10.02.2007
The 21st Century Mafia: Made in China
№1 2007 January/March



China, which is rapidly becoming a
leader in global development, is now the talk of the world.
However, the positive manifestations of this diverse phenomenon are
closely linked with negative ones. For example, as China continues
to consolidate its leading positions in the global economy, Chinese
organized crime is expected to broaden its presence in global
criminal links. This is of tremendous concern for Russia and the
world.

THE “TRIADS” AND
REFORMS

Many observers believe that
information concerning the negative processes in contemporary China
is classified, but this view is largely exaggerated. Chinese
criminologists (including Liao Ping, He Bisong, Xin Yan, and
others) have conducted in-depth studies into organized crime in
their country, and the results of these studies have been
translated into other languages, including Russian. Furthermore,
Chinese officials from the Communist Party and law-enforcement
bodies eagerly share their information about the criminal
situation.

Analysis of these studies suggests
that any shift from a command economy to a market economy brings
about, as a negative side effect, an upsurge (or rather an
outburst) of organized crime and corruption. China launched market
reforms earlier than the Soviet Union, followed by Russia, and
therefore was in the position to recognize the problem at an
earlier time. While the Soviet Union first confronted the problem
of organized crime and corruption in the mid-1980s, beginning with
the famous “Uzbek affair,” China already experienced this
phenomenon in the late 1970s, with the revival of the notorious
“triads” (which, incidentally, played a significant role in the
Celestial Empire back in the 17th century).

The study of contemporary
organized crime in China, carried out by Chinese scholar Xin Yan,
shows that mafia-type organizations seriously destabilize public
order. Their leaders actively infiltrate economic structures as
corruption ties grow stronger and economic crimes become more
refined. Meanwhile, low-level government bodies (in villages and
small towns) and law-enforcement agencies become increasingly
infiltrated by criminal elements.

Eventually, the leaders of
criminal organizations succeed in rising to high positions in the
social hierarchy. For example, they become deputies of the National
People’s Congress or members of political consultative councils in
the provinces. Criminal organizations are more frequently
interfering with the reshuffling of high-ranking officials.
Moreover, there were even cases when the authorities of some
Chinese regions asked the mafia to take over low-level
administrative power (for example, in villages), while many local
administrators asked the mafia for financial aid. Thus, criminal
organizations in those regions evolved from a “criminal force” into
a “criminal power.”

Xin Yan has studied many criminal
cases and concluded that organized crime groups are often organized
and run by former party and administrative functionaries and
high-ranking officials of prosecutor’s offices. There were even
reports alleging that these criminal leaders were active deputies
of the National People’s Congress, secretaries of Communist Party
cells, and chief executives of local Public Security
Bureaus.

An increasing number of triad
societies now operate under the umbrella of legitimate companies
and enterprises and infiltrate governmental economic entities.
Triads, which generate massive profits, have built a system for
laundering illegal revenues. According to Chinese experts, about
200 billion yuans (U.S. $24.7 billion) is laundered in China each
year; huge sums of money circulate through illegal money-changing
shops. 

Triads are more active in the
coastal provinces, especially in Hong Kong. They control heroin and
opium supplies, the hard currency black market, and the trafficking
of Russian and Ukrainian prostitutes for brothels in Hong Kong and
Macao. Finally, they control arms trafficking and provide
“protection” for local businessmen. In Hong Kong, for example,
there are 15 to 20 triad groups that actively engage in criminal
activities, each having at least 30,000 members.

The official China News Weekly
Review published an article in 2005, revealing that, apart from
Hong Kong and Macao, the Chinese mafia has spread its operations to
large industrial centers in mainland China, such as Guangzhou,
Tianjin and Shanghai.

Mafia organizations are taking
advantage of both the negative and positive aspects of China’s
economic reforms. Of course, they could not ignore the country’s
fast-developing Internet market (as of early 2006, China placed
second in the world with over 110 million users, behind only the
U.S.) and organized on-line sales of pirated audio and video
materials. Now, items offered for sale by triads also include
drugs, prostitutes, stolen cars, weapons, false documents, and even
human organs for transplantation.

The Beijing authorities work hard
to control the Net by means of over 30,000 Internet police
officers. Since the beginning of the 21st century, more than 2,000
web sites have been closed down for offering sexual services and
gambling entertainment. Yet every day new sites appear that replace
the closed web sites.

