. Earth Science News .
POLITICAL ECONOMY
Money and power: China government's link to Panama Papers firm
By Ben Dooley
Beijing (AFP) April 8, 2016


China slowdown bedevils Prada results
Milan (AFP) April 8, 2016 - A slowdown in the Chinese market pushed Prada's profits sharply lower last year, the Italian luxury company said on Friday.

Net profit dropped nearly 27 percent to just under 331 million euros ($378 million) in the 12 months to end-January, Prada's financial year.

Group sales stagnated at 3.5 billion euros, while the contribution from Asia dropped because of Chinese weakness, Prada said in a statement.

"The economic situation on the Chinese market remains negative," it said, leading to a 4.4 percent drop in sales from the Asia-Pacific region. Stripping out the impact of a strong dollar last year the drop was even higher, at just over 16 percent.

A weaker euro, meanwhile, helped European sales as Asian and American visitors got a better exchange rate, and turnover in Japan also rose, helped in part by Chinese tourists buying Prada products in Japan.

Revenues in the United States rose, but only thanks to dollar strength.

Prada said the drop in the group's bottom line was a result of costs related to its retail network expansion which were not offset by any sales growth.

Prada's net profit margin fell to 9.3 percent of sales from 12.7 percent a year earlier.

It added, however, that its cost-cutting drive was beginning to bear fruit.

Prada held its dividend at 11 euros per share and said that the earnings outlook was clouded by economic uncertainty.

"Throughout 2015, the luxury goods market had to deal with an economic environment characterized by volatile financial markets and by heightening geopolitical tension in different regions across the world," Prada chief executive Patrizio Bertelli said in the statement.

"These conditions are still present and 2016 is expected to be affected by instability which makes any short-term forecasts uncertain," he added.

Long before the Panama Papers leaks put law firm Mossack Fonseca on front pages around the world, the company was already well known among a certain class of Chinese investor -- and to the government.

The tight-lipped firm says it has cooperated with authorities in Beijing and state-backed banks to help Chinese companies take their business international, according to information gleaned from transcripts of speeches by the company's representatives and archived versions of its Chinese web site.

On several occasions, it has recommended Chinese companies cloak themselves in offshore disguises to avoid foreign restrictions on and opposition to acquisitions.

Since setting up its mainland China operation in 2000, Mossack Fonseca has had at least 11 offices in the country. It currently has eight, including one in Hong Kong.

The International Consortium of Investigative Journalists (ICIJ), which coordinated the Panama Papers reports, said that in 2015 Mossack Fonseca collected fees for more than 16,300 offshore companies incorporated in offices in China and Hong Kong, accounting for 29 percent of its "active companies worldwide".

According to ICIJ, the semi-autonomous Chinese territory of Hong Kong housed the greatest number of intermediaries, banks and law firms that set up offshore corporations on behalf of clients.

The group said the data includes the names of relatives of at least eight current or former members of China's Communist Party's Politburo Standing Committee, the country's most powerful body.

Despite that, until the leaks began last weekend, Mossack Fonseca appears to have been largely unknown among international corporate lawyers in China.

The number of offices the company had was "staggering", China-based attorney Edward Lehman told AFP, adding that in almost 29 years of doing business in the country, he had "never used them once, never been solicited by them once".

But Mossack Fonseca was known in Beijing. It has arranged investment conferences with the commerce ministry and its official think tank, the Chinese Academy of International Trade and Economic Cooperation (CAITEC), past versions of its website show.

As recently as 2014, Chinese government agencies invited Mossack Fonseca representatives to address companies on how offshoring could be used by Chinese firms as part of the country's strategy for domestic enterprises to seek markets and acquisitions abroad.

"We are actively assisting Chinese private and state-owned firms' march into the international market," the company said.

- Convoluted structures -

When it first entered the mainland, Mossack Fonseca offered free consulting services to law and accounting firms, government offices and others to educate them about the benefits of offshoring, Zhang Xiaodong told the China Economic Weekly in 2007.

Zhang was described as a partner in the company's Asia office by the magazine, which is owned by the People's Daily group, whose flagship is the official newspaper of the Communist Party.

He suggested that offshoring could be used by Chinese companies to evade restrictions imposed by foreign authorities on investment from the country.

Zhang cited Chinese state-owned oil company CNOOC's takeover bid for US energy firm UNOCAL, which was withdrawn in the face of opposition from a US committee tasked with investigating proposed investments for national security implications.

"These types of risks can actually all be avoided through the use of offshore companies," he said.

"It's very hard for the other party to determine whether the investors only came from China or the investments only represent Chinese interests."

In other talks, company representatives discussed using offshoring to disguise Chinese investment in Africa and Europe.

Without naming names, it said it had helped a client hide its acquisition of a European firm through a corporate structure that included an offshore company, a foundation, a company in Luxembourg, and another company in the target nation.

Mossack Fonseca also said it had close ties with at least two prominent state-backed banks: Chinese Merchants Bank and Shanghai Pudong Development Bank.

"For many years, our firm has maintained a good relationship with these two," the company said in a November 2008 letter posted on its website, adding that it had helped the banks conduct annual reviews of accounts held by their offshore clients.

Between January 2007 and September 2009, on at least five occasions, the company's representatives trained bank staff on offshoring or appeared at conferences sponsored by the banks on international trade and investment, the newsletters said.

- British Virgin Islands -

Offshore companies are not illegal in themselves and can be used for many legitimate purposes, and Mossack Fonseca has denied any wrongdoing.

