For years, the Chinese people and government have been at odds with foreign currencies. Therefore, Chinese people are trying to transfer as much of their yuan as possible into foreign currencies to keep the value of their wealth.
According to the Chinese government, banks and financial institutions in China have to report all domestic and overseas cash transactions of 50,000 yuan (about 7,600 dollars) since July 2017. The threshold was previously set at 200,000 yuan (30,500 dollars). Any overseas transfers by individuals of 10,000 dollars or more will also be reported.
The South China Morning Post (SCMP) reported a story about Guo Lili, a middle-class Chinese investor.
Guo is prohibited from sending money abroad to purchase property as a Chinese national. But, like other individual Chinese investors, she could find ways to invest overseas when the Beijing government tried to control the money outflows from China.
As a part of her long-term vision, Guo sees the property as a solid investment. So she decided to buy a property in Thailand’s capital.
According to SCMP, it is a safe place for Guo to secure her money.
Last October, Chinese national media reported the first unlawful foreign cash exchange case utilizing game point cards. The total amount involved is more than 4 billion dollars. The value of unredeemed game point cards seized by Chinese police amounts to 310,000 dollars.
The case involves over 20 people and three different online exchange platforms. They collaborate with overseas operators to provide foreign exchange services through gaming point cards and work with domestic card dealers to facilitate the business.
The partnership creates an industrial chain with numerous links, including management, sales, point-card, and receiving groups. As reported, this system has been working smoothly for six years.
Regarding the crackdown on underground banks, the State Administration of Foreign Exchange (SAFE) disclosed 10 cases of penalties on October 29.
Among the ten, there are two enterprises and eight individuals. The highest penalty imposed was 5.38 million yuan (820,000 dollars) on an individual named Zheng.
He was charged with 32 illegal foreign exchange transactions through underground banks, despite strict rules from the government. His investments totaled 7.47 million dollars.
Beijing has recently added more scrutiny to the regulations. Since March 1, users have had to report the sources and purposes if the transaction exceeds 50,000 yuan (about 7,600 dollars).
However, the Chinese people’s efforts to relocate their assets abroad have never stopped despite the stiff regulations on foreign exchange transactions.
According to a Chinese national media outlet, Chinese people are using other ways to transfer their assets overseas.
Some people use all their friends and relatives to go to the bank to exchange foreign currency. They call it the “ant’s moving.”
What are some of the reasons for the Chinese to move their assets?
According to SCMP, capital outflows are a necessary aspect of international trade. Too much money going overseas can add up from ordinary transactions and affect an economy.
CNBC reported on March 29 that wealthy Chinese are transferring their money to Singapore. These people are worried about keeping their money in mainland China.
In addition, some see Singapore as a safe haven.
According to CNBC, Beijing’s crackdown is one of the reasons.
The trend began in 2021, after Beijing’s surprise crackdown on the education industry. The Chinese government emphasized “shared prosperity,” moderate wealth for all, not just a few.
Iris Xu, CEO of JENGA, said, “[Wealthy Chinese] believe there are plenty of opportunities to make a fortune in China, but they are not sure whether it is safe for them to park money there.”
China’s nationals do not just seek illegal ways to transfer money out of their home country. They also try illegal methods to bring cash to the host country.
According to the Rule of Law Foundation, the federal prosecutor’s office in Los Angeles on February 7 filed a civil complaint to the U.S. Central District Court of California seeking to forfeit 754 Bank of America (BofA) accounts from Chinese nationals, potentially worth tens of millions of dollars.
The court documents show that since 2019, many Chinese citizens who are not in the United States have purchased “U.S. bank offshore account opening” services through platforms such as Taobao and WeChat to conduct banking business. Most defendants were suspected of opening multiple bank accounts using illegal channels.
Four former employees of Bank of America in Southern California, most of whom were Chinese-born, were involved in the incident.
Now, as China’s economy faces difficulties with key sectors struggling, investors consider moving their money out of the country.
Beijing has witnessed an outflow of foreign wealth as international enterprises exit the country. They take the money they had previously deposited in Chinese banks with them.
Recently, an increasing number of multinational firms have withdrawn from China.
In March and April, the Financial Times reported a foreign capital outflow of 193 billion yuan (about 29 billion dollars). Meanwhile, according to Reuters, foreign investors have sold a net $1.01 billion worth of Chinese equities this month via Hong Kong’s stock-connect program, following a $7.1 billion selling in March.