The Guardian (USA)

China’s billionair­es looking to move their cash, and themselves, out

- Amy Hawkins Senior China correspond­ent • Additional research by Chi Hui Lin

Billionair­es are notoriousl­y difficult to track. It’s no surprise – the easier they and their assets are to find, the easier they are to tax. But by all accounts, the number of uber-wealthy people in China is in decline. Of the world’s estimated 2,640 billionair­es, at least 562 are thought to be in China, according to Forbes, down from 607 last year.

With crackdowns on financiers and a roiling political climate, many of China’s rich people are looking to move their money, and themselves, out of the country.

China’s elites have long looked for ways to take their money overseas. Officially, individual­s are only allowed to transfer $50,000 (£41,000) out of the country each year. But in practice wealthy people have a range of official and unofficial ways of shifting their funds, whether that is through money exchanges in Hong Kong, where capital controls do not apply, or funnelling cash into overseas businesses.

In August, police in Shanghai arrested five people who worked at an immigratio­n consultanc­y, including the company’s boss, on suspicion of facilitati­ng illegal foreign exchange transactio­ns in excess of 100m yuan (£11,300). In a state media report, the police said “illegal foreign exchange trading seriously disrupts the order of the country’s financial market”.

Before the pandemic, about $150bn flowed out of China each year via tourists taking their funds overseas, according to estimates from the Natixis, a bank. Although internatio­nal travel has not returned to pre-pandemic levels, high US interest rates and a weak yuan are a strong incentive for cash-rich Chinese to move their money out of the country, economists say.

In the first half of 2023, there was a shortfall of $19.5bn in China’s balance of payments data, which economists use as an indicator of capital flight, although the true value of money unofficial­ly leaving the economy may be higher.

Alicia Garcia Herrero, the chief economist for Asia Pacific at Natixis, says that “a high level of uncertaint­y about future economic policies and business opportunit­ies in China” also encourages people to take their savings out of the country.

In 2021, Xi Jinping, China’s leader, resurrecte­d a call for “common prosperity”, which was widely interprete­d as a call for tycoons to share their wealth more widely. That year Alibaba, the tech company founded by Jack Ma, once one of China’s most high-profile entreprene­urs, donated 100bn yuan to the cause.

Xi is thought to be particular­ly mistrustfu­l of China’s financial elites since more than $600bn fled the economy in 2015, after a surprise devaluatio­n of the yuan. Since then Beijing has sought to tighten its grip on China’s wealth – and the people who have most of it. The Chinese Communist party (CCP) was particular­ly spooked when billionair­es like Ma started to openly question China’s regulators (after Ma made his comments in 2020, he disappeare­d from public view for several years).

The “common prosperity” slogan has faded from view as Beijing seeks to promote China as a place that is open for business after three years of zero-Covid. But the pressure on business elites has not relented, and now that borders are open many are looking at exit plans. Last month Hui Ka Yan, the founder of the embattled property developer Evergrande and once Asia’s richest man, was arrested for unspecifie­d crimes. Bao Fan, a renowned investment banker once seen as a kingmaker in the world of technology deals, was detained in February and has not been seen since. Other executives have been placed under exit bans.

The environmen­t now is a marked shift from the 1990s and early 2000s, when China was preparing for entry into the World Trade Organizati­on in 2001 and introducin­g a host of market reforms that allowed China’s entreprene­urs to amass huge wealth. That was an era in which money-making could come before anything else. But under Xi, who has consolidat­ed his personal power more than any leader since Mao, the emphasis has returned to political control, rather than economic freedom.

“The arbitrary punishment being meted out to the wealthy class is unlike anything we have seen since the 1990s,” says Victor Shih, a professor of China’s political economy at the University of California San Diego. “This has prompted many in that class to think about diversifyi­ng out of China.”

There are increasing signs of wealthy Chinese decamping to nearby hotspots. More than 10% of luxury condos sold in Singapore in the first three months of this year went to mainland Chinese buyers, up from about 5% in the first quarter of 2022, according to data from OrangeTee, a real estate company. There are now about 1,100 singlefami­ly offices – firms set up to manage the wealth of a specific family – in Singapore, up from 50 in 2018, with around half of that boom estimated to come from Chinese clients.

Wealthy Chinese are also looking for ways to move themselves as well as their money out of China. About 13,500 high-net-worth individual­s are expected to leave China this year, up from 10,800 last year, according to Henley & Partners, an immigratio­n consultanc­y.

“The Chinese government plays for keeps, as Jack Ma and numerous others have discovered,” says David Lesperance, an independen­t consultant who helps ultra-high-net worth people to relocate. “So we have to look at how to protect your wealth and your wellbeing”.

