Photo caption: The flood of money from China into Canada has not only distorted the Vancouver housing market beyond redemption, it has changed the sort of community Vancouver is going to be for generations to come. And, in a bizarre piece of absence of mind and lack of attention, it has hitched the future of Vancouver to the fate of the Chinese Communist Party. Above, Vancouver’s downtown/Yaletown area at sunset as a storm approaches./Photo by Deborah Jones © 2015

By Jonathan Manthorpe,

International Affairs,

Special to The Post

Vancouver has the double affliction of a deeply embedded lack of self-esteem and an overdose of self-obsession.

A result is a temperamental inability to make sound judgments about communal pressures, including those coming from outside. Sad to say, the vain and vacuous “Real Housewife of Vancouver” is the perfect civic emblem for the Western Canadian metropolis.

Forget the verdict of a writer in The Economist that Vancouver is among the world’s most “mind-numbingly boring” cities. Immeasurably more important in recent years is the inability to address the seismic problem of money flooding in from China.

The most mind-numbing element of this story is the amount of money flooding out of China illegally. The numbers are obscene. Last week the major French bank, BNP Paribas, published an analysis of financial flow statistics for the first quarter of this year tabled by the People’s Bank of China. The French bank concluded that in the first three months of 2015 over $80 billion had been spirited out of China illegally. This puts China’s wealthy on track to shuffle over $320 billion out of the country this year.

This represents a significant increase on reasonably reliable estimates of illegal outflows in recent years. For example, the Washington-based anti-money laundering organization, Global Financial Integrity, calculated that in 2012 just under $250 billion was slipped out of China and that the total for the previous decade was about $1.25 trillion.

The rush to get money out of China has now reached almost three times the amount of money being invested in China. According to official Beijing statistics, inward investment was $119 billion last year.

The basic reason for the money flight is simple. After nearly 70 years in control, the Communist one-party state has almost exhausted its political legitimacy. Egalitarian ideology has been abandoned. The low hanging fruit of economic reform have all been picked and eaten, and the Communist Party has no intention of embarking on the political reforms necessary for the next stage of economic development. All that is left to sustain the regime is intensified repression — much in evidence in the last three years – and crass appeals to nationalism. Hence we see daily the pursuit of totally false, but increasingly belligerent claims to territory in the East China and South China seas, and fabricated anti-Japanese and anti-American rhetoric. There is also a worrying and dangerous increase in the amount of blindly patriotic chest-thumping by politicians and People’s Liberal Army senior officers, not all of whom seem to be under control.

Authoritarian regimes usually look very solid. But they are always very brittle. A tap on the plate glass in the right time and the right place and the whole window collapses into the street. We’ve seen it with the Soviet Union and, more recently, with the Arab Spring and fall or besieging of the authoritarian regimes in Tunisia, Libya, Egypt, Syria and Yemen.

The flight of money from China suggests that very many people at the top of the regime have doubts about how much longer the Communist Party can hold power, and they are arranging safety nets for their assets and their families.

The flood of this money into Canada has not only contorted and distorted the Vancouver housing market beyond redemption, it has changed the sort of community Vancouver is going to be for generations to come. In a bizarre piece of absence of mind and lack of attention, it has also hitched the future of Vancouver to the fate of the Chinese Communist Party.

Vancouver’s low self-confidence and its destructive vanity have both played a part in these failures.

Lack of self-esteem has deterred Greater Vancouver from responding to warning signs about the money fleeing China. Part of this may be what a friend of mine calls “the Komagata Maru syndrome.” That is the fear of singling out any ethnically identifiable group for fear of being labelled a racist. Just look at the city’s media. It has taken it years to pluck up the courage to say that it is torrents of money from China that is distorting Vancouver’s economy.

Some people, most of them in Vancouver’s economic and political ruling class, have been unwilling to look critically at what is happening because they are doing so well out of it. Developers, building contractors, engineers, lawyers, luxury goods retailers (or, often more accurately, retailers of goods with luxury prices), sellers of expensive cars have all done very well out of the Chinese cash tsunami.

The municipal and British Columbia provincial government have also seen their revenues grow, making them reluctant to curb or even gather useful data on what is happening. Vancouver City Council is reported to make about $700 million a year on property transfers, and the province is making over $1 billion.

For the majority of Greater Vancouverites, shut out of the feeding frenzy, the effects are less wholesome. A report by the Royal Bank of Canada a couple of years ago said that for the average family in Greater Vancouver the total cost of homeownership has rocketed up to a mind-blowing 92 per cent of pre-tax family income. If anything, the situation has got worse since. Vancouverites face not only the emigration of their children to more affordable parts of Canada, but also the prospect of people performing what used to be thought of as middle income, but essential public service jobs, such as the police and teachers, having to move elsewhere.

Politicians and officials have allowed the economy, and especially the housing market, to become so distorted that it would now be dangerous to try to impose reality. It would not take much to trigger the kind of mortgage crisis that so devastated the United States economy in 2008-2009.

