Topic: China Busts a $3 Billion Underground Bank as It Tightens Its Grip on Money (Read 264 times)
November 29, 2017, 07:33:38 AM
China has always been competitive in terms of economic growth, so, it is only anticipated that whatever could harm that progress would receive a tighter resolution to resolve the problem.
November 26, 2017, 02:13:03 AM
As I am reading that news, it is indeed true that capital control is one of the many reasons why China decided to ban the held of ICOs within the country's jurisdiction and why it also later on ban the operation of Bitcoin exchanges as it would have been difficult for the government to stop outflows of funds once they are already in the form of cryptocurrency. The government wants to maintain a strong grip on money and it is demanding to know how the money is spent. This and more can be the ground why we should not anymore welcome China to Bitcoin and cryptocurrency as its government is known to be control freak.
Obviously and it was stated back then that the way cryptocurrency trading platforms were going about things without proper license is totally against their monetary policies. Honestly, I would not blame them. Looking at the rate at which money can be siphoned out of the country with the help of the exchanges, and then it is something that was worth looking at.China never had any intention of attacking bitcoin, but they just could not trust the activities of some people surrounding bitcoin which was why they had to implement those policies.
Whales were just the ones that used it as a means to cause FUD. China has always been a control freak and there are better ways they could have done things, but I feel they are just trying to wipe the country clean since it has had bad record of corrupt practices in the past.
November 24, 2017, 04:27:18 PM
I only see this a good opportunity to start a short position on the forex market agains their fiat. I am sure that i can make a few hundreds from this chaos 
But i dont understand why they are still behind all those institutions that are still trading or having some kind of relationships with cryptocurrencies or initial coin offerings, this is a little bit annoying.
When they would stop doing all this chaos? I think that they need to stop, why are they trying to do the impossible in order to catch up all those who are using cryptos?
It is insane, what a horrible government.
But i dont understand why they are still behind all those institutions that are still trading or having some kind of relationships with cryptocurrencies or initial coin offerings, this is a little bit annoying.
When they would stop doing all this chaos? I think that they need to stop, why are they trying to do the impossible in order to catch up all those who are using cryptos?
It is insane, what a horrible government.
November 24, 2017, 04:23:01 PM
The article writer is a little hypocrite here. When it's about our own countries that's fine to do this but when it's about China it's not fine.
It's a common practice that is running for years and years under different schemes and improvement with time passing.
As the Ministry said, these banks are illegal but common in China. In other countries they use subdivision located in taxes paradises like Cayman, Man island, Aruba, Panama etc. but it is the same system used
If a Chinese really want to send his funds outside his country he can still f
do it without any underground bank, so setting z limit is going to help at all, other than developing another system
It's a common practice that is running for years and years under different schemes and improvement with time passing.
As the Ministry said, these banks are illegal but common in China. In other countries they use subdivision located in taxes paradises like Cayman, Man island, Aruba, Panama etc. but it is the same system used
If a Chinese really want to send his funds outside his country he can still f
do it without any underground bank, so setting z limit is going to help at all, other than developing another system
November 24, 2017, 02:42:58 PM
I don`t think that the US government or FED has the goal to keep thrillions of US dollars outside the USA,this would be stupid.
....
Yes, that would appear to be the goal of the US gov and the Fed. Thanks for summarizing it perfectly.
The united states has the highest corporate taxes in the world which encourages the wealthy to invest in every country other than the USA.
There's a counter intuitive principle fundamental to income taxes. Sometimes, tax revenues can be increased with tax cuts. Unfairly high tax rates encourage tax evasion and the use of tax shelters. Cutting the corporate tax rate has potential to increase tax revenues as more wealthy parties would bring their money inside the united states to invest in its economy.
America's high corporate taxes keep money outside its borders and discourage investment. The polar opposite to china's low corporate tax rates and policies designed to keep money inside its borders from leaving.
November 24, 2017, 04:23:27 AM
As I am reading that news, it is indeed true that capital control is one of the many reasons why China decided to ban the held of ICOs within the country's jurisdiction and why it also later on ban the operation of Bitcoin exchanges as it would have been difficult for the government to stop outflows of funds once they are already in the form of cryptocurrency. The government wants to maintain a strong grip on money and it is demanding to know how the money is spent. This and more can be the ground why we should not anymore welcome China to Bitcoin and cryptocurrency as its government is known to be control freak.
