Oz property nightmare: Chinese capital controls

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The AFR reports today on another dodgy Chinese real estate deal Downunder:

The former chairman of a Chinese bank is being investigated for taking “huge bribes”, which allegedly funded the purchase of two Australian properties and enabled a transfer of $6 million to his wife in Sydney.

…Mr Li, who chaired the Guangdong Development Bank for ten years until 2009 before working as a senior official in the province’s finance department, has been accused of receiving illicit payments worth more than 50 million yuan ($10.9 million).

These were accepted in Hong Kong dollars, US dollars and yuan, allowing him to purchase six properties in Shenzhen, Guangzhou and Australia, according to a statement issued on January 20 by an anti-corruption unit linked to the Guangdong provincial government.

…The Communist Party regularly cites Australia as one of the three top destinations for corrupt Chinese money, along with the United States and Canada.

I see no end to the need to tighten capital controls in China. It will keep slowing and will need to keep easing monetary policy as well if it is to avoid a hard landing. This notion has now become so mainstream that the head of Japanese central bank overnight suggested that China should install capital controls now. Martin Wolf at the FT explains:

Needless to say, this outcome would be a shocker for Australia’s deeply corrupt real estate market. It is a risk that should not be discounted, not least because it most likely to arrive in the midst of global crisis.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.