China: How to move your money out illegally

China is no longer poor. Actually let me rephrase that – there are still parts of the country that are poor and some of her people struggle to get by daily however on a bigger scale, China is no longer that war-torn poor nation recovering from both civil and foreign occupation. As China opened up, Communist China became ever more so Capitalist.

The current situation is that the rich are super rich. New millionaires pop up like daisies, the middle class get by with life and dreams of a richer life while the poor remains poor. For many rich Chinese, they are finding ways to move part of their assets overseas or in many cases, they move their entire family overseas. This movement is legal though since many Chinese have already migrated successfully. Before we take a look at this legal movement, here are some ways to xiqian ( Chinese for “Washing your Money”) or money laundering[moving your money/assets out of the country (sometimes) illegally].

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Fat corrupt official (TAKEN FROM INTERNET)
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Illegal money laundering by corrupted officials : buying properties, making investments and sending their kids overseas (TAKEN FROM INTERNET)

How are people getting their money out? * China faces huge corruption issues so no surprise that restrictions are put in place to stop illegal money laundering. ( All corrupt officials must be dealt with harshly!)

“These capital control laws say any individual can move only $50,000 out of China each year”

 

“An estimated $1.08 trillion in illicit capital flowed out of China between 2002 and 2011, according to Global Financial Integrity, a U.S.-based advocacy group” (http://www.gfintegrity.org/report/2013-global-report-illicit-financial-flows-from-developing-countries-2002-2011/)

Here we go:

  1. The dumb but safe +involve your friends and relatives way: Take money/traveller’s cheque with you out of the country every time you leave the country for personal travels etc, ask friends and relatives to do the same to slowly move your money out. Some take out RMB, some change it into other currency (NOTE: You are only allowed to change 3000 rmb into foreign currency per day) some declare it and some don’t to take out more
  2. The using your kid way: Send your child overseas for study, pay for expensive tuition and move money out that way might as well buy a property for your kid (Combo with the Property way)
  3. The Macau way: Visit Macau casinos which is separate from the Mainland where you can exchange gambling chips for foreign currency in Macau casinos. There is a loophole in the regulation which means sometimes money launderers do get by. So what do you do and how do you do it? Find a middle man ( Someone approached me in 2013 asking if I need help to be shown around the casinos, they offer all kinds of services one is to help me buy chips and show me what gambling event to participate in) http://www.mp.gov.mo/ebook_pdf/bdmp12/bdmp12-p42-47.pdf Macau government recognize that gambling is the easiest way for people (mostly mainlanders to move out their money)
  1. The Macau way 2: Go to currency exchange stores and jewelry stores (Chow Tai Fook store told me in 2013 that there is no limit, you can buy whatever you want) and you can spend money/swap/exchange with no limit. Go shopping and use your debit cards to buy the most expensive things such as luxury goods, jewelry etc, money exchange more tradable, buy something exchange it for cash and pay a fee to the person who help you with transaction. Hop on board a high-end travel company/tour agent who arranges everything for you especially casino credit, borrow money from these operators to fund gambling, go to casinos and pick up the ‘dead’ chips, you can’t trade it hence why it is dead- you can play with it and then you are paid in cashable chips for currency exchange INSIDE the casino ( Chinese authorities can’t trace it)
  1. The property/land way (Investment): Buy property, find an agent to buy property anywhere and then move money into account using renminbi to pay someone abroad for something,” http://www.realtor.org/reports/profile-of-international-home-buying-activity

Over the 12 months ended March 2014, buyers from China purchased U.S. properties estimated at $22 billion in total value, approximately a quarter of total international sales. Approximately 51 percent of reported purchases by Chinese buyers were in California, Washington, and New York. All cash 76% type of financing by Chinese purchasing

  1. The pay RMB way: Whatever you are thinking of buying or investing or paying suppliers, use and pay RMB (no rule that says you can’t pay someone overseas in RMB). A asks friend B to send an invoice for say computers/goods/service fee etc then send them money to pay for that while B put it in a bank account for you (NOTE, this is just like the Invoice way except this is transferred at a personal level)
  2. The underground way: use underground money transfer agency and/or underground banks
  3. The invoice way: Use fake invoices write anything from transaction fees, consultancy fee, investment fee to move money
  4. The charity way: Use charity/foundation to move money through ‘donation and charity’
  5. The advantageous artistic way (Investment): Art prices are fuzzy, not easy to spot fakes, can’t say to someone “ You overpaid for the artwork”, most payment settled in cash hence doesn’t leave behind a paper trail. So, buy paintings, sculptures, artworks, antiques, pricey wine then sell them outside of China. The profits will be in whatever foreign currency you want it in then put it in the bank OR pay someone to buy it for you for an inflated price then transfer the cash into an offshore bank account that someone you trust help to establish.
  6. The disguise way: Never mind it is your own personal finances, just say that it is for some business and recruit a few buddies to help you transfer amounts over a course of time.
  7. The tit-for-tat way: A give deals to land, business licenses and contracts to B and B gives bank deposit rights and cash exchanges to A when they arrive say in HK or Macau etc
  8. The official PBOC Youhuitong way: SUSPENDED ? While Bank of China didn’t provide figures, the 21st Century Business Herald estimated the lender has moved about 20 billion yuan ($3.2 billion) abroad through Youhuitong, citing people with knowledge of the trial program. “Many commercial banks” in Guangdong offer a similar service, Bank of China said in its statement, without naming them. Some reports said that Youhuitong has been suspended while the PBOC and its anti-money laundering bureau request records of all previous transactions, according to a person familiar with the product, who asked not to be identified because he wasn’t authorized to speak publicly. However, PBOC STATEMENT also said that Youhuitong is a financial service/product and legal thus it will not be suspended.Transfer approval for Youhuitong customers usually takes several weeks to a month, the person said. They need to provide documents showing how the money to be transferred was obtained, such as tax-payment receipts and proof of income, as well as a property-purchase agreement or proof of emigration, he said. Youhuitong customers would typically deposit yuan with Bank of China at least two weeks before the transfer, the person said. Once approved, the customer and the bank agree on an exchange rate before the funds are moved to an overseas account designated by the customer, he said. Money destined for real estate would go directly to the property seller’s account to ensure the cash won’t be misused, he said.

