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href="https://web.archive.org/web/20160515152316/mailto:/?subject=A%20third%20of%20Panama%20Papers%20shell%20companies%20set%20up%20from%20Hong%20Kong%2C%20China&body=Here%20is%20something%20from%20Nikkei%20Asian%20Review%20that%20might%20interest%20you%3A%0D%0AA%20third%20of%20Panama%20Papers%20shell%20companies%20set%20up%20from%20Hong%20Kong%2C%20China%0D%0Ahttp://s.nikkei.com/1ShLUpK">Mail</a></li> </ul> </div> <div class="article-box"> <div class="detail"> <div class="feature-article"> <div class="date-area">April 23, 2016 3:07 am JST</div> <h1 class="title">A third of Panama Papers shell companies set up from Hong Kong, China</h1> <p>YASUO AWAI, Nikkei staff writer</p> </div> <img src="/web/20160515152316im_/http://asia.nikkei.com/var/site_cache/storage/images/node_43/node_51/2016/201604/0413n/0413n-mossack-fonseca/4349416-1-eng-GB/0413N-Mossack-Fonseca_article_main_image.jpg" width="580" alt=""/> <p class="img-caption"> Police outside Mossack Fonseca, the law firm at the center of the Panama Papers. </p> </div> </div> <div class="article-box detail"> <div class="wysiwyg_area"> <div class="articleBodyText"> <p>HONG KONG -- Intermediaries located in Hong Kong and China have established roughly 30% of the offshore firms exposed in the massive document leak known as the <a href="https://web.archive.org/web/20160515152316/http://asia.nikkei.com/Features/Panama-Papers/" target="_self">Panama Papers</a>, an analysis by the organization behind the revelations shows.</p><p>     Mossack Fonseca, the Panamanian law firm at the epicenter of the scandal, opened up a Hong Kong office in 1989, then established eight more units on the Chinese mainland. Through the end of last year, those affiliates oversaw and earned fees from 16,300 active offshore companies, the International Consortium of Investigative Journalists reports.</p><div class="page_limit free"></div><div class="page_limit"></div><p>     Hong Kong's British-style legal system has been largely preserved under the "one country, two systems" style of governance put in place after China reclaimed the city. Western financial institutions have operated in Hong Kong providing professional services for the wealthy. The ICIJ calls the city the law firm's busiest hub in the world due to its role connecting China with the global tax avoidance network.</p><p>     Top Chinese government officials, corporate bigwigs and other well-to-do figures would carry funds to Hong Kong, which would then be channeled to shell companies in the British Virgin Islands and other tax havens. Through those vehicles, clients could skirt China's strict currency controls and anonymously invest funds in real estate and other assets.</p><p>     The U.S. is a popular destination for that capital due to the view that Washington will resist political pressure from China, said Bill Majcher, a former inspector for the Royal Canadian Mounted Police who is well-versed in financial crimes.</p><p>     Some of the funds even find their way back to the mainland in the form of illicit investments. The Tax Justice Network, a tax haven watchdog, says that Chinese investors would use the offshore accounts to make it look like their funds came from foreign corporations in order to take advantage of tax incentives offered by the government.</p><p>     On the other hand, Chinese enterprises often register their headquarters at tax havens when they list on Wall Street or other stock markets outside the Chinese mainland. For example, e-commerce giant Alibaba Group Holding is incorporated in the Cayman Islands. According to an expert, Chinese Internet companies often find themselves re-registering home offices to offshore locations as a way to raise foreign capital, which is normally banned by Chinese law.  </p> </div> </div> <div id="modal-screen_zoom"></div> </div> <div class="pagination no-border"></div> <div class="related-list"> <p class="related-header">Related stories</p> <ul class="point-list"> <li><a href="/web/20160515152316/http://asia.nikkei.com/Politics-Economy/Policy-Politics/China-cracking-down-harder-on-offshore-accounts">China cracking down harder on offshore accounts</a></li> <li><a href="/web/20160515152316/http://asia.nikkei.com/magazine/20160414-MEXICO-ASIA/Politics-Economy/Bill-Majcher-Panama-Papers-reveal-Hong-Kong-s-role-in-the-world-of-tax-havens">Bill Majcher: Panama Papers reveal Hong Kong's role in the world of tax havens</a></li> <li><a href="/web/20160515152316/http://asia.nikkei.com/magazine/20160414-MEXICO-ASIA/Politics-Economy/Michael-Stott-London-offers-an-easy-home-for-dirty-money">Michael Stott: London offers an easy home for dirty money</a></li> <li><a href="/web/20160515152316/http://asia.nikkei.com/magazine/20160414-MEXICO-ASIA/Politics-Economy/China-does-its-best-to-ignore-the-Mossack-Fonseca-leaks">China does its best to ignore the Mossack Fonseca leaks</a></li> <li><a href="/web/20160515152316/http://asia.nikkei.com/magazine/20160414-MEXICO-ASIA/Politics-Economy/Pacific-islands-provided-fertile-ground-for-Panamanian-law-firm">Pacific islands provided fertile ground for Panamanian law firm</a></li> <li><a href="/web/20160515152316/http://asia.nikkei.com/Politics-Economy/Policy-Politics/Panama-Papers-furor-highlights-Japan-s-struggle-with-tax-dodgers">Panama Papers furor highlights Japan's struggle with tax dodgers</a></li> <li><a href="/web/20160515152316/http://asia.nikkei.com/Politics-Economy/Policy-Politics/Panama-Papers-reveal-dubious-wealth-of-dictators-cronies">Panama Papers reveal dubious wealth of dictators, cronies</a></li> <li><a href="/web/20160515152316/http://asia.nikkei.com/Business/Companies/Panama-Papers-show-Japanese-stakes-in-270-offshore-tax-haven-entities">Panama Papers show Japanese stakes in 270 offshore tax haven entities</a></li> </ul> </div> <div class="OUTBRAIN" data-src="https://web.archive.org/web/20160515152316oe_/http://asia.nikkei.com/Politics-Economy/International-Relations/A-third-of-Panama-Papers-shell-companies-set-up-from-Hong-Kong-China" data-widget-id="AR_1" data-ob-template="Nikkei_Asian_Review_EN"></div> <script type="text/javascript" async="async" src="https://web.archive.org/web/20160515152316js_/http://widgets.outbrain.com/outbrain.js"></script> <div class="link-box GCCMD_removeall">  <h2 class="title">Follow Nikkei Asian Review</h2> <div class="follow-nar"> <dl> <dt><div class="fb-like" data-href="https://www.facebook.com/nikkeiasianreview/" data-layout="button_count" data-action="like" data-show-faces="false" data-share="false"></div></dt> <dd class="Facebook">The best content posted</dd> <dt class="Twitter"><a href="https://web.archive.org/web/20160515152316/https://twitter.com/NAR" class="twitter-follow-button" data-show-count="false">Follow @NAR</a> </dt> <dd class="Twitter">The latest headlines tweeted</dd> </dl> </div> </div> </div> <script type="text/javascript">  </script> <script type="text/javascript">  </script> <script>  </script> <link rel="stylesheet" href="/web/20160515152316cs_/http://asia.nikkei.com/css/article_pagination_v001.css"/> <script type="text/javascript" src="/web/20160515152316js_/http://asia.nikkei.com/js/497390b.js"></script> <script type="text/javascript">  </script> </div> <div class="secondary"> <div class="link-box "> <h5 class="title"><a href="/web/20160515152316/http://asia.nikkei.com/Latestheadlines">Latest headlines</a></h5> <ul class="headline-list"> <li> <a href="/web/20160515152316/http://asia.nikkei.com/Politics-Economy/Economy/Vietnam-bank-says-thwarted-SWIFT-messaging-fraud-attempt">Vietnam bank says thwarted SWIFT messaging fraud attempt</a> </li> <li> <a href="/web/20160515152316/http://asia.nikkei.com/Politics-Economy/International-Relations/Ex-IAAF-chief-s-son-denies-receiving-Tokyo-2020-Olympics-bid-money">Ex-IAAF chief's son denies receiving Tokyo 2020 Olympics bid money</a> </li> <li> <a href="/web/20160515152316/http://asia.nikkei.com/Business/AC/Stateowned-Telkom-goes-to-combat-with-digital-economy"><span class="sub-title-s">Company in focus: </span>State-owned Telkom goes to combat with digital economy</a> </li> <li> <a href="/web/20160515152316/http://asia.nikkei.com/Politics-Economy/International-Relations/Kavi-Chongkittavorn-Russia-A-new-strategic-partnership-for-ASEAN"><span class="sub-title-s">Commentary: </span>Kavi Chongkittavorn -- Russia: A new 'strategic partnership' for ASEAN?</a> </li> <li> <a href="/web/20160515152316/http://asia.nikkei.com/Viewpoints/Viewpoints/Joseph-E.-Stiglitz-Monopoly-s-new-era"><span class="sub-title-s">Commentary: </span>Joseph E. 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