The rapid growth in fuel prices
tempted the mafia to steal crude oil from pipelines, many of which
were seriously damaged. The police estimated the amount of oil
stolen in 2005 at over U.S. $120 million.

CHOPPING OFF THE DRAGON
HEADS

The architect of the Chinese
reforms, Deng Xiaoping, laid the ideological and organizational
basis for the struggle against mafia structures and corruption in
the People’s Republic of China. In the early 1980s, he pointed to a
steadily worsening criminogenic situation in the country and
emphasized the need for a long-term struggle against this social
evil. In particular, he ordered full-scale operations against
organized crime.

Deng also initiated the
establishment of powerful analytical subdivisions within the
Ministry of State Security and the Ministry of Public Security.
These subdivisions prepare long-term forecasts for the development
of the geostrategic and regional criminogenic situation and devise
plans for full-scale operations. There are also several central
analytical organizations (for example, the Research Office under
the State Council).

From 1983 to 2005, at least ten
full-scale operations of this kind were carried out, in which more
than one million criminal groups were liquidated. Many of their
leaders, together with the most odious members, were
executed.

Importantly, these types of
operations against organized crime, together with the ongoing
struggle against the mafia and corruption, are conducted in China
in strict compliance with the law. China’s criminal law, together
with those laws that pertain to criminal procedure, is constantly
modified to respond to changes in the situation. Chinese laws,
unlike Russia’s, contain clear definitions of mafia organizations,
while the Supreme People’s Court regularly gives detailed
explanations of judicial practices pertaining to cases on organized
crime and corruption.

To counter the increased scope of
money laundering by the mafia, the Chinese government in 2004 set
up the Anti-Money Laundering Monitoring and Analysis Center.
Additionally, the Ministry of Public Security has an anti-money
laundering department, which develops specific measures, interacts
with foreign counterparts, and coordinates the activities of the
ministry’s local divisions. There is even a special computer
network that controls money flows 24 hours a day.

All these organizations
participate in the full-scale operations, after which criminal
activities subside for some time. Yet, after a while, criminal
groups become active again, because these operations fail to
eliminate the main reasons for crime. Thus, in place of the chopped
off head of the dragon, many more deadlier heads grow in its
place.

Unless unemployment, China’s main
social problem, is solved, the self-reproduction of liquidated
criminal organizations will continue. The number of the unemployed
in the country is estimated at 182 million to 199 million, or 26 to
28 percent of the number of the employed. This figure equals 10
Chinese armies, and the mafia uses a large part of these redundant
people.

A source of special concern is
that the army of the unemployed is largely recruited from young
people below the age of 35. According to a study conducted by
China’s Ministry of Labor and Social Security, the unemployment
rate among young people in 62 cities across China has exceeded 60
percent. Even graduates from institutions of higher learning have
difficulties finding a job.

The “going outward” and “welcome
to come” strategies, conducted by China in the last few years, are
intended to increase the country’s foreign trade and foreign direct
investment and, simultaneously, to solve the unemployment problem
through intensive labor migration to other countries.

THE EXPANSION
PROJECT 
GAINING
STRENGTH

The above
strategies helped China to increase its foreign trade almost
threefold between 2001 and 2005. According to expert estimates, by
2020-2030, China will pass the United States in terms of GDP, thus
becoming the world’s economic leader. The same conclusion is drawn
by the well-known 2020 Project [Mapping the Global Future, prepared
by the National Intelligence Council, a CIA advisory group, and
issued on January 15, 2006 – Ed.].

As regards the “welcome to come”
strategy, according to some Western analytical centers cited by
Maxim Chereda, the leaders of the largest and most influential
triads established contacts with representatives of the Chinese
leadership at all levels, which ensured the safe infiltration of
their cash into Mainland China, mainly in its southern provinces.
The triads’ money was used for establishing profitable joint
ventures, such as nightclubs and casinos. The co-founders of these
ventures included regional representatives of China’s security
organizations, in particular the Ministry of Public Security and
the People’s Liberation Army.

However, any sort of “peaceful
coexistence” between the Chinese mafia and the country’s leadership
could not last for long. “Triads were alright for Beijing for as
long as their capital was needed for economic reforms in the
country,” Chereda wrote. “Now the reform process no longer needs
support from ‘not quite legitimate organizations,’ to put it
mildly.” As a result, the Chinese leadership has launched an
offensive against triads.

