Heat from CCTV exposé unlikely to hit mainland cash outflows | South China Morning Post
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  • Mar 3, 2015
  • Updated: 11:52am

Bank of China

Bank of China is one of the big four state-owned commercial banks of the People's Republic of China – the other three are Industrial and Commercial Bank of China, China Construction Bank and Agricultural Bank of China. Bank of China was founded in 1912 to replace the Government Bank of Imperial China, and is the oldest bank in China. From its establishment until 1942, it issued banknotes on behalf of the Government of the Republic of China along with the "Big Four" banks of the period: the Central Bank of China, Farmers Bank of China and Bank of Communications. Although it initially functioned as the Chinese central bank, in 1928 the Central Bank of China replaced it in that role. Subsequently, BOC became a purely commercial bank.

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Heat from CCTV exposé unlikely to hit mainland cash outflows

Transfers under BOC scheme make up only a fraction of capital flight, analysts say

PUBLISHED : Wednesday, 16 July, 2014, 1:15am
UPDATED : Wednesday, 16 July, 2014, 1:15am

Overseas investment flows from the mainland are likely to suffer only a minor setback in the wake of a scandal that has embroiled one of its biggest banks in a row over alleged breaches of strict foreign exchange controls.

A Bank of China official who asked not to be named told the South China Morning Post the State Administration of Foreign Exchange had temporarily shut down the bank's Youhuitong service just days after state broadcaster China Central Television accused the bank of using the service for money laundering. SAFE declined to comment.

But the billions of yuan funnelled so far this year through the service, which BOC said was launched under the auspices of the authorities such as SAFE in 2011 to help better manage foreign exchange flows, are only a fraction of either major cross-border commercial deals in the first half of the year or private sector property purchases.

Analysts say a clampdown on the scheme following the CCTV exposé will barely be noticed given the scale of capital seeking to leave the mainland.

Thomas Lam, a senior director and head of valuation and consultancy at Knight Frank, said he did not expect a halt to the exchange service to stop mainlanders from buying property overseas.

"For years, China has imposed foreign exchange restrictions but Chinese purchases of overseas properties keep increasing," Lam said. "There are so many channels to transfer money."

A Hong Kong immigration consultant said BOC's network of overseas branches helped it succeed in moving large amounts of money abroad. Still, the exchange service was just one of many ways individuals sent money abroad.

Many banks did not require clients to exchange money at all, the consultant said. Banks simply debited clients' mainland accounts and credited their accounts in places such as Hong Kong, making the transactions hard to track.

"Youhuitong was Bank of China's wealth management plan," the consultant said. "But many other banks have plans just like this."

Industry and regulatory officials said it would take at least several months for SAFE to lift a "temporary" ban on the plan.

Additional reporting by Don Weinland

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