Obsessive vanity has played a destructive role in all this. Many people believe the hype that Vancouver is one of the most liveable and attractive metropoli in the world, so why would wealthy Chinese not flock to it?

Well, doubtless some are attracted by the geography. But a much greater draw is that Canada and British Columbia are open doors without gatekeepers or much in the way of rules or regulations impeding wealthy Chinese anxious to find a safe haven for their assets. Other favoured destinations with the rule of law and respect for private property, such as the U.S., Australia and much of Europe, impose stringent restrictions and requirements on foreign investors or

property buyers. Canada, on the other hand, has no real idea of who owns what, and the planning departments of far too many of our municipalities are so amateurish and ill prepared that anything goes. And local politicians seldom push back against the energies of the property industry, much of which is often inexorably entwined with the elected officials anyway.

But an essential part of understanding what is happening in Greater Vancouver and, indeed, Toronto, is to look at what is happening in China.

The central question is to ask why so many wealthy Chinese, who have gathered their fortunes over the last three decades because of their ties to the Communist Party, want to get as much of their assets as they can out of China. Having benefited so fruitfully from their links, either by party membership, blood or business bonds, to the pinnacles of power, surely these are the people who should feel most secure? But as China approaches the 70th anniversary of the Communist Party’s 1949 takeover of China, obviously not.

And most wealthy Chinese want to follow their money abroad. A story posted briefly on the People’s Daily newspaper website earlier this week said a recent survey found that over 50 per cent of wealthy Chinese are determined to emigrate. It didn’t take long for the censors to take the story down, however. The reality that most well-to-do Chinese dream of leaving the country clashes dramatically with the “Chinese Dream” of becoming a military, economic and political world power that is the watch word of the country’s new paramount leader, President and party boss Xi Jinping.

Other well-founded surveys have found that over 60 per cent of wealthy Chinese are either in the process of emigrating or determined to do so. Senior Communist Party officials have for some years been worried about a perceived link between corruption and having relatives overseas. Having family in Canada, Australia, the U.S. or Europe is seen as the preparation for flight both of money and the money-maker. At the hub of the current anti-corruption campaign and the Communist Party’s equivalent of the Spanish Inquisition is the Commission for Discipline Inspection. As a matter of interest, a couple of years ago the Commission did a study of the 204 members of the party’s Central Committee, China’s third most important administrative body after the Politburo and the Politburo Standing Committee. The Commission found that 91 per cent of Central Committee members have relatives abroad. Then, perhaps as a comparison test on these results, the commission looked at its own members. It found that 88 per cent of its own staff have close relatives who have emigrated and acquired foreign citizenship.

Clearly, an extraordinary proportion of the senior echelons of the Chinese Communist Party has one foot out the door, having already moved a good deal of their wealth, much of it ill-gotten, to politically sunnier climes.

For those who look, it is easy to see why. China has become a grossly unequal society with most wealth in the hands of a tiny minority of people in and around the top echelons of the Communist Party. Indeed, the political and economic structure of China now looks very much like the old imperial dynastic system. No wonder the vastly wealthy Communist Party families that control the economy, with in many cases individual families having monopoly control of economic sectors, are called the Red Nobility.

These princely families are widely despised, and quite often some outlandish piece of boorish behaviour in public will lead to an outraged burst of unrest. But unrest is constant anyway. There are about 180,000 “mass incidents” a year in China, and the number has remained about the same for several years. These are defined as involving a violent protest by more than a thousand people and requiring the deployment of the People’s Armed Police or a riot squad. That’s an average of just under 500 riots a day. Translated into Canadian terms, that would be an average of 13 Stanley Cup riots across the country every day. No wonder China’s wealthy feel that the ground under their feet is unsteady.

There are several common causes for these daily riots. The most common is the theft of peasants’ land by local party and government officials in order to sell it to crony developers. The bribes flow in all directions, except to the peasants.

An increasing cause of unrest is the extraordinary environmental destruction of China, the run-off from its fast and furious economic development. Chinese government reports say that most of underground aquifers, which provide 70 per cent of China’s drinking water, are irredeemably polluted. The water in more than 75 per cent of Chinese rivers is unsuitable for drinking or fishing. And, incredibly, about 30 per cent of China’s rivers are too polluted for their waters to be used for agriculture or industry. Nearly 700 million people, over half the population, drink water contaminated with human or animal waste.

Air pollution in China has been well publicized. It is now so bad that foul air is directly responsible for the death of well over a million people a year.

For those who can, there is every reason to get out of China. And the perfect landing spot is somewhere where the people don’t ask too many questions and are easily manipulated through flattery.

Jonathan Manthorpe is a founding columnist with Facts and Opinions and is the author of the journal’s International Affairs column.

Manthorpe has been a foreign correspondent and international affairs columnist for nearly 40 years, most recently for The Vancouver Sun.

This article first appeared on Facts and Opinions (factsandopinions.com). See http://www.factsandopinions.com/galleries/opinion-columns/jonathan-manthorp-international-affairs/vancouver-not-mind-numbingly-boring-but-vacuously-vain/