At the same time, as prominent
sinologist Vilya Gelbras writes, China has attracted U.S. $600
billion in foreign direct investment in the course of its “going
outward” policy. According to some estimates, China has invested
U.S. $700 billion in American securities, thus protecting the
dollar and securing its presence on the U.S. market. From 2002 to
2005, foreign direct investment by Chinese enterprises alone
(without taking into account financial organizations) amounted to
$17.9 billion (with an average increase of 36 percent a year!),
while more than 10,000 various enterprises have been set up outside
the country. Considering the toughening of the government’s
anti-mafia and anti-corruption policies inside the country, and the
continuing “going outward” strategy, triad leaders objectively
benefit more from directing their expansion out of the
country.

This global criminal project is
already being implemented – and very effectively. Chinese mafia
organizations have established control over migration processes and
have taken leading positions in organizing human trafficking and
illegal migration. As follows from the U.S. Department of State’s
report of 2005, China now ranks amongst the countries that require
special attention due to the vast number of people who are made
victims of human trafficking. A June 2006 report by Europol
described Chinese mafia groups as leaders in human trafficking
throughout the European Union.

Chinese triads have even made
Japan’s mafia, yakuza, make room in its own country: the Chinese
account for about half of all crimes committed by foreigners in
Japan (double the figure from a decade ago), while their mafia
organizations control two-thirds of heroin trade in that country.
According to U.S. expert estimates, these organizations have also
infiltrated the U.S. legal and black-market economies, surpassing
even the Colombian cartels. In Italy, in early 2006, law
enforcement bodies launched a major investigation into links
between Chinese gangsters and the Italian mafia. An investigation
is being held in Milan’s Chinatown with regard to suspicious
investments in real estate and trade. In Rome, investigators have
revealed dummy firms and banks engaged in money laundering. The
first large-scale investigation concerning the financial resources
of the Chinese mafia in Italy involved 22,000 Chinese. In total,
the Italian police have launched 250 criminal cases against the
leaders of Chinese mafia organizations and their
assistants.

A 2005 report by Italy’s chief
prosecutor said that the local Chinese triad was becoming more and
more aggressive and united. The last few years have seen a rise in
illegal activity, such as robberies and acts of extortion with
regard to Italian citizens, and the emergence of mixed
Chinese-Italian criminal groups.

Chinese organized crime can
provoke global economic crises and influence market prices. In
particular, in 2005 the world copper market was on the brink of
collapse after a disastrous gamble on the London Metal Exchange.
Chinese copper trader Liu Qibing, well known among business
circles, sold 200,000 tons of copper on the exchange on behalf of
the Chinese State Reserve Bureau, after which he disappeared, while
world copper prices reached a record high.

Given the vast expansion of
Chinese organized crime, it was impossible that the phenomenon
would bypass Russia, but the intensity and forms of this expansion
differ in many respects from the situation in other countries.
There are objective reasons for this.

INFILTRATION OF RUSSIA

Sociological studies conducted by
Russian scholars on Chinese communities in Moscow, Irkutsk,
Khabarovsk and Vladivostok, in addition to the results of polls
taken in Blagoveshchensk, Nizhny Novgorod, Rostov-on-Don, Barnaul
and Belokurikha (the Altai Region), have shown that Russia, like
the rest of the world, is experiencing a decisive moment: the
development of new conditions for the global expansion of Chinese
migration, and the rise of Chinese communities in foreign
countries. This largely spontaneous growth has given way to the
organized expansion of Chinese immigrants abroad and the broadening
of their business activities.

The estimated number of Chinese
migrants in Russia varies from 400,000 to 3 million. The main
problem posed by this relatively new phenomenon is the damage these
groups inflict on the Russian economy: the Chinese communities,
according to police information, are covertly controlled by Chinese
mafia organizations. Meanwhile, relations within these communities
are patterned after those in the triads (strict obedience to the
leaders, a vow of silence, severe punishment of recalcitrant
members, etc.).

The majority of Chinese migrants,
organized by mafia, go to Russia’s Far East. There are objective
historical, demographic and, particularly, economic reasons for
this choice. Sinologist Andrei Ostrovsky writes that Russia’s
market reforms, marked by the loss of state regulation in the
economy, have not made the region attractive to investors.
Actually, in the competition for attracting capital to the Far
East, Russia lost out to China.

