Chinese Government Clamps Down on Capital Flight
There seems to be an all out assault on restricting Chinese capital from flowing out of the country. In lieu of a sputtering Chinese economy citizens have been looking to get their money out of the Country by any means possible. Even if it means investing in a digital currency such as Bitcoin. The chart below shows Bitcoin hits a new three year high as the Chinese Yuan falls.
- Customers must pledge money won’t be used for overseas purchases of property, securities, life insurance or investment-type insurance. While such rules aren’t new, citizens previously didn’t have to sign such a pledge
- Customers must give a more detailed account of the planned use of funds, such as business travel, overseas study, family visits, medical treatment, merchandise trade or purchases of non-investment insurance policies, including the timing, by year and month
- Violators of foreign-exchange rules will be be added to the currency regulator’s watch list, denied foreign-exchange quota for three years and subjected to anti-money-laundering investigations
- Customers must confirm compliance with restrictions on money laundering, tax evasion and underground bank dealings
- Customers must now confirm they aren’t lending or borrowing quotas to or from other citizens
This comes after an estimated $762 billion USD flowed out of the country over the past 11 months in search of safe havens, such as Vancouver and Toronto real estate just to name a few. This announcement comes at a time when China’s foreign exchange reserves were depleted by $300 billion in 2016, applying serious pressure on Chinese banks.