ICIJ said most of Mossack Fonseca's offshore companies were set up in the British Virgin Islands (BVI), a Caribbean jurisdiction renowned for the purpose.

Chinese foreign investment flows to BVI have multiplied since Mossack Fonseca opened on the mainland, going from $1.88 billion in 2007 -- the earliest figure available from the National Bureau of Statistics (NBS) -- to $4.57 billion in 2014, the most recent.

At least some of that money is likely to have been moved out of China by corrupt officials, who have sent more than $120 billion overseas, according to a 2011 report by the People's Bank of China.

Mossack Fonseca is not the only purveyor of offshore companies to Chinese clients, with other major players including OIL, Sovereign Trust and OCRA.

But unlike those better-known firms, its dealings remain hazy.

"This is not a law firm I've ever seen associated with real deals," said Paul Gillis, an expert on Chinese accounting practices at Peking University.

That may have been the point.

For Chinese clients, he said, the purposes of the offshore companies was probably "to get money out of China, and not in a form where it can be traced back to them".


Thanks for being here;
We need your help. The SpaceDaily news network continues to grow but revenues have never been harder to maintain.

With the rise of Ad Blockers, and Facebook - our traditional revenue sources via quality network advertising continues to decline. And unlike so many other news sites, we don't have a paywall - with those annoying usernames and passwords.

Our news coverage takes time and effort to publish 365 days a year.

If you find our news sites informative and useful then please consider becoming a regular supporter or for now make a one off contribution.
SpaceDaily Contributor
$5 Billed Once


credit card or paypal
SpaceDaily Monthly Supporter
$5 Billed Monthly


paypal only


.


Related Links
The Economy






Comment on this article via your Facebook, Yahoo, AOL, Hotmail login.

Share this article via these popular social media networks
del.icio.usdel.icio.us DiggDigg RedditReddit GoogleGoogle

Previous Report
POLITICAL ECONOMY
Follow the money: how Hong Kong helps outflow of Chinese cash
Hong Kong (AFP) April 7, 2016
The Panama Papers leak has put the spotlight on Hong Kong as a hub for setting up offshore firms, with much of the money flowing through the city coming from mainland China. Revelations Thursday that more than 16,300 of Panamanian law firm Mossack Fonseca's active shell companies were incorporated through its Hong Kong and China offices - 29 percent of the worldwide total - show the lengt ... read more


POLITICAL ECONOMY
Vibrations make large landslides flow like fluid

It's home bittersweet home for returning Iraqi migrants

To flee Lebanon's trash crisis, family heads to Syria

Red Cross says more funds needed in wake of Fiji super cyclone

POLITICAL ECONOMY
Artificial molecules

New understanding of liquid to solid state transition discovered

New metallic glass bounces

Scientists divide magnetic vortices into collectivists and individualists

POLITICAL ECONOMY
Study: Ritual human sacrifice maintained social stratification

West Coast scientists sound alarm for changing ocean chemistry

Coral reefs highlight the key role of existing biodiversity

Ocean scientists want action plan to combat seawater chemistry changes

POLITICAL ECONOMY
Canada must establish new Arctic shipping policies: report

Ice Age Antarctic Ocean gives clue to 'missing' atmospheric carbon dioxide

Plant gases can counteract Arctic climate change

North Atlantic played pivotal role in last great climate tipping point

POLITICAL ECONOMY
Can urban gardeners benefit ecosystems while keeping food traditions alive?

China arrests six over fake infant formula: government

Agriculture expansion could reduce rainfall in Brazil's Cerrado

Study finds wide-reaching impact of nitrogen deposition on plants

POLITICAL ECONOMY
Fiji residents ordered to stay inside as cyclone looms

Pakistan searches for 23 people trapped by landslides

Alaska researchers improve their 'hearing' to detect volcanic eruptions

Rescuers race to reach thousands stranded by rains in Pakistan

POLITICAL ECONOMY
Primate populations suffer as a result of Congolese warfare

Senegal to beef up military as security threat grows

France at odds with US over UN police presence in Burundi

Djibouti's strategic position draws world's armies

POLITICAL ECONOMY
Global competition shows technology aids weight loss

Neuronal feedback could change what we 'see'

Study of Japanese hunter-gatherers suggests violence isn't inherent

Study: Indonesian 'hobbits' likely died out sooner than thought









The content herein, unless otherwise known to be public domain, are Copyright 1995-2024 - Space Media Network. All websites are published in Australia and are solely subject to Australian law and governed by Fair Use principals for news reporting and research purposes. AFP, UPI and IANS news wire stories are copyright Agence France-Presse, United Press International and Indo-Asia News Service. ESA news reports are copyright European Space Agency. All NASA sourced material is public domain. Additional copyrights may apply in whole or part to other bona fide parties. All articles labeled "by Staff Writers" include reports supplied to Space Media Network by industry news wires, PR agencies, corporate press officers and the like. Such articles are individually curated and edited by Space Media Network staff on the basis of the report's information value to our industry and professional readership. Advertising does not imply endorsement, agreement or approval of any opinions, statements or information provided by Space Media Network on any Web page published or hosted by Space Media Network. General Data Protection Regulation (GDPR) Statement Our advertisers use various cookies and the like to deliver the best ad banner available at one time. All network advertising suppliers have GDPR policies (Legitimate Interest) that conform with EU regulations for data collection. By using our websites you consent to cookie based advertising. If you do not agree with this then you must stop using the websites from May 25, 2018. Privacy Statement. Additional information can be found here at About Us.