The governor of the Khabarovsk
Territory in the Russian Far East, Victor Ishayev, told the
Izvestia newspaper in April 2006: “The Far East has been isolated
from the Russian economy. In the Soviet times, 75 percent of all
our products were supplied to Russia’s domestic market, whereas
today we supply only 4 percent. Full-scale ties with the rest of
Russia are impossible due to unequal conditions, in particular high
tariffs on heat energy, electricity and transport, and the absence
of industrial restructuring… Today we are legislatively determined
to be a raw-material appendage of the advanced, fast-developing
countries (Japan, China, Korea).”

Chinese mafia organizations
exploit Russia’s Far East and Siberia precisely as a raw-material
appendage. Yuri Yegorov and Alexander Samsonov, who studied
organized crime in Russia’s East Siberia and Far East on the basis
of police information available for the period 1999-2003, cite the
following figures.

 

Of all criminal cases launched by the
Russian police against ethnic organized crime groups in 2002,
Chinese criminal groups accounted for 38 percent of the criminal
cases in East Siberia, and for 40.9 percent of all cases in the Far
East.

 

Poaching
and smuggling of the forests and seas in the Russian Far East is
also carried out on an organized basis. Hundreds of Chinese
citizens are repeatedly detained in the Ussuri taiga with ginseng
roots and other plants included in the Red Book of Russia. During
the season for pine nut picking, Russian police recovered many tons
of pine nuts from Chinese illegals. In China, pine nuts are
processed for oil, which is later used as a component in
pharmaceuticals and perfumes. Products that are valuable on the
Chinese market, including trepang, ginseng, tiger skins and even
bear bile, are smuggled out of the Maritime Territory. There is
also an underground market for various kinds of frogs and turtle.
In 2003, Chinese citizens began to actively smuggle various species
of sturgeons into China from Russia.

 

Chinese
poachers have destroyed the commercial stock of autumn salmon in
the Ussuri River and have taken almost complete control over the
migration routes of valuable fish species, including Siberian
salmon and Siberian sturgeon, as well as popular sturgeon spawning
areas.

 

Initially,
the Chinese caught the fish themselves; now they actually hire the
local Russian population for this task. The Chinese organized crime
groups also hire Russians for cultivating plots of land leased by
these groups. In other words, instead of serving as additional
manpower resources, these Chinese “migrants” mercilessly exploit
the Russian population: the mafia never becomes a manpower
resource!

 

Professor
Vitaly Nomokonov of the Far Eastern State University warns that
Chinese mafia organizations in the Far East are intensively
integrating with the Russian mafia. In Ussuriisk, for example,
triads have established business relations with local criminal
leaders: Russian organized crime groups help triads to buy metals
in the region and to ship them abroad. Also, Russians set up
passenger transportation firms, which are used by the Chinese, and
provide warehouses for storing goods, including contraband. The
last few years have seen the rise of yet another phenomenon: more
and more Chinese are joining Russian organized crime groups,
tipping them off about the movements of Chinese traders. At least
one Chinese trader is robbed every month.

Professor
Valery Sobolnikov of the Siberian Academy of Civil Service points
out that in 2002-2005 Chinese organized crime groups registered
businesses with dummy Russian owners, which allowed the actual
heads of these firms or commercial structures to evade taxes. In
many cases, the Chinese mafia establishes firms for single
transactions. In the Chita Region, for example, about a thousand
such “companies” have been revealed. In the Novosibirsk Region,
numerous facts have been disclosed about foreign-trade operations
carried out by front businesses. Incidentally, a majority of such
commercial structures export strategic raw materials out of
Russia.

 

Professor
Anna Repetskaya of the Baikal State University of Economics and Law
points to a similar tendency in the Irkutsk Region. She cites
reports collected by the local bodies of the Federal Security
Service (FSB), which thwarted the thefts of strategic raw and
radioactive materials that were intended for export to China. Many
Russian and Chinese organized crime groups divided functions:
Russians stole the products from local enterprises, while the
Chinese smuggled them to China.

 

FOREST
MANDARINS

 

Researchers are warning that the greatest threat to Russia’s
national security (especially in the economic realm) comes from
criminal operations in the timber sector. Anatoly Lebedev of the
Bureau of Regional Public Companies in Vladivostok has analyzed
this problem in detail in the course of a journalistic
investigation. Below are its main findings.

