The stock market is crumbing, the value of the yuan is slipping and Chinese are scrambling to move their hard-earned savings overseas.
For those transferring USD50,000 or less, the task is easy – Chinese hukou-holders can head to any licensed bank and exchange a wad of renminbi for foreign currency to send abroad. But the annual limit (per person) is capped at USD50 grand – well below the amount most Chinese hope to sneak out of the mainland, especially in an unsettling economic climate.
Enter the suave ranks of China’s middlemen – convenience store managers by day and currency exchange bosses by night. Well-versed in the fine print of China’s financial system, these guys funnel thousands of Mao notes through regulatory loopholes before dawn. There is no official data on the magnitude of covert transfers, but central-bank officials estimate underground banks handle about RMB800 billion (USD125 billion) annually, according to a recent Wall Street Journal article. And this year, given China’s economic upheaval, that number is significantly higher.
Desperate customers range from Chinese officials looking to hide monetary gains to families investing in property where their children are studying abroad. A few rely on relatives and friends to carry cash on trips overseas. Others set up US companies to mask money transfers as overpayments for imports.
As for expats? We’re sure you’ve found plenty of entertaining ways to transform that stack of pink slips into a solid account balance back home. Rules surrounding foreign currency exchange are strict in China, but even stricter for laowai. Without any documentation, the most a foreigner can exchange per day is $500. There are other (more tedious) avenues, of course, including submitting work permits to transfer larger sums or utilizing foreign investment companies.
For now, China is as determined as ever to limit cash outflow and ensure interest-rate cuts stimulate growth. So prepare those work documents or try your luck with an underground middleman – capital controls are here to stay.
[Image via China Daily/Reuters]