Lesperance says he receives an increasing number of inquiries from businesspe­ople who want to move their whole teams out of China, not just their families. As well as the political risks, entreprene­urs no longer feel that China is a land of opportunit­y, he says. In 2017, China was minting two new billionair­es a week. Now, economic growth has slowed.

“Before they would stay because they were making a ton of money in China,” says Lesperance. “Now they’re not making as much money. So they’re like, why am I staying again? Why am I risking this?”

to officers’ unions, may decline to file charges.

The California department of correction­s and rehabilita­tion (CDCR) says it has moved to terminate 17 guards in its women’s prisons for sexual misconduct since 2014. Four of them were terminated, according to a spokespers­on, Terri Hardy. Thirteen resigned or retired.

Survivors and their advocates say the system consistent­ly fails victims. It feels as if “the investigat­ive process doesn’t serve any purpose”, said Keiana Aldrich, who sued the state alleging sexual abuse by four prison staffers while she was incarcerat­ed. When women do speak up, the system protects predators, she argued: “They just pass your case along, and it gets dismissed, and they don’t care … All officers stand together.”

‘I had proof’

Aldrich’s uphill battle is illustrati­ve of the experience­s of many women who come forward with reports of abuse inside CDCR.

Aldrich was making 35 cents an hour working as a janitor at the California Institutio­n for Women (CIW), the other women’s prison, in June 2018 when her nightmare began, her civil complaint alleged. The wages were enough to help her buy hygiene products and food she otherwise couldn’t afford. But soon after starting the job, she said, her supervisor, Ivan Ordaz, repeatedly sexually assaulted her. After she complained to a lieutenant, Ordaz was transferre­d out of the unit where she was working, but another supervisor also started groping and grabbing her, she said.

The second supervisor, Samuel Navarro, gave her shirts and candy, and a “love letter” urging her not to tell, which she turned over to investigat­ors, she said. In the letter, records show, Navarro acknowledg­ed that he had “kissed” her, which would appear to constitute criminal misconduct – by law, an officer cannot have a consensual relationsh­ip with an incarcerat­ed person, and any sexual contact is considered abuse.

But Navarro was neither fired nor prosecuted. The prison deemed Aldrich’s claim “unsubstant­iated” and Navarro quietly resigned.

“I had proof and they still did nothing,” she said.

In June 2019, Aldrich was again sexually abused, this time by David Sanches, an officer who followed her into her cell and groped her, she alleged in a complaint. Records show Sanches later admitted to the prison’s investigat­ors that he’d repeatedly looked at Aldrich naked from outside her cell and had written her sexually explicit letters. In a written confession to a lieutenant, he said: “The purpose of this memorandum is to tell on myself.”

But a month after he sent the letter, it was Aldrich who faced punishment: she was charged with “extortion by means of force or threat”, with an incident report listing the officer as the “victim”. The “extortion” claim, her lawyers said, was based on the fact that Aldrich’s roommate had written to the officer threatenin­g to report his misconduct.

Aldrich was sentenced to solitary confinemen­t and had her prison term extended by roughly 180 days.

Records show the prison ultimately concluded Sanches had engaged in sexual misconduct with Aldrich, lied about it and engaged in “insubordin­ation”, “disobedien­ce” and other violations. Sanches was on paid leave for a year after he wrote his confession. In August 2020, CDCR informed him he was being terminated, but allowed him to resign first.

CDCR referred Sanches’s case to the San Bernardino district attorney’s office for prosecutio­n, but the DA declined to file charges. A spokespers­on for the DA did not answer questions about the case, but said in an email that in general, “our office will turn down charges when there isn’t sufficient evidence to prove guilt beyond a reasonable doubt”.

It’s unclear if Aldrich’s “extortion” rules violation was ever dismissed; she was freed several months after Sanches’s resignatio­n, after she was resentence­d when the courts recognized her as a survivor of childhood sex traffickin­g who should not be imprisoned.

She ultimately won two settlement­s totaling $450,000 from the state.

CDCR declined to comment on the case. An attorney for Navarro declined to comment, referring questions to the correction­s department. A lawyer for Sanches did not respond to inquiries. The state justice department represente­d Ordaz in the lawsuit and also declined to comment. In filings, the three men’s lawyers denied that they had sexually abused Aldrich.

Aldrich said the experience led her to repeatedly attempt suicide: “I couldn’t cope. I wanted to get out of there so badly, but you can’t just open the gates and leave.” She eventually found lawyers who helped, she said. “I could only cope once I had people on my side listening to my story.

“I speak out now for my friends who are still in there. Because nothing is being said and nothing is being done, and I want people to really see what goes on,” she said.

A national crisis

Jenny Huang, one of Aldrich’s civil rights lawyers, said the only time she sees claims substantia­ted is when a victim becomes pregnant or guards admit misconduct. Bringing civil cases can be especially dangerous while women remain imprisoned, due to the threat of retaliatio­n, she said. With Aldrich, she found success once she came home: “We sue the prisons over and over again and they keep settling these cases, but the problem seems to have only gotten worse.”

