China blocks tax haven progress

Following our recent blogging about the rise of Asia in private banking circles, now Lucy Komisar, an investigative journalist and former co-chair of TJN-USA, notes that:

China is the major international power blocking a global solution to the offshore bank and secrecy problem. It is doing so because of its own secrecy jurisdiction, Hong Kong, says Jose Manuel Barroso, the president of the European Commission. Barroso told me this privately at the Council on Foreign Relations in New York last week. Before that, at his public speech, I asked his strategy for dealing with the offshore system which facilitates tax cheating, corporate corruption, organized crime and terrorism.

He said some countries hadn’t been reacting positively to efforts to change the system , to establish a level playing field. After the meeting, I asked him why the major financial powers hadn’t been able to achieve a solution. He said the problem was “China, because of Hong Kong.”

This is of course worrying, though it isn't entirely new: at the April 2009 G20 meeting where world leaders pretended to mount a crackdown against tax havens, Chinese president Hu Jintao fought behind the scenes to get two of the Chinese elites' favourite secrecy jurisdictions - Hong Kong and Macau - relegated to a footnote in the OECD blacklist. Still, it augurs ill for the future, and particularly for developing countries.