With Beijing on the verge of enacting new measures to open up foreign investment and commerce, Merlin Linehan investigates the damage being caused around the world by under-regulation of Chinese trade.
For a price of 8,000 yuan – a little over $1,100 – Khin Khin Oo, a four-year-old Burmese girl, was sold to a childless Chinese couple.
The girl’s father had lost heavily at cards and sold his daughter to traffickers who then smuggled her over the nearby Chinese border. Fortunately the girl’s grandparents pursued the matter up with local police, who eventually repatriated Khin Khin back to Myanmar.
Khin Khin was lucky. Many others never return home. Couples desperate for a family plus a shortage of young women in China have stoked demand for children and brides from abroad. By 2020, the surplus of men to women will increase by a further 24 million across China – the result of the government’s (now partially relaxed) one child policy, and a preference for boys over girls.
For traffickers from neighbouring Myanmar, Vietnam, North Korea and Laos, business in human and other merchandise is booming. China’s economic rise has been characterized by a mass inflow of raw materials and the outflow of manufactured goods, finding their way into every nook and crevice of the world. In tandem has been a huge increase in illicit goods: ivory, minerals and drugs.
Of higher value to traffickers than children like Khin Khin is Myanmar’s famed gemstone: jade. It has an ancient and iconic role in Chinese sculpture and jewelry.
The most sought-after jade is to be found in Kachin State. Here, in the north of Myanmar, it’s illegally mined and then smuggled through porous borders by local warlords and Chinese traffickers.
They’re not only depriving a poor country of much needed tax and customs revenue; the human toll is high. These illicit mines are dangerous. The surrounding shanty towns are overrun with illicit drug use and prostitution.
The illegal jade trade probably yields a staggering $31 billion every year, according to Global Witness. That’s equivalent to about half of Myanmar’s total GDP. It represents the largest natural resource theft in history, according to the NGO.
Unsurprisingly, Kachin’s commodity curse has fuelled conflict between the Myanmar military and separatists fighting for land containing the lucrative jade mines. The jade-rich regions are mostly closed to Westerners, enabling Chinese buyers to dominate the local market, picking out the most highly prized specimens along with locally mined rubies and sapphires for onward transit to China.
Operation Dragons Head
Along with the outflow of China’s manufactured goods are thousands of Chinese citizens. Increasing numbers have taken up residency in other parts of Asia, Africa and Latin America, starting up new ventures from manufacturing plants to grocery shops.
This migration wave has caught the attention of organized crime groups. The centuries-old Triads have followed their compatriots overseas and terrorized local Chinese communities through racketeering and extortion. For such groups, operating abroad can be highly profitable and often with less risk, as Chinese communities usually remain isolated from their host country because of language and cultural barriers, making them an easy target.
For these settlers, there are new resources to be exploited, such as ivory in East Africa or illegally mined gold in Ghana – all fetching much higher prices back in China.
Operation Dragons Head targeted a Chinese mafia group in Argentina called the Pixiu. Named after a creature from Chinese folklore representing good fortune, the Pixiu were accused of extorting protection payments from local Chinese businesses, typically demanding around $50,000 upfront and a $3,600 monthly fee.
It took close collaboration between the Argentine authorities and Chinese police officers flown over from Beijing to convict the Pixiu. Many more organized Chinese crime operations continue in Latin America and Africa, untroubled by the authorities.
Chinese gangs have allegedly teamed with Mexican cartels to supply them with the chemicals used for manufacturing drugs like cocaine and meth. Others are involved in the more mundane but profitable distribution of Chinese-made counterfeit shoes, clothes and watches.
The profits from all of these illicit activities are immense but to be useful to criminals they need to be legitimised and recycled into the legal economy. Chinese crime lords looking to hide their profits might use nightclubs, casinos or other cash-rich legitimate businesses to launder money via tax havens like the British Virgin Island or international property markets such as Sydney, Singapore or London.
Crucially, diversifying assets abroad in this way has the benefit of concealing wealth from Chinese authorities currently in the midst of a major corruption crackdown. The recent Panama papers leak showed that many close to the ruling elite have amassed great fortunes secreted in offshore bank accounts.
Merlin Linehan has worked in development finance within Eastern Europe and Asia, and spends much of his time investigating the risks and opportunities that are created from the ongoing expansion of Chinese businesses that invest overseas in emerging markets.