Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

From Crypto to Offshore Accounts: Tactics Used to Get Cash Out of China

From Crypto to Offshore Accounts: Tactics Used to Get Cash Out of China

There’s barely a global asset that isn’t influenced by Chinese money, from the latest hot Hong Kong public offering to luxury apartments in Vancouver.

Technically though, most of these purchases are the result of loopholes exploited by Chinese citizens — or in some cases outright law-breaking. China’s capital control rules explicitly forbid citizens from using any of their $50,000 annual foreign exchange quota to directly purchase offshore property or securities, although indirect investment via some channels is permitted. There’s an official program for trading Hong Kong stocks, for instance, which crucially doesn’t include IPOs.

Depending on the severity of the breach and the amount of money involved, potential sanctions range from being denied future quotas to criminal conviction.

Despite the risks, finding a way around the regulations is something of a national pastime. For ordinary middle-class families exploiting loopholes is all about making money, while for the rich — spooked by China’s crackdown on Alibaba Group Holding Ltd. — it’s about protecting fortunes.

As the Chinese authorities periodically crack down on common techniques, exactly how funds are moved changes over time. Right now, it’s all about peer-to-peer and cryptocurrencies rather than cash in a suitcase.

“It’s got a lot harder than before, but people are still finding a way,” said Peter Cai, project director of Australia-China relations at the Lowy Institute. “The risks are manageable for most people because the rules haven’t been fully enforced by the Chinese authorities.”

Details are based on interviews with people who moved money offshore and those familiar with the practice, who declined to be quoted publicly or by full name due to the sensitivity of the topic.

1. Offshore Basics


A prerequisite to spending money abroad is an offshore bank account. This part is legal, if sometimes tricky.

Chinese banks set a high bar for opening a Hong Kong bank account onshore: China Minsheng Banking Corp., for example, asks its clients to deposit 300,000 yuan ($46,476) for three months. And Chinese banks tend to be stricter about checking what quota money is used for.

Those who spend significant time overseas — for example attending university — can qualify for accounts while out of the country. For those without that connection, players like Standard International Bank offer U.S. accounts opened online with no asset requirements. The drawback? The transaction costs for shifting money out are higher than using a Hong Kong bank account, said Zhu Yunpeng, head of securities and futures brokerage department at TF International Securities Group Ltd.

Once you have an offshore account, you can then wire in money up to your quota limit.

To buy into the latest hot Hong Kong public offering, it’s then just a matter of moving money into a brokerage account. Each individual step is legal, but taken together as a chain individuals are breaching their pledge on what they intend to use their forex for. Though that’s not putting people off — at one brokerage, mainland customers have driven a 10-fold surge in new account openings this year.

“Most of the people moving money outside the borders are to pursue higher investment returns,” said Hao Hong, chief strategist of Bocom International, highlighting in particular the rush to get in on overseas IPOs of superstar technology firms.

The risks: Chinese regulators have so far turned a blind eye to such practices and the forex regulator is mulling whether residents should be allowed to buy overseas stocks directly. The State Administration of Foreign Exchange didn’t immediately respond to a faxed request for comment. Still, if officials decide to crack down, violators could be added to the currency regulator’s watch list, denied foreign exchange quota for three years and subject to anti-money-laundering investigations.

2. Peer to Peer


If you want to avoid drawing attention to yourself with cross-border transfers — or move more than the $50,000 cap — another popular option is a “two-way exchange.”

Where there’s demand, there’s a business. Some Hong Kong-based insurance agents have turned themselves into underground money exchangers for those who need the local dollar, typically charging a fee, according to two insurance agents who declined to be named.

The risks: Apart from the risk of someone running off with your money, the biggest threat is a potential criminal penalty. Fraudulent buying and selling of foreign exchange or forex trading in a disguised form could lead to a criminal conviction, according to a document published by the Supreme People’s Court. It doesn’t give a detailed description of exactly what types of transaction fall into this category.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Polish MEP: “Dear Leftists - China is laughing at you, Russia is laughing, India is laughing”
Western Europe Records Hottest June on Record
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
China’s Central Bank Consults European Peers on Low-Rate Strategies
France Requests Airlines to Cut Flights at Paris Airports Amid Planned Air Traffic Controller Strike
Poland Implements Border Checks Amid Growing Migration Tensions
Emirates Airline Expands Market Share with New $20 Million Campaign
Amazon Reaches Milestone with Deployment of One Millionth Robot
Yulia Putintseva Calls for Spectator Ejection at Wimbledon Over Safety Concerns
House Oversight Committee Subpoenas Former Jill Biden Aide Amid Investigation into Alleged Concealment of President Biden's Cognitive Health
Amazon Reaches Major Automation Milestone with Over One Million Robots
Extreme Heat Wave Sweeps Across Europe, Hitting Record Temperatures
Meta Announces Formation of Ambitious AI Unit, Meta Superintelligence Labs
Robots Compete in Football Tournament in China Amid Injuries
China Unveils Miniature Insect-Like Surveillance Drone
Marc Marquez Claims Victory at Dutch Grand Prix Amidst Family Misfortune
Germany Votes to Suspend Family Reunification for Asylum Seekers
Budapest Pride Parade Draws 200,000 Participants Amid Government Ban
Southern Europe Experiences Extreme Heat
Xiaomi's YU7 SUV Launch Garners Record Pre-Orders Amid Market Challenges
Jeff Bezos and Lauren Sanchez's Lavish Wedding in Venice
Russia Launches Largest Air Assault on Ukraine Since Invasion
Massive Anti-Government Protests Erupt in Belgrade
Iran Executes Alleged Israeli Spies and Arrests Hundreds Amid Post-War Crackdown
Hungary's Prime Minister Criticizes NATO's Role in Ukraine
EU TO HUNGARY: LET THEM PRIDE OR PREP FOR SHADE. ORBÁN TO EU: STAY IN YOUR LANE AND FIX YOUR OWN MESS.
Hungarian Scientist to Conduct 30 Research Experiments on the International Space Station
NATO Members Agree to 5% Defense Spending Target by 2035
NATO Leaders Endorse Plan for Increased Defence Spending
U.S. Crude Oil Prices Drop Below $65 Amid Market Volatility
International Astronaut Team Launched to Space Station
Macron and Merz: Europe must arm itself in an unstable world
Germany and Italy Under Pressure to Repatriate $245bn of Gold from US Vaults
Iran Intensifies Crackdown on Alleged Mossad Operatives After Sabotage Claims
Trump Praises Iran’s ‘Very Weak’ Response After U.S. Strikes and Presses Israel to Pursue Peace
Oil Prices Set to Surge After US Strikes Iran
BA and Singapore Airlines Cancel Dubai Flights Amid Middle East Tensions
Trump Faces Backlash from MAGA Base Over Iran Strikes
Meta Bets $14 B on Alexandr Wang to Drive AI Ambitions
FedEx Founder Fred Smith, ‘Heart and Soul’ of the Company, Dies at 80
Chinese Factories Shift Away from U.S. Amid Trump‑Era Tariffs
Pimco Seizes Opportunity in Japan’s Dislocated Bond Market
Labubu Doll Drives Pop Mart to Status as China’s Most Valuable Toy Maker
Global Coal Demand Defies Paris Accord Goals
United States Conducts Precision Strikes on Iran’s Nuclear Sites
US strikes Iran nuclear sites, Trump says
Telegram Founder: I Will Leave My Fortune to Over 100 of My Children
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
×