U.S. to Cooperate with China on Deporting Corrupt Fugitives

China Briefing, by Vivian Ni, August 1, 2011 

Aug. 1 – Chinese government officials and state-owned enterprise (SOE) leaders charged with corruption may not find the United States a safe haven for them to flee to anymore, despite the lack of an extradition treaty between the two countries. A senior U.S. official recently said the United States will be working together with China to repatriate Chinese fugitives wanted for graft, according to a Reuters report.

During his five-day Beijing visit last week with a focus on anti-corruption and commercial rule of law issues, U.S. Department of Commerce General Counsel Cameron Kerry complimented the current cooperation between Chinese and U.S. prosecutors on repatriating graft officials or their illegally-obtained assets. He also said prosecutors from both countries are looking to have more cooperation on various cases in the future, including investigations into bribes paid to Chinese officials by U.S. companies under the U.S. Foreign Corrupt Practices Act.

Although there is no extradition treaty between China and the United States so far, some other domestic legal mechanisms can be used to pursue and repatriate fugitives, according to Kerry. For example, many of the fugitives have been deported under immigration laws, since they usually fail to obtain a legal residency in the United States.

A report completed in 2008 (in Chinese) but only recently disclosed to the public by the Anti-money Laundering Monitoring & Analysis Center of the People’s Bank of China (PBC) said there have been around 16,000 to 18,000 government officials and SOE managers who have fled overseas to escape corruption accusations since the mid-1990s. The Reuters report also cited the Chinese police statistics in 2010, saying there were around 600 Chinese suspects at large overseas who are wanted for economic crimes. Western countries, including the United States, Canada, Australia and the Netherlands, have become major destinations for officials who have embezzled large amounts of money, the PBC report pointed out.

Beijing’s lack of extradition treaties and its harsh penalties against corruption have increased the complexity when the Chinese government looks for the West’s help to repatriate the fugitives. According to China’s Criminal Law, individuals who  have embezzled more than RMB100,000 could receive a 10-year to life sentence, or even the death penalty.

However, if we look at several major fugitive deportation cases in the past, China seems to have been able to stick to its commitment to the international community that extradited criminals will not face capital punishment. Canada’s recent repatriation of Lai Changxing – who was accused to have smuggled US$6.4 billion worth of goods into China between 1996 and 1999 and evaded a total tax payment of US$3.96 billion – was agreed upon based on China’s promise that Lai will not be given the death penalty.

Yu Zhendong, a former Bank of China manager responsible for the embezzlement of US$482 million of bank funds together with other two managers, was deported by the United States in 2006 and received a 12-year jail sentence instead of the death penalty.

One of the major motivations that drive China to call its corrupt ex-officials back from foreign countries is its concern over a massive amount of capital flight. The PBC report estimated a total of RMB800 billion of illicit capital has flown out of the country together with those graft fugitives since the mid-1990s, emphasizing that it is still difficult to calculate the exact scale of asset loss China has suffered due to the escape of corrupt individuals. Noticing the fact that a significant amount of the illegal money is often spent overseas, the report warns of the risk that China’s stolen social fortune will be injected into economic development cycle of other countries, and that capital flight to a serious level will finally harm the country’s financial stability.

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