    Newton Oriental Fund manager Caroline Keen said: “The Chinese government’s incentive behind the scheme is to open the renminbi (RMB) up as an international investment currency. It will also give international investors access to 580 new stocks which they could not previously access unless they were a qualified investor.”

What is the latest on the government’s pilot schemes to ease capital controls and allow money to flow more freely?

Hong Kong-Shanghai Stock Connect trading scheme aims to broaden investor access to the Chinese market… dubbed the ‘through-train’, is designed to enhance foreign access to China’s Shanghai A-share market and will also allow some mainland Chinese investors to access Hong Kong’s H-share market. Development of the facility is the latest step in the ongoing liberalisation of the Chinese capital market and the scheme is expected to launch this October after a series of pilot tests. The Shanghai free-trade zone will conduct “stress tests” on the impact of increased cross-border fund flows, a financial official said on Friday, in a possible prelude to further loosening of China’s strict capital controls. (I have doubts over the success of the Shanghai free-trade zone since the long-time rivalry between Beijing and Shanghai meant that many policymakers in Shanghai will not go ahead and cooperate with Beijing that easily. So far, the People’s Bank of China has signed bilateral currency swap agreements with 24 governments worth Rmb2.57 trillion, amounting to about 10% of China’s total import-export value in 2013, according to Tang. More offshore renminbi clearing and settlement centres are developing too: most recently agreements with London and Frankfurt. China is now in discussions with Paris. However, no agreements have yet been inked in North America, which is a prerequisite for a 24-hour renminbi global clearing and settlement network necessary for companies to seamlessly hedge their currency risk.

Ok, we get it. Chinese are richer than before. The government is controlling outgoing assets and people are leaving but who are they? how many? reasons?

Wealthy Chinese are the main group with the rest being middle-class/noveau rich/white-collar workers and international students. Why? Public services, environmental degradation, food safety, financial security and education.                                                                 Where are they from? Most applications from Beijing, Shanghai, Guangdong but also second-tier cities such as Dalian, Qingdao, Zhejiang, Jiangsu and Chongqing.

 How many people with money are leaving China?

“Those who possess over 100 million RMB, 27 percent have already emigrated, another 47 percent are considering”

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2012 Statistics: 12% management /11% admin /9% doctors,engineers and lawyers/ 9% sales/ 8% technology. Since 1978, more than 4.5 million have left China. China is currently going through a “Third Wave of Immigration”.

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“10 percent of the wealthiest have decided to leave the country” while another 10 percent “have plans of doing so, and the rest are still considering it….. “among those mainland business owners who possess more than 100 million yuan ($16.3 million), 27 percent have already emigrated, while another 47 percent are considering leaving.”

The best report to have a better understanding of this phenomenal is http://up.hurun.net/Hufiles/201406/20140605230513490.pdf

This report is based on a survey of 141 Chinese (HNWIs) currently in the process of emigration or considering emigrating. Respondents had family wealth of no less than 6 million CNY (US$1 million), with an average wealth 42 million CNY (US$7 million). 6% had wealth exceeding 100 million CNY (US$15 million). The survey was carried out in March and April 2014, with 60% of respondents from Tier 1 cities in China (Beijing, Shanghai, Guangzhou and Shenzhen). The average age was 41, 57% were male.

# 64% of China’s rich—defined as those with assets of more than $1.6 million—are either emigrating or planning to.

#66% of those who have emigrated, are applying or are thinking of doing so, would consider giving up their Chinese nationality to get a passport of the country they move to.

And another article from my company on millionaires  http://www.cnbc.com/id/101531767

So what is a legal way to move your assets?

Visa program and schemes from investment immigration (most popular and relatively easy for wealthy Chinese) to skilled immigration ( complicating since you need to fit into criteria) /to study ( can be both easy and difficult for students- situation may be affected by changing policies and job prospects)

Europe, US, UK, Canada,Australia, NZ are top popular destinations

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Because of too many applications, in 2010 Canadian policy in investment emigration was revised eight times, America twice, Australia and Singapore once. The bar was raised. Canada raised the original personal asset of 800000 Canadian dollars to 1.6 million/ and investment from 400000 Canadian dollars to 800000. Australia increased the amount for the spouse of the applicants to emigrate from 250,000 Australian dollars to 500,000 Australian dollars. Singapore increased from 1.5 million Singapore dollars to 2.5 million yuan.

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LAST WORDS: Oh dear China, you are constantly facing problems. I commend President Xi Jinping for his fight against corruption. I love China’s anti-corruption campaign “Sky Net” and “Fox Hunt”.  Yes, fat cats and corrupted officials, no matter where you go off in the world – you will be punished!

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