Cash. And a hole. (File photo)
About 150 developing countries were the source of illicit financial outflows amounting to nearly US$859 billion in 2011, with China accounting for almost half, according to a report by Washington DC-based research and advocacy organization Global Financial Integrity.
Flows of money from tax evasion, crime and corruption in the developing world reached US$858.8 billion in 2011, an 11% increase compared with 2010 and near the all-time high of US$871 billion in 2008, the organization said. Following the start of the global financial crisis, the figure declined to US$776 billion in 2009.
The report said illegal money coming out of China reached US$420.2 billion in 2011 and exceeded a total of US$2.7 trillion between 2000 and 2010.
In that decade, US$5.9 trillion flowed from these 150 developing countries through illegal channels. Nearly 61% came out of Asia.
"The magnitude of illicit money flowing out of China is astonishing. There is no other developing or emerging economy that even comes close to suffering as much in illicit financial outflows," said Raymond Baker, director of Global Financial Integrity.
Baker said that amid a sluggish global economy, almost every country, whether rich or poor, is seeking to stimulate growth. The report strongly reminds governments to step up their efforts to reduce the harm to their economies due to the illegal outflow of wealth.
Only a small group of corrupt officials benefit from sending their money out of the country, while national economies lose huge amounts, said Dev Kar, lead economist for the organization. Illicit financial flows have been shown to exacerbate income inequality and official corruption in China, Kar added.
One of the adverse effects has been an increase in the country's income equality as the wealthy get richer through tax evasion and take advantage of a shadow financial system to protect and multiply their illegal assets, the report said.