People and Funds Surge Out of China

Chinese snapping up real estate in US, Canada, Australia, and UK
May 22, 2013 Updated: May 23, 2013

The number of Chinese purchasing property in Western countries and transferring their money out of China, both legally and illegally, has been significantly increasing since 2011.

An analyst in the financial industry says that currently there are four groups of people who transport assets overseas in order to avoid loss from social unrest in China: immigrants, investors, business owners, and celebrities. 

Still another group is “naked officials”—so called because they send their families to live abroad, leaving them alone in China—or corrupt officials who are transferring illegally obtained funds overseas in case they have to flee China in a hurry. 

Hot Real Estate 

Chinese buyers are heating up real estate markets around the world.

In the United States, the National Association of Realtors (NAR) released its annual report showing that in 2007 purchases of U.S. property by Chinese accounted for 5 percent of total international sales. 

However, by 2011, it jumped to 11 percent, and Chinese (including Hong Kong buyers) spent a total of US$9 billion on real estate purchases. China thus became the second-largest overseas buyer of real estate in the United States for the second consecutive year. 

From 2010 to 2011, Chinese buyers invested 4.09 billion Australian dollars (US$4 billion) in the Australian real estate market to become Australia’s second-largest overseas buyer.

Colliers International, a real estate consulting firm, released a report in early 2012 showing that over the past 20 years, there was an upward trend in Chinese investors purchasing real estate in Canada. The proportion of Chinese buyers in Vancouver, Canada, rose from 29 percent in 2011 to more than 40 percent in 2012. 

In June 2011, according to a survey by Knight Frank, a real estate brokerage firm in the U.K., Chinese buyers spent 120 million pounds (US$182 million) on real estate purchases in London.

Meanwhile, the International Talent Blue Book’s “China International Migration Report (2012)” disclosed that China is currently experiencing a third wave of immigration. In 2011, China had more than 150,000 people permanently emigrate to several of the world’s major countries.

Underground Banks Booming

According to a report by China Economic Weekly, in the city center of Shenzhen, in southern China, many shops, fronting as education agents, operate underground banks. 

These banks allow transferred funds to be wired to an account within the territory. Afterward, the underground banks deposit the equivalent in foreign currency in the overseas account opened for the customer. 

Generally, they will operate a number of accounts simultaneously to avoid detection. The banks charge a handling fee of 0.8 to 1.5 percent in accordance with the volume of transactions. 

Money is also laundered through offshore casinos, and bankcards and cash are successfully transferred overseas, bypassing China’s State Administration of Foreign Exchange (SAFE). 

A branch president of the China Construction Bank told a reporter from The Epoch Times, “China’s economy is in a bad situation, and lots of legal and illegal funds are being sent overseas. We have lots of money in circulation every day. There is an obvious problem, judging from the flow of the funds, and the abnormality can also be seen from the amount of money and turnover period.”

Import and Export Trade

Chinese trading companies have devised a way to increase their profits in overseas accounts by collaborating with overseas companies. The Chinese companies are reporting higher import prices and lower export prices, enabling them to keep large profits in overseas accounts. 

This phenomenon is already being reflected in public trade data. According to the official customs statistics, in the first quarter of this year, exports from mainland China to Hong Kong totaled US$105.6 billion, which is a year-on-year increase of 74.2 percent. 

People in the industry say it is unusual for first quarter exports to increase so drastically and far exceed the import prices. Zhu Haibin, JP Morgan’s chief China economist, told China Economic Weekly, that their analysts “do not rule out the possibility that capital and profits are being transferred overseas through exports to Hong Kong.”

In addition, analysts believe that in 2011, the Chinese regime approved 10 times more overseas investments, increasing the amount of transferred funds as well. 

Translation by Irene Luo. Research by Sunny Chao. Written in English by Arleen Richards.

Read the original Chinese article.