Reasonable Doubt

Should Chinese RCBI Investors Be Worried? Wailian Raid, Chinese Officials in Vanuatu Are Smoke Signals

David Lesperance ,  ,  ,  ,  , 

Reasonable Doubt
With David Lesperance

A contrarian expert on contingency plans for the wealthy delivers uncomfortable truths.

Over the past few months, the Chinese government seems to have accelerated its efforts to determine whether Chinese nationals hold second citizenships and residences. This effort is just another brick in the wall that the CCP is building to control its citizens. However, while publicly acknowledging this action, the government is saying it is motivated by concerns that some citizens may be using their foreign citizenship and residences to evade taxes, launder money, and engage in other activities that may be detrimental to the Chinese economy and national security.

In carrying out this campaign, the Chinese government has reportedly been collecting data from various sources, including immigration records, tax records, and social media platforms. They have also been asking Chinese embassies and consulates abroad to provide information on Chinese nationals who have obtained foreign citizenship and residences.

Is Wailan the last Chinese immigration consultant to be raided?

China’s efforts to monitor the activities of its citizens with foreign citizenship and residences have recently escalated by the dramatic raid on the offices of Wailan a major Shanghai based immigration consultant. Was this really about investigating currency control violations? Is this the last China-based immigration consultant’s office to be raided? In my opinion, to believe the reasoning or the uniqueness of this raid is to ignore history and engage in magical thinking.

It is just not realistic to think that having struck intelligence gold at Wailan that the CCP will not continue to mine the treasure trove of the computers of every other China-based immigration consultant.

Vanuatu is now an open book

On the heels of the Wailan raid came news that Chinese security officials are now publicly operating in Vanuatu. It is worth remembering that China is the top market for Vanuatu’s “Honorary Citizenship by investment” program. According to media reports, Chinese nationals make up the vast majority of applicants for the program.

It is reasonable to assume that upon arrival one of the first “asks” of Vanuatu officials was the names and files of all Chinese nationals who have ever applied for or secured Vanuatu Honorary Citizenship. While Vanuatu is not the only country with a CBI program, it is the only one that has so far publicly invited Chinese officials to come there to investigate.

It is worth noting that China has had diplomatic relations with several Caribbean CBI program countries, including Grenada (since 2005), Antigua and Barbuda (since 1982), and Dominica (since 2004). Whether these countries will invite in Chinese officials or have already given up this information unilaterally is worth pondering.

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For those who think they have dodged a bullet by acquiring a second residence rather than a citizenship by investment, they should come to terms with the reality that Chinese officials will assume that the individual later received citizenship after that country’s naturalisation period has passed.

Are Chinese with second citizenships and residencies in danger?

So, with these two events and a realistic logical anticipation of future events, why should Chinese nationals be concerned if the Chinese government knows they have a second residence or citizenship? To answer this question it is worth considering the situation through the lens of the Chinese government.

The Chinese government not only wants to control its nationals and their political and financial activity; it also wants to extract as much information and as many assets as possible from them. The ambiguous and uneven enforcement of Chinese laws relating to dual citizenship gives the Chinese government several threat levers including:

  1. Stripping away currently held Hukou (household registration) statuses, which has a tremendous impact on the ability to where to live, work, etc.;
  2. Threatening to cancel Chinese citizenship and passports, which would impact everything from mobility to the right to own real estate beyond a single residential property; 
  3. Imposing Exit Bans; and
  4. Forcing the renunciation of the foreign citizenship.

By using these blackmail threats to pressure the Chinese individual, the CCP can then seek the following:

  1. Corporate secrets for domestic and foreign companies to which these individuals have access;
  2. Strong-arming “voluntary” contributions to Common Prosperity;
  3. Arrest on vague charges and ignoring consular interventions by the second citizenship country while selling the assets of the accused.

What should the Chinese in this situation do?

Today’s environment reminds me of a discussion I had with one of my first Chinese clients in the early 1990s. His family was from Shanghai, the long-time home of international commerce in China. I will always remember what he told me:

“My ancestors lived through various Emperors, the Taiping and Boxer rebellions, Chiang Kai-shek, the Japanese, Mao Zedong, and now the pro-business policies of Deng Xiaoping. The family motto is ‘No matter how good things are, always keep a fast junk in the harbour, with some gold bars, a second set of papers, and permission to put into a friendly port.’”

Today, this translates to a second passport, international bank accounts, and the right to live in a country that will protect their family. Everyone needs to decide about the level of imminent danger to themselves and their family posed by the current Xi Jinping regime and act accordingly.

Some readers will undoubtedly say that I am being alarmist and hyperbolic in my interpretation of the present and predictions of the future. That knee-jerk response reminds me of another client’s recent words of wisdom. His grandparents had fled Vienna Austria right after Kristallnacht.  Tragically, one Uncle did not want to leave immediately because he wanted to first sell some of his valuable household possessions. That relative later died in the Holocaust, giving rise to the family’s guiding principle, “Never stay for the carpets”.

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