Yesterday’s Chinese trade data contined this rather amusing chart, from Tom Orlick at Bloomie:
Chinese capital flight sure ain’t stopped, it’s just bleeding out through bogus invoicing in the trade account not the capital account.
As some offset, Chinese authorities are again tightening on the latter, from SCMP:
Beijing will intensify its crackdown on the country’s underground banking system to stem illegal capital outflows, as part of its efforts to keep the financial sector in order.
State-level law-enforcement authorities and financial regulators are determined to root out illegal money transfers abroad that not only threaten China’s financial stability but also fuel criminal activities such as drug trafficking, terrorism and corruption, Zhang Shenghui, chief of inspection department at the State Administration of Foreign Exchange (SAFE), told state-owned Economic Information Daily.
Admitting that the regulator has been facing increasing pressure to control money outflows since the second half of last year amid yuan’s depreciation, Zhang said the SAFE would tighten loopholes with stronger supervision and data analysis.
His remarks came after a round of nationwide inspections that uncovered illegal deals worth more than 1 trillion yuan involving money transfers.
Li Youhuan, a professor at Guangdong Academy of Social Sciences who researches fund flows, said the amount is a drop in the bucket of illegal transactions through the underground banking system, and that it would take some time before the regulatory loopholes are fully plugged.
The SAFE, along with the central bank, the ministry of public security, the supreme court and the supreme procuratorate, waged a high-profile war against underground banks last year following a stock market rout and a one-off devaluation of the yuan.
Illegal capital outflows could cripple China’s financial system, spark social unrest and trigger a loss of confidence in the world’s second-largest economy.
Meng Qingfeng, a public security vice-minister, warned that the illegal transactions are also related to corruption as unscrupulous officials use underground banks to siphon their ill-gotten gains out of China.
They are of course welcome in Turnbull ‘s money-laundering Australia.
