The Growth of Chinese Organised Crime Around the World
The Asian Crime Century briefing 74
The Asia Scotland Institute recently hosted a webinar discussion of the growth of Chinese organised crime around the world, with the author in discussion with Vanda Felbab Brown of the Brookings Institution. The video recording of the discussion is above, and extracts from the Asian Crime Century notes are below.
More excellent events from the Asia Scotland Institute are available to access on their website (https://asiascot.com/ ).
What is Chinese organised crime?
Organised Crime is planned and co-ordinated criminal activities by people working together on a continuing basis.
Organised crime and secret societies in China were largely eradicated after the communist revolution in 1949.
But Chinese organised crime thrived in the second half of the 20th century in peripheral areas that were not under Chinese communist control, such as Hong Kong, Macau, and Taiwan.
Chinese Triad Societies
Not all Chinese criminals are Triads, but generally speaking all Triads are criminals.
Triad society is an English word given by Europeans to Chinese secret societies during the Qing Dynasty (1636–1912).
Triads have a ‘foundation myth’, which asserts that they are connected with supporters of the Ming dynasty (1368–1644) and opposition to the Manchu Qing dynasty rulers from the 17th century. In reality [Professor Dian Murray, imperial archives in Taiwan] , they are also connected to mutual aid societies tied to periodic rebellions by poverty-stricken peasants.
The foundation myth of triad and secret societies’ opposition to the Qing Dynasty is a foundation myth, although recounted in various Qing dynasty documents. In short, the legend is that 128 monks of the Shaolin Monastery went to the assistance of the Qing emperor (either the Kangxi or Qianlong) to fight against an invasion by the Xi Lu barbarians (whose origins are not clear).
The Shaolin monks defeated the invaders but declined any reward from the Emperor and returned to their Buddhist devotions. However, the monks were accused of plotting rebellion against the Emperor who ordered their monastery destroyed. Only five of the monks survived and devoted themselves to revenge against the Qing Emperor.
According to the legend, the five surviving monks became the founders of the triad society, established “lodges” which subsequently initiated thousands of recruits into the triad society with the aim of a mass uprising against the Qing dynasty.
In the People’s Republic of China after 1949 Triads were largely eradicated.
In Hong Kong and Macau Triads prospered and thrived because of the inability of British and Portuguese colonial rule to eradicate them (and some tolerance of them).
In Taiwan Triads prospered after 1949 because some were utilised by the Kuomintang and they have also not been deemed as illegal organisations.
The expansion of Chinese organised crime
In the first two decades of the 21st century, Chinese organised crime groups and some Triad societies started to expand more quickly to parts of South East Asia.
The expansion of the Belt and Road Initiative has contributed to this growth, with Chinese business people going out to other parts of the world.
Under Deng Xiaoping the first stage of economic opening up was “Welcoming in”.
From 2001, when China joined the World Trade Organisation, Chinese companies and business people “Going out” was encouraged. This has included criminals seeking business opportunities.
They have operated betting, gambling, sexual services and fraud in the Philippines, Cambodia, Laos, Vietnam, and Myanmar, largely to cater to Chinese nationals who were able to travel outside of their country and eager to spend money.
From 2018 onwards, some (but not all) of the Chinese organised crime groups in the Philippines were displaced by pressure from the authorities to Cambodia (especially Sihanoukville) to operate casinos, online gambling, and online fraud.
From 2022 onwards, Chinese organised crime groups were displaced from Cambodia to Myanmar to operate casinos, online gambling, and other criminal activities (people trafficking, online fraud, etc), following pressure by the Chinese government on Cambodian authorities to take action against Chinese criminal groups operating in the country.
Myanmar became the next destination for Chinese organised crime groups to shift their operations. There are now huge “crime factories” in border areas where people are trafficked to work in slavery or bondage, industrial scale fraud is conducted, and online betting and gambling as well as sexual services.
The wheel has turned again in 2024 as pressure from the Chinese authorities has displaced Chinese organised crime groups within Myanmar.
The country remains a haven for criminality because of the civil war, and borders with neighbouring countries are so porous that criminals can move between Cambodia, Laos, Myanmar and Thailand with multiple safe havens.
Narcotics trafficking has boomed from Myanmar because of the suppression of opium supply from Afghanistan by the Taliban.
Online fraud and online gambling has boomed because of the expansion of online activity during the pandemic.
Money laundering has surged because of the need to deal with the huge increase in proceeds of crime from Chinese and other organised crime groups.
International money laundering
Chinese money laundering is now evident in most developed countries around the world. This expansion of Chinese money laundering is partly due to the growth of the ‘Belt and Road Initiative’ (BRI), the infrastructure and investment strategy launched in 2013. The international business connectivity facilitated by the BRI has also fuelled international organised crime connectivity.
The BRI has facilitated “Trade-based money laundering”, which involves disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimize their illicit origins. An increase in trade means consequent growth in TBML activities including opportunities for newer and more innovative black-market exchange schemes to launder proceeds from drug trafficking in the European Union.
The BRI has boosted the long existing trade in counterfeit and illicit products from China and enabled the established Chinese criminal gangs active in those businesses to introduce the additional business line of underground banking and money laundering.
This growing international underground banking system is part of informal payment systems amongst Chinese communities often referred to by the Chinese term ‘fei qian’ or ‘fei chien’, meaning flying money, which relies on a trusted network of transfer agents. The network of Chinese money agents has grown in the past several decades as restrictions on the movement of money out of China has led to a demand from wealthy Chinese for informal methods.
Money laundering or capital flight?
Capital flight has been a growing problem for the government of China since the economy started to expand following the start of the period of opening up in the late 1970s. This is partly a result of greater wealth seeking new investment opportunities, but also driven by endemic corruption in both the private and public sectors.
The legal restriction of the flow of funds out of China was formalised in 2006 when the State Administration of Foreign Exchange (SAFE) promulgated the ‘Measures for the Administration of Individual Foreign Exchange’.
SAFE regulations stipulated USD50,000 as the maximum for the domestic individual purchase of foreign exchange per person per year, and bans using foreign exchange for investing in properties, securities, and dividend-paying insurance products. This was highly restrictive to Chinese nationals, who largely did not have the same access to stable investments in China as have been available in the West.
As part of the huge economic growth in China in the past four decades, there has been a huge growth in corruption.
The key problem with all of the unexplained or unauthorised capital outflow is that there is a high risk of funds being related to corruption, and hence being the proceeds of crime.
The restrictive laws and regulations for money movement out of China have led to huge national and international underground banking money laundering networks to facilitate the exit of funds. These networks are multi-faceted and based on the legal banking system, illegal underground banking networks, and misuse of the credit card system. This is a diverse and huge scale money laundering system that has developed in parallel with the huge growth of the economy in China as well as the expansion of the banking system and online payments. Underground banking is not any single channel or platform, but involves multifaceted activities across multiple business sectors.
The outcome of the opening up of the Chinese economy, the growth of corruption, capital flight from China, the global expansion of the Belt and Road Initiative, and the expansion of Chinese organised crime groups (initially to South East Asia but increasingly to other regions), has been the growth of networked Chinese organised crime and money laundering around the world.