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OPED By Vaishali Basu Sharma

Since the Covid-19 pandemic, China has been trying to present itself as a reliable partner for economic recovery. But just like China’s vaccines, which have raised questions about effectiveness, the country’s partnership in economic recovery is fraught with waste, fraud and political manipulation.

Moreover, Beijing has failed to crack down on the corruption and crime that Chinese government-affiliated companies in South Asia commonly use to gain an unfair advantage.

Corruption is often a key element of China’s economic engagement in the region. China is estimated to be responsible for the largest illicit financial flows (IFFs) related to corrupt business practices by value globally, particularly to developing countries. Chinese nationals are regularly arrested in Asian countries on suspicion of involvement in various illegal activities.

How Chinese Apps Duped Indian Borrowers

During the lockdown caused by the pandemic were dozens of Chinese-owned ones Micro-lending apps went live in India under very dodgy conditions. Chinese instant loan apps Momo, CashBus, Timely Cash, Y Cash, Kissht, Robo Cash, Fast Rupee, Cash Mama and Loan Time claimed to play fair and offered payday loans to Indians, targeting borrowers at the lower end of the income scale . Many of these apps have more than a million installs. Borrowers are charged exorbitant processing fees and interest.

In case no repayments are made, these Chinese microcredit apps run aggressive recovery campaigns. Borrowers are given official looking fake documents such as FIRs (Indian Police Reports), legal notices, court summonses, downgrade warnings from credit rating services and even signed and stamped warnings from the Reserve Bank of India, which really scares these economically disadvantaged borrowers who lack basic knowledge about finance.

According to blockchain data platform Chainalysis, CThese cryptocurrency addresses have sent more than $2.2 billion Value of digital tokens at addresses associated with illegal activities such as fraud and dark web operations between April 2019 and June 2021.

India’s Enforcement Directorate has encountered cases of black money being sent to Chinese nationals to convert the Indian rupee into cryptocurrency.

Chinese illegal activities in Bangladesh

Recently, a Chinese national was arrested by Indian authorities while trying to enter the country illegally via the Bangladesh border and was found to have at least delivered 1,300 Indian SIM cards to its counterparts in Chinaallegedly used to steal data and defraud individuals and banks.

It was found that Chinese nationals used these SIM cards to set up shell companies, bank accounts and run bogus cell phone numbers. Last year’s scam involving malicious Chinese investment apps like Powerbank, Sun Factory and Ezplan was staggering in scale, with over 5,000 people across India losing over Rs 150 million.

China proactively seeks engagements in developing countries, reaches out to public or private stakeholders, and schedules the completion of the project to coincide with elections in the partner country. When the misappropriation of funds in mega-projects came to light, the Chinese government was forced to withdraw from the financing of three infrastructure projects in Bangladesh.

Under a government-to-government (GTG) approved project, China rigged that it would employ Chinese contractors without the ability to hire local contractors. In addition, these companies increase the effort by repeatedly extending the project duration under various pretexts.

The bridge over the Padma River in Bangladesh being built by a Chinese company. (via Twitter)

The project, which includes building railway lines at both ends of the Padma Bridge and tanks at the bottom of the Karnafuli River in Chittagong, is suffering from major delays and huge cost overruns, with spending more than doubling the original estimate due to repeated expansions .

Chinese companies and workers are notorious for frequently violating the environmental and labor standards of the countries in which they operate.

In Bangladesh, coal-fired power plants and infrastructure projects are causing widespread displacement of densely populated rural areas and threatening their ecosystem. The residents of the affected areas are protesting against the ruthless land grab by Chinese companies and for better working conditions in the power plants.

Defective pay, poor working conditions, impracticability and corruption are characteristic of Chinese projects, not only in Bangladesh but almost everywhere they have entered infrastructure development.

In a recent case, a “roll of tape,” a thin wrapped tape, was discovered bid and packets of cigarettes intended exclusively for the Bangladesh government to source from manufacturing companies were illegally printed by a Chinese company based in Shenzhen.

The Chinese company called ‘Digit Anti Fake Company Ltd’ (DAFC) supplied counterfeit rolls of tape resulting in fraudulent tax evasion of over 250 crore BD Taka for Bangladesh. It was also involved in printing other fake passports, ballots, ID cards, birth certificates, etc.

Also Nepal at the receiving end

As the scale of Chinese investment in Nepal has increased, so has their bad reputation for unscrupulous and nefarious business practices. Arrested by authorities in December 2019 122 Chinese nationals illegally residing in Nepal and involved in financial fraud through electronic transactions.

Anti-China protests in Vietnam 2014 - Wikipedia
Image file: 2014 Vietnam anti-China protests – Wikipedia

While the Nepalese law enforcement agencies were investigating, the Chinese Ministry of Public Security (MPS) exerted influence and rushed all 122 suspects back to Beijing on a special plane. Chinese nationals have been found running networks of criminals to hack ATMs and smuggle gold into Nepal.

This type of embezzlement by Chinese nationals, in which the state appears to be complicit, is not unique to Asia. In Africa, the level of Chinese corruption is, and is, widespread increasingly documented. From paying bribes to win contracts to incessant delays in doing business and hiding illicit earnings, Chinese corruption takes many forms.

Bloomberg reported on the extent of control Chinese companies are exercising over Congo mines and that promised $3 billion in infrastructure financing from Chinese companies never materialised. In Namibia, four Chinese magnates have reportedly operated a $300 million tax fraud scheme.

Amazon has permanently banned 600+ Chinese brands across 3,000 different seller accounts. It launched an investigation after The Wall Street Journal claimed that device makers such as RavPower, part of Chinese consumer electronics company Sunvalley Group, offered gift certificates in exchange for reviews.

Even within China, the government’s plan to boost the semiconductor industry has indeed resulted in a series of reckless investments in ill-planned projects by companies “with insufficient knowledge of integrated circuit design entered projects blindly.” These went bankrupt within a few years after hijacking millions of dollars of investments from government agencies.

Chinese syndicates and criminals have been extremely efficient at creating loose, flexible multinational structures, often associated with legitimate business ventures, and subsequently exploiting weaknesses in the law enforcement systems of relatively weaker states.

The PRC is aware that massive amounts of IFFs are occurring under the Belt and Road Initiative (BRI). Why else would Xi Jingping’s government promise a new “Clean BRI” for 2019 that promises to promote transparency and integrity and fight corruption?

However, hardly anything seems to have changed in terms of more transparent handling. In a post-pandemic situation where developing countries are also hoping for a speedy economic recovery, there is a risk of falling victim to illicit financial flows from China.

  • (The author is a strategic and economic affairs analyst. She has worked as a consultant for the National Security Council Secretariat for almost a decade. She tweets at @basu_vaishali). VIEWS PERSONAL
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