More Chinese firms registering in Caribbean financial centres

Wednesday, June 16, 2004

BEIJING, China (AFP): An increasing number of Chinese firms are registering in offshore financial centres, including those in the Caribbean, according to a commerce ministry official who said the move threatened China's financial security, state media reported Tuesday.

For the first quarter of 2004, the British Virgin Islands were the second largest source of foreign direct investment (FDI) in China, with 1.75 billion dollars, while the Cayman Islands were in seventh place, the official Xinhua news agency said.

These small territories, along with Western Samoa, alone accounted for 20 percent of FDI in China during the period.

Commerce ministry expert Mei Xinyu said some Chinese companies were using offshore operations as a short-cut to listing on foreign stock exchanges as the Chinese regulations for a domestic firm to list overseas were very complicated and strict, Xinhua said.

The move included top Chinese firms such as telecoms firm Unicom, television manufacturer TCL and banking and insurance group Everbright.

"The offshore drive shows Chinese companies' need to carry out cross-border business but it also leads to unrest for the country's financial security," said Mei.

Offshore operations could also be used to disguise non-performing assets and debts by removing them to a firm set up in those regions where the company's financial situation would be kept secret, he said.

They could also be used for illegal transfers of state assets by corrupt officials or managers of state-owned enterprises.

"It will be a tough task for the government to curb corruption done through offshore operations," he said.

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