government] … These rules mean that “naked officials” who state that they will bring home their family members cannot use temporary inability to cancel foreign citizenship as an excuse.|
The big question, of course, remains: is China really going to get any FATCA reciprocity out of the U.S. to aid in its investigations of corrupt officials? This is certainly the spin that the mainland media have been putting on Beijing’s gross surrender of national sovereignty. However, the far more likely outcome can be seen by spending five minutes reading FinCEN’s “DATCA” regulations and finding the obvious loopholes: Treasury has no intention of offering genuine reciprocity even if Congress continues to look the other way and allow them to. More broadly, the U.S. enjoys all the foreign money being laundered into its real estate markets too much to give serious thought to aiding foreign corruption crackdowns.
On the flip side, the latest crackdown on corrupt officials notwithstanding, there are signs that Beijing is not particularly interested in ruining the lives of ordinary families with overseas-born kids — witness the recent six-month suspended sentence for a Shenyang man who bought fake Beijing registration papers for his U.S. citizen daughter (Article 280 of the PRC Criminal Code allows a custodial sentence of up to seven years).
So if they’re barely punishing Chinese citizens & their families for identity fraud against the local government, do you seriously think they’ll punish any Chinese citizens for lying to banks about their tax compliance status under foreign law? Beijing’s compliance with FATCA is likely to be precisely as honest and effective as Washington’s reciprocity, and if Washington keeps following its present path, that means data exchanges on both sides will be carried out only to the extent necessary to save face for everyone.
At most, maybe China’s State Administration of Taxation will take the opportunity to dob in some American expat workers at foreign corporations in order to keep the IRS happy. Of course, if the loss of key employees to IRS “offshore crusades” means that those foreign corporations compete less effectively against domestic Chinese companies, then that’s just an additional bonus for Beijing — and one more example to add to the long and successful history in Chinese statecraft of “using foreigners to control foreigners” (以夷制夷)
As someone who has spent lots of time in CHina and am married to a Chinese citizen. . I can say that enforcing FATCA laws in China does not stand much of a chance. China is barely effective at enforcing their own financial regulations, let alone reporting to a foreign body. In fact they are not effective at all. The reason corruption is so rampant is that it is so easy to hide or bribe the investigators to look away.
Even many Chinese stocks have come and gone from the NY stock exchange because they did not welcome or do well under the intense scrutiny and auditing required for all those who list on the NYSE.
This procedure should be highlighted. The FATCA database in the IGA will do ALL of the work necessary for those Chinese in USA. FATCA has enabled China to perform this act.
A while ago, I read a post from a blogger over at Caijing who argued that China should make the U.S. disclose the details of all naturalised citizens from China as part of the “FATCA reciprocity”, so that China could make sure their Chinese nationality & ID cards were properly cancelled.
But up to now, we still have no idea what the text of the China–U.S. IGA actually says, so we have no clue what the U.S. has promised to disclose, let alone what they’ll actually disclose. Maybe it’ll remain secret until after comes into effect, the way the U.S. does with other controversial treaties which have huge commercial implications
Another brilliant post, Eric. I doubt that the authors of FATCA had any idea what a monster they were unleashing on the world, not just financially but politically. Maybe the F should stand for Frankenstein.
The US government will get what they deserve. I feel for the US people who are at the hands of a sick twisted government.
More news along the same lines: The Ministry of Public Security has pretty much admitted they have no idea how to seriously enforce China’s prohibition against dual citizenship — they’ve set up a public tips hotline for people to snitch on emigrants who still keep their Chinese household registration.
Like every other snitch system in the world (Hi Form 211!), basically this will catch only people with marital problems & disgruntled business partners, and leave everyone else alone …
I`m guessing that China is perhaps the ONLY country in the world that America fears. Maybe they will comply for them.