How wealthy Chinese move hundreds of billions abroad to buy assetsCapital flight remains a concern for the authorities. But experts think the government has it under control, for now
China imposes strict capital control on residents, only allowing each individual to buy no more than US$50,000 in overseas assets annually.
“A widely used method is to fake invoices, such as overstating the value of imports,” he said.
For example, a Chinese company imports a machine and invoices it at US$1 million, while it’s actually worth US$500,000. The company pays the actual amount and puts the rest of the money in offshore bank accounts or invests it in other overseas assets.
For individuals who want to sneak out more than US$50,000 to buy overseas assets, such as a house in New York or Vancouver or Sydney, a popular way is to pool quotas of a group of family members or friends, with each person transferring US$50,000 out of the country.
The process is called “smurfing” in the banking industry, or “ants moving their house” in Chinese.
Another widely known method by individuals is to use underground private banks, which are popular in China’s southeastern provinces such as Guangdong.
A Chinese resident can deposit 1 million yuan in his account in a domestic private bank, and take out the same value of money in foreign currencies, such as Hong Kong dollar or US dollar, in the overseas branches of the bank as quickly as within hours.
Source: SCMP
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