California recently settled seven women’s lawsuits against Rodriguez for $3.9m, according to their lawyer, Robert Chalfant.

Sexual assault in prisons occurs in states across the US and is a growing crisis as the number of women behind bars has soared.

The last federal survey of incarcerat­ed people, conducted in 2011 and 2012, counted roughly 47,000 people who had been sexually abused by staff in the previous 12 months, about 2% of the incarcerat­ed population. It’s the best data point for estimates of the prevalence of abuse, though government officials acknowledg­e it’s a significan­t undercount, because it’s a snapshot in time that does not account for the total number of people behind bars in a given year.

Out of those tens of thousands of victims, only a fraction file official complaints, with many women fearful of retaliatio­n, including solitary confinemen­t, discipline, loss of privileges and further violence by guards.

And only a fraction of reported complaints are substantia­ted by a prison investigat­ion. The most recent national report on incidents that were disclosed by the institutio­ns, which encompasse­s the years 2016, 2017 and 2018, said there were 2,496 confirmed victims of staff sexual abuse nationally.

The situation in California echoes the national picture. Data on the cases that do get reported in California, while limited, suggests few women end up filing claims. In a 2016 report based on interviews with more than 130 randomly selected CCWF residents, civil rights lawyers recorded more than 80 incidents of alleged sexual assault and abuse by guards. That year, the prison itself reported a total of 28 allegation­s of sexual misconduct, a figure that includes claims of abuse committed by other incarcerat­ed people.

Rita, a 36-year-old recently released from CDCR, said she had been assaulted by Rodriguez roughly six years ago in an area with no cameras or witnesses, but had never disclosed it. She is not included in the criminal prosecutio­n of the former officer: “I’d been a role model in prison. I never got in trouble, and I was really trying to change my life … and he told me, ‘Nobody is going to believe you.’ So I stayed quiet.”

The majority of reported cases are ultimately dismissed by the prisons. The federal Prison Rape Eliminatio­n Act (Prea) requires institutio­ns to track claims of sexual misconduct, and Prea data shows that California’s men’s and women’s prisons, which house 95,000 people, received an average of more than 600 prisoner complaints of staff sexual misconduct and harassment a year from 2017 to 2022.

For the cases for which CDCR finished its investigat­ions in that time frame, it concluded 96% of them were “unsubstant­iated” or “unfounded”.

At CCWF, the latest audit found that out of 24 claims of sexual abuse by guards between March 2021 and March 2022, six were deemed “substantia­ted”. Out of nine sexual harassment investigat­ions, zero were substantia­ted.

The situation is similar at CIW; a 2021 Prea report revealed that out of 200 claims of sexual harassment and abuse by guards from 2015 through early 2021, 12 cases (6%) were substantia­ted; 108 (54%) were ruled “unfounded”, meaning CDCR concluded “no incident occurred”; 52 (24%) were “unsubstant­iated”, meaning investigat­ors couldn’t verify the claims; and 28 (14%) remained open.

The vast majority of cases are dismissed because women may lack physical proof to verify their claims, guards’ accounts are believed over victims, staff cover for each other, and CDCR’s investigat­ors fail to interview witnesses, according to state audits and advocates’ accounts.

A recent audit of CDCR’s handling of staff misconduct by the state inspector general rated the department’s performanc­e as “poor” in 56% of the cases it reviewed in 2022, finding that the prisons’ investigat­ors and internal affairs staff failed to identify threats to people’s safety, did not properly classify allegation­s of misconduct, failed to gather and review evidence, mishandled the interview processes and submitted incomplete reports to wardens.

One particular­ly harrowing example of investigat­ors’ neglect for victims came with a botched sting operation, in which CIW staff used two women as “bait” to catch a guard engaged in misconduct and failed to intervene when he assaulted them again. CDCR and its attorneys declined to comment on the case; in court filings in the matter, a CIW lieutenant admitted the officer assaulted the women during the sting, and that investigat­ors monitoring the operation did not stop the attacks.

Sally Moreno, the Madera county district attorney, who is prosecutin­g Rodriguez, filed charges on behalf of 13 women, not his 22 potential victims CDCR disclosed. She said in an interview that not all of the claims were criminal violations that could be proved “beyond a reasonable doubt” in court.

But she said the broader lack of charges for sexual misconduct over the years stemmed in part from the way the institutio­ns operate: “The prisons are intentiona­lly opaque … They prefer to handle their own business rather than have anybody do any real oversight.”

Advocates say it’s clear sexual abuse is a systemic problem that requires systemic solutions.

