• Thu
  • Dec 25, 2014
  • Updated: 3:52pm
BusinessBanking & Finance
FOREIGN EXCHANGE

How do rich Chinese elude foreign exchange laws to move their money abroad? Take your pick of ways

A number of methods exist to circumvent Chinese restrictions on individual foreign exchange, from the complex to the very simple

PUBLISHED : Thursday, 10 July, 2014, 11:55pm
UPDATED : Friday, 11 July, 2014, 1:43pm

Chinese law limits individual citizens to the equivalent of US$50,000 per year in foreign exchange, meaning that anyone who wants to spend more than that overseas must look for alternative ways to move money out.

For example, that amount would be far from enough to successfully acquire a US immigration green card through investment.

The United States, the top destination for Chinese emigrants, requires they invest US$1 million, or at least US$500,000 in a targeted employment area, according to the US Citizenship and Immigration Services.

In 2013, three-quarters of US investment immigration visas were issued to Chinese nationals, with 6,124 Chinese receiving US green cards through the scheme - almost eight times more than in 2010, according to the annual Report on Chinese International Migration 2014, published by the Centre for China and Globalisation. The report says the number of Chinese immigrants reached 9.34 million last year, and China is now the world's fourth-largest source country for migrants.

Besides the Bank of China's Youhuitong service, which has come under scrutiny after state media alleged it may be breaking foreign exchange laws, the following seven methods are used to transfer money overseas.

Family and friends

Split the transfer among as many identities as possible. With 20 people, it's easy to transfer US$1 million out of the country. This has been a popular way to avoid the restrictions. It is also low in cost. Many think it's the best method for transfers of less than US$1 million.

Underground money changers

A client transfers funds to the money changer's mainland account first. Then the money changer will remit the equivalent in foreign currency to the customer's overseas account. However, these underground money changers usually only do business with people they know. Immigration agencies may help introduce them.

Private banking

Banks on the mainland help their wealthy clients open overseas accounts within the same bank. After that, they can apply for loans overseas and get foreign currency. Usually this method requires deposits of between 6 million and 10 million yuan (HK$7.5 million to HK$12.6 million).

Trade

After setting up offshore companies, owners on the mainland can either use fake trade contracts to transfer money or they can report high import prices and low export prices to help money flow overseas.

Direct business investment

Company owners or board members can choose to invest in foreign companies. It's easy for them to transfer money out. State authorities have been encouraging private companies to expand overseas and have cut out many complicated procedures on foreign exchange.

Marriage

People who have married a foreign citizen can more easily transfer money out.

Travel with cash

For those who choose to take a large risk.

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This article is now closed to comments

newgalileo
Read in the press about the massive purchases of real estate in the USA, in the tens of billions USD. And many Chinese buyers pay in cash. And so on. How is this all possible? It would be easy for the Chinese authorities to know the buyers. What are they doing? Nothing. But if a common person wants to legally send out USD 60,000 for a good reason, forget it. Or if you are a foreigner living in Beijing and you need money for living expenses, say USD 20,000, FORGET IT. The system does not work, neither does the government. So, underground banking is the only way. Pretty rotten, isn't it?
recanter
They forgot to mention money laundering in Macau casinos...
pure88
I also dont know why nobody asks the question of how can the high end watch and jewelry market in HK be so HUGE? Aren't people who bring luxury items back into China supposed to pay a duty? Have you EVER seen anyone paying duty at Chinese borders? If they did legally pay, this would negate the lower purchase price in HK. I guess courier services are extremely busy delivering empty Rolex boxes back into China while the owners simply wear the items. Seriously...does anyone know what the tax is supposed to be?
lucifer
How about having a Mainland export company and invoicing your customers from Hong Kong or just telling them to remit the funds to an HK account.
rvto
Same question how can a mainland citizen buy real estate in Hong Kong.
HK_eh!
it used to be you can just carry the cash over from shenzhen to HK, as there was no limit like when you fly to other countries (ie, $10K USD).
then from an account in HK, you can send the money overseas (variety of ways as above).
now apparently, USA and China has agreed to hand over personal information on each other citizens. ie, USA wants to know what assets Americans are holding in China (global taxation), in return China wants to know who the Chinese are who is taking money to USA.
Think it's called the Foreign Accounts and Tax Complicance Act (FATCA), search it.
no way for the rich chinese to hide in the USA anymore.
John Adams
Indeed yes ! For the average PRC citizen ( or even foreign nationals working in China) the practical difficulties of remitting US$ or RMB abroad are so complex and time-consuming that the whole system encourages people in China to find "other methods"..
.
Crazy !
.
I recently had to help an English friend working as a teacher in BJ to remit US$5,000 (not even US$50 K ) out of China for holiday expenses in HK . The friend said it would have have taken him multiple trips to his Chinese bank branch and hours of queuing to have done it legally. So finally his mother wrote me a cheque from her UK bank account and I gave my friend equivalent HK$ cash in HK.
OC2S
The grey areas that so many people rely on are becoming very black and white ...
clc2
Keira Lu Huang has, correctly in my view, not used the word "laundering" in her story, which describes ways to evade Mainland currency controls.
"Laundering" of cash means using intermediate transactions to hide the origin of money gotten from criminal activity. Some of the transfers out of China may be of laundered money, but not all money made on the Mainland and transferred out comes from criminal activity.
Some of the activity may come from manufacturers trying to buy foreign machinery for their production lines. The government on the mainland wants its own companies to buy locally manufactured equipment and uses currency controls as one way ensure that.
Comrade Crunch
Easiest way is via prepaid debit cards issued under the China Union Pay branding mostly in the Philippines. They load 50-100K US into the card and walk out of the country with a mill in 10 pieces of plastic. This can easily be cashed in at pawn shops run by Chinese in the US or at casinos.

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