Panama Papers Potentially Endanger Chinese Social Contract

Within the recent release of some 11.5 million documents that detail a massive web of shell companies and tax havens worldwide termed the ‘‘‘Panama Papers,‘ a number of Chinese political elites have been named.  They include eight current or former members of China‘s Politburo as well as the brother-in-law of Chinese President Xi Jinping, the daughter of former premier Li Peng and the imprisoned ex-party chief of Chongqing, Bo Xilai.  While these and other Chinese individuals have not yet been found to have broken any laws, the optics of leadership figures seemingly benefiting from their relatives via corruption has left President Xi in an awkward position, given his aggressive anti-corruption campaign and ‘‘‘trust me‘ social contract with the Chinese people.

The seriousness with which President Xi is taking these revelations is apparent in the following leaked media directive sent to a Chinese provincial Internet watchdog.

‘‘Find and delete reprinted reports on the Panama Papers.  Do not follow-up on related content, no exceptions.  If material from foreign media attacking China is found on any website, it will be dealt with severely.‘

China‘s state-run media has been purged of any mention of the story with little news available to Chinese citizens coming through social media.  Chinese regulators have been able to scrub such content from the web almost as quickly as it appears.  Social media network Sina Weibo has also blocked the search terms ‘‘‘Panama + offshore,‘ ‘‘‘offshore + finance,‘ ‘‘‘Panama + Deng Jiagui,‘ and ‘‘‘Panama + Li Xiaolin.‘

The swift and harsh reaction of Chinese regulators against any reports on the ‘‘‘Panama Papers‘ indicates an acknowledgment by Xi and his inner circle of the political danger this information poses, if widely distributed to the public.  So far, they have been successful in their efforts to prevent the Chinese public from accessing the story, but for how long

If the story were to gain traction within China, Xi would face a two-pronged threat, one from the elites, whom he has been targeting through his anti-corruption campaign, and the other from the Chinese people themselves.  During the period of rapid economic growth within China, revelations such as this would have perhaps been largely ignored or chalked up to ‘‘‘these things happen,‘ but, with dramatically slowing growth, perilous property, debt and equity bubbles and a decline in manufacturing, the ‘‘‘Panama Papers‘ could gain traction among the Chinese people.

Elites who have been targeted by Xi have also been handed a golden opportunity to undermine his power.  Simply releasing this information would likely be enough to damage the faade of incorruptibility Xi has constructed for himself and the social contract with the Chinese people that trades-off free political expression for higher living standards.