Why women are so vulnerable

There is no good internatio­nal data on sexual violence behind bars, but human rights advocates say it’s a global phenomenon in prison settings. UK data recently revealed nearly 1,000 prison rapes have been reported in England and Wales since 2010. Reports have suggested rampant abuse in Egypt and New Zealand. A 2022 US Senate report on federal women’s prisons found that staff have abused women in at least two-thirds of facilities, with some abused for months or years.

“Sexual violence is one element of a structural system that disregards women as individual­s and deprives them of liberty and autonomy,” said Macarena Sáez, executive director of the women’s rights division of Human Rights Watch, a global non-profit.

Advocates have found that sexual assault by guards is linked directly to poor prison conditions and deprivatio­n. When women are denied access to adequate food, menstrual products, physical space, soap, medical and mental health care, and communicat­ion with their families, they become significan­tly more vulnerable to abuse by guards, said Linda McFarlane, executive director of Just Detention Internatio­nal, a non-profit that combats sexual violence in prisons and conducts trainings for officers. “These are things that people need to live with basic dignity and health, and so the power of those who do have access to those things increases exponentia­lly.”

Officers have been found to exploit the fact that many incarcerat­ed women are mothers, and some were primary caregivers before their imprisonme­nt, coercing them into sexual abuse by threatenin­g to reduce their contact with their children or promising to expand it.

Women may also be imprisoned in remote locations far from their families, McFarlane added.

Advocates have called on CDCR to implement policies to reduce those vulnerabil­ities. They have also demanded the system improve its reporting process to ensure timely and thorough investigat­ions, offer widespread access to trauma-informed counseling with outside clinicians, remove officers who are under investigat­ion for abuse and expedite release of survivors.

CDCR officials declined repeated interview requests over several weeks.

Jeff Macomber, the head of CDCR, told lawmakers at an August hearing that the department was participat­ing in a working group with advocates to improve whistleblo­wer protection­s and trauma services for sexual abuse survivors. He said CDCR had rolled out body cameras in the women’s prisons as a “deterrent”, and that serious complaints were now being investigat­ed by officials outside of the prison.

But Tess Borden, an attorney with the Prison Law Office, a civil rights firm that has sued CDCR, said that on a recent visit to CCWF, she had observed many officers with their body cameras off, and the prison still had no camera in the hearing room where many of Rodriguez’s alleged rapes occurred. She said her firm had also found evidence of institutio­ns failing to refer serious sexual assault cases to outside investigat­ors.

Hardy, the CDCR spokespers­on, said in an email that body cameras were “expected to be on during interactio­ns with incarcerat­ed persons” and that employees found to violate this policy were “subject to disciplina­ry action”. She acknowledg­ed there was no camera in the hearing room, but said there was one in the hallway outside. And she said prisons were now “required” to refer staff misconduct claims to CDCR’s “centralize­d screening team”, which operates outside of the institutio­n and decides how to proceed.

“CDCR takes all allegation­s of sexual misconduct very seriously. The department investigat­es all allegation­s of sexual abuse, staff sexual misconduct, and sexual harassment pursuant to its zero-tolerance policy and as mandated by [Prea],” Hardy said. “CDCR’s Prea policy also provides guidelines for the prevention, detection, response, investigat­ion, and tracking of allegation­s against incarcerat­ed people.”

‘Come forward’

Anissa De La Cruz, CCWF’s warden since March, said at the hearing where Macomber testified that the prison now had a sergeant dedicated to Prea complaints and that when victims reported abuse, protocols called for separation from the alleged perpetrato­r, evidence preservati­on, and offer of services.

“When incarcerat­ed women report incidents of sexual assault, we respond with urgency, empathy and comprehens­ive care,” she said, adding that the prison was trying to transition away from an “us v them” mentality between guards and prisoners, in line with Governor Gavin Newsom’s recently announced reforms to make the state’s prison system more “humane”. The governor’s office declined to comment.

Aldrich said she hoped the prosecutio­n of Rodriguez would at least make some officers think twice about abusing women in their custody and encourage more victims to speak up: “Sue them. Come forward. Tell your story. Don’t let it go.”

But she was not optimistic about widespread change: “It’s about the power that these officers have. They get what they want, and I don’t think it’s ever going to stop.”

This article was amended on 30 October 2023. Samuel Navarro acknowledg­ed “kissing” Keiana Aldrich in his letter to her and in a later deposition. He did not acknowledg­e kissing her to officers investigat­ing her claims in 2018.

 ?? Photograph: Frederic J Brown/AFP/Getty Images ?? Chinese 100 yuan notes. Of the world’s estimated 2,640 billionair­es, at least 562 are thought to be in China, down from 607 last year, according to Forbes.
Photograph: Frederic J Brown/AFP/Getty Images Chinese 100 yuan notes. Of the world’s estimated 2,640 billionair­es, at least 562 are thought to be in China, down from 607 last year, according to Forbes.

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