Zhu Rongji, the premier, was furious after learning of the growing levels of capital flight from China via illegal transfers, money laundering and underground banks, the sources added.

Like other corruption cases in China, most of the criminals behind various forms of capital flight have turned out to be government officials or senior executives of China's state-owned enterprises.

According to the Chinese "Banyue" Magazine, an official publication, more than 4,000 people suspected of stealing state funds or using their position to solicit bribes have gone abroad, having absconded with more than 5 billion yuan (US$600 million).

Typically, the officials transfer money into accounts abroad opened either by branches of their company, business associates or overseas relatives.

"The usual way for a corrupt official to escape is to send the wife and children abroad first, transfer illegal assets out of China and then flee when the time is ripe," the article said.

In a bid to crack down on the abuses, last July the People's Bank of China, the central bank, set up a department to monitor the transfer of funds abroad and later another bureau to counter money laundering. All China's commercial banks have been ordered to set up systems to monitor suspected money laundering by January.

The capital flight problem coincides with a recent focus in Chinese official circles on another vexed issue -- rampant tax evasion and avoidance. Liu Xiaoqing, a prominent actress and also a business women once liked by many of her age peers, was arrested last month for dodging income tax.

Official figures on capital flight from China in recent years are not available, but a study by Peking University put the amount of money leaking through the country's supposedly closed - but infinitely porous - capital account at US$36.4 billion in 1997, US$38.6 billion in 1998 and US$23.8 billion in 1999.

One official said recent official estimates of capital flight in 2000 and 2001 showed an alarming increase over these numbers. Many Chinese officials have sent their children to study abroad, the United States especially, transferring money into accounts which their children opened there.

Some have even bought luxurious houses in North America, Australia and Europe, the magazine said. Given that their salaries are less than US$1,000 a month, it is hard to see how they can legitimately afford school and university fees.

But despite treaties with more than 40 countries around the world on the transfer and repatriation of criminals, Beijing finds it hard to ensure the return of suspected criminals to China.

For example, Xu Guojun, Yu Zhendong and Xu Chaofan - three men who embezzled US$483 million from a branch of the Bank of China in the southern province of Guangdong - are all still at large abroad.

(China Daily August 21, 2002)