 

The lack
of funding of the State Timber Service and Inspectorate in past
years, compounded by official permission to seize confiscated
illegal timber, resulted in unprecedented rates of corruption in
the timber sector. Later, in 2002, a new government decree outlawed
the practice by foresters and law enforcement bodies to profit by
means of confiscated timber. Since then, all confiscated timber
must be sold in favor of the Ministry of Property, while the
foresters no longer receive a cent from these revenues.

 

Yet the
corruption continues. The system of illegal logging and timber
resales has become too widespread and involves too many local
high-ranking officials to be easily liquidated. Chinese businessmen
play a major role in this system. This is why attempts to adopt a
new Forest Code that provides for the abolition of forestry
enterprises, together with the delegation of their functions to
leaseholders, have caused a panic in the region. For the Far East,
this would mean that the vast forests could simply fall under the
direct control of Chinese businesses.

 

Many
retired Chinese generals and agents of special services actively
participate in legal and illegal commercial operations in the Far
East, buying property, hiring workers and controlling the most
profitable kinds of businesses. The Chinese have quickly learned to
copy Russian methods of evading taxes, with a slight difference:
they are more effective at it. Thus, the large-scale smuggling of
timber continues to the mutual delight of Russian and Chinese
businessmen – and to the detriment of the Ussuri taiga.

 

Many
Chinese, who operate under alias Russian names, control areas for
wholesale timber sales in several cities of the Maritime Territory
– Luchegorsk, Dalnerechensk, Lesozavodsk, Ussuriisk, Nakhodka and
Dalnegorsk, in the Khabarovsk Territory, the Jewish Autonomous
Region, and in the Amur and Chita Regions. According to the
Anti-Organized Crime Department of the Maritime Interior Affairs
Agency, there is enough proof that Chinese timber businesses in the
Maritime Territory are under the strict control of
triads.

 

DARING THE
DRAGON

 

Why is it
important to focus attention on these natural and raw-material
resources? The matter is that over the years of reforms the Russian
and foreign (including Chinese) mafias have got possession of what
must never fall into their hands: Russia’s natural wealth,
raw-material resources, metals (including rare-earth varieties and
gold), timber and coal.

 

This
situation is tantamount to a loss by the state of the levers of
governance in the law enforcement sphere. If the government does
not realize where it must focus its efforts, the law enforcement
resource will continue to be dissipated without yielding the
required results. Since it is impossible to address all the
problems at once, the government must first set national
priorities. Then it will be clear what methods will be the most
effective against the Chinese mafia: cleaning up Chinese markets,
dislodging triads from the taiga and timber-felling sites or
launching military operations against those who destroy Russian
bio-resources and ship trainloads of nonferrous metals and timber
to China. On this last option, it would be extremely useful for
Russia to borrow from China’s experience in conducting full-scale
operations against the mafia. Certainly, the success of any
law-enforcement operation depends on whether the government makes a
turn for the better in its social and economic policy in the Far
East and East Siberia, which, in turn, depends on its policy
nationwide. Why not follow the example of the Chinese leadership,
which has admitted making serious mistakes pertaining to the “going
outward” and “welcome to come” strategies?

 

The 5th
Plenum of the Chinese Communist Party Central Committee of the 16th
convocation (held in October 2005) discussed the five-year plan for
2006-2010 and set the task of “revising the view on the
development” and “creating a new development model.” In its desire
to “reform the reforms,” the Chinese authorities are focusing their
ideological efforts on two major areas – propaganda of a new
economic policy, with an emphasis on social justice and maximum
expansion of the domestic market, together with a struggle against
the liberal ideology, viewed as a challenge to China’s political
stability. At the same time, the authorities have shifted the focus
of the polemic away from Chinese problems to Latin America, Russia
and other states of the Commonwealth of Independent States,
asserting that those regions have turned into disaster areas due to
America’s policy of imposing its liberal model on them.

 

Beijing
has already announced that the economic model that has been used to
rapidly enrich the most active part of Chinese society has
exhausted itself. Now, the time has come to pay attention to the
quality of growth, smooth over social conflicts, remove inequality,
and provide equal opportunities for hundreds of millions of
Chinese.