Posted on October 26, 2012
by Becket Adams
Xi Jinping (center) and Li Keqiang (right) will become, respectively, the president and premier of China (AP)
BEIJING (TheBlaze/AP) — Chinese investors evaded government controls to move more than $600 billion out of their country last year and the outflow is increasing, fueling economic and political risks as communist leaders prepare for a handover of power, a Washington-based monitoring group says.
The study by Global Financial Integrity gives backing to anecdotal signs of huge, unreported movements of Chinese money out of the country. Experts say the outflows are driven by public frustration with a banking system that subsidizes state companies at the expense of savers and by businesses profiting from loopholes in the government’s pervasive economic controls.
Chinese companies are widely believed to move money abroad both to invest and to “round trip” back into the country disguised as foreign investment to win tax breaks and other incentives. Chinese families move money abroad to gain a better return than they can from state banks that pay low deposit rates.
Last year’s outflow was part of a $3.8 trillion flood of capital that left China over 11 years, Global Financial Integrity said. It said the amount rose from $172.6 billion in 2000 to $602.9 billion in 2011.
The group said it was unclear how much of the money came from corruption or other crimes but it said the illicit outflow could aggravate economic and political strains by aiding tax evasion and widening China’s sensitive wealth gap.