In light of President Xi Jinping’s anti-corruption campaign, which has unveiled officials with all kinds of investments and holdings, China is unlikely to ease its restrictions on overseas investments by individuals in the near future, state media said.
Regulators worry that if the restriction were lifted, the outflow of domestic capital would offer opportunities for corrupt officials to launder their assets overseas, said China Economic Weekly, a financial magazine owned by Communist Party mouthpiece People’s Daily, quoting an unnamed source who it says is knowledgeable about the situation.
The National Development and Reform Commission, China’s top economic planner, said in a long report on its website two weeks ago that “the next step is to improve relevant regulations on utilisation of foreign capital and overseas investments, and allow individual investors to make overseas investments”.
Without elaborating when and how that will happen, the report lifted some hopes that the government will soon raise its limit on individual overseas investment. The current law limits foreign currency transfers by individuals to US$50,000 a year.
In a recent twist, state broadcaster China Central Television (CCTV) aired a programme in July, accusing the Bank of China (BOC) of helping rich clients transfer money abroad through one of its services, which violated the foreign exchange regulations.
Although BOC claimed the service was a legitimate pilot programme of which regulators were made aware, the allegation by CCTV against the country’s fourth-biggest lender struck a nerve, especially in a country where it is an open secret that corrupt officials move billions of US dollars gained from malfeasance to offshore accounts or use it to buy property.
Xi has said often that corruption will ruin the Communist Party’s control over the country, and that was the reason he launched a massive anti-graft campaign after moving into the presidency last year.
In another part of the widening anti-corruption campaign, China has stepped up its hunt for financial fugitives overseas – most of whom are corrupt officials and criminal suspects. At least 18 fugitives charged with major economic crimes have been returned home since the Ministry of Public Security launched a special operation late last month, Legal Daily reported.
Beijing has been pushing Chinese companies to venture abroad to diversify the investment of its foreign exchange reserves. The government also launched the Qualified Domestic Institutional Investor programme in 2006 to allow individuals to buy securities in overseas markets through asset managers and funds.
However, the programme falls far short of satisfying wealthy individuals on the mainland who are looking for high-return investment opportunities.
According to an annual report by the Boston Consulting Group, the number of millionaire households in China rose from 1.5 million in 2010 to 2.4 million last year. China passed Japan to become No 2 in the world, following the United States.