November 24, 2017, 02:33:40 AM
The US high corporate taxes are fair,because most of the huge global corporations are created in the USA and they have huge profits.I don`t think that the US government or FED has the goal to keep thrillions of US dollars outside the USA,this would be stupid.Anyway,i don`t find anything common between China`s underground banks and cryptocurrency exchange platforms.The main goal of the crypto-platforms was to trade cryptos,not to export fiat currency outside China.
November 24, 2017, 12:43:25 AM
Quote
BEIJING — The money came from all over China — its wealthy southern and eastern coasts as well as the arid northwest — as thousands of people scrambled to circumvent the country’s strict controls on wealth.
In the end, more than 10,000 people had used an underground bank to effectively funnel $3 billion out of the country before the authorities put a stop to it, Xinhua, China’s state-run news agency, reported on Thursday.
The discovery of the underground bank in Shaoguan, in the southern province of Guangdong, demonstrates the furtive lengths that Chinese citizens go to in order to skirt government limits and get more of their money out of the country.
The sums involved are enormous, large enough to not only affect China’s economy but resonate around the world. Two years ago, a loss of confidence in China’s outlook led many of its people to send their money abroad — a flow that helped drive a $1 trillion drop in China’s stash of surplus foreign money. The exodus was enough to darken the country’s long-held image as a major global economic growth engine.
China appears to have since stemmed the surge of money abroad, thanks to an improved economic outlook and tough new efforts to keep the money at home. But the underground bank bust announced Thursday showed the lengths that the authorities will pursue to enforce limits on money leaving the country.
The Chinese police have detained seven people believed to be involved in the bank, according to the Thursday reports. The authorities discovered 148 “illegal and fraudulent accounts” from the bank, involving more than 10,000 people, the Xinhua report said.
Underground banks are illegal but common in China. According to China’s Ministry of Public Security, underground banks handled more than $137 billion in transactions last year. There are also lawful ways of moving princely sums out of China without surpassing government limits: directing money to casinos in Macau — the only Chinese territory where gambling is legal — as well as using credit cards to buy luxury goods abroad and purchasing insurance policies that can be cashed out overseas.
China imposes strict limits on how much money can leave the country. Those limits help the government keep a firm hand on the value of its currency, and the Chinese authorities credit the limits with helping keep its financial system steady during emergencies like the 1997 Asian financial crisis and the global crisis that began in 2008.
The government sets a $50,000 limit on the money Chinese citizens can move out of the country in a year, though businesses and those making strategic investments can send out much more.
But growing numbers of people began dodging the limits two years ago, when a stock market crash, a surprise government-led currency devaluation and prospects of slowing economic growth led many to seek safer havens for their money.
President Xi Jinping has made it a top priority to keep more money in China. His government has shut down platforms that trade cryptocurrencies; announced controls on outbound investment in property, entertainment and soccer; and imposed curbs on payments overseas.
Much of China’s underground banking activity is centered in cities that border Hong Kong and Macau, special administrative regions of China that are governed by their own laws.
In Shaoguan, the police were alerted to a suspicious bank account that was opened in 2011 in the city by a Mr. Zhong, a resident from the southern city of Zhuhai that borders Macau, according to Guangzhou Daily, an official newspaper. It did not further identify Mr. Zhong. After almost no activity for years, there were 121 transactions involving $15 million in 2016, prompting the authorities to look more closely at who was involved.
Ultimately, the Xinhua report said, the authorities discovered that the people running the underground bank had illegally bought and stole the identity documents of more than 200 people to open the fake accounts that underpinned the enterprise. News reports did not disclose detailed information about how the underground bank worked.
The Shaoguan government and the police did not respond to requests for comment.
The trail appeared to lead to Macau, according to the news reports. The suspicious bank account that prompted the investigation was opened specifically for a gambler in Macau called Mr. Peng to transfer money, Xinhua said. “Several members of the criminal gang” then converted the renminbi into Hong Kong dollars for Mr. Peng, according to the report. Hong Kong has its own currency, which tracks the value of the United States dollar.
The Xinhua report did not offer details about Mr. Peng.
Macau is under pressure to keep a tight rein on capital outflows. Most recently, it installed automated teller machines with facial recognition software to monitor transactions for people using Chinese bank cards, according to Macau Daily Times.
The Xinhua report acknowledged that underground banks are “seductive,” especially for people who struggle to get financing, but warned that “the people will suffer tremendous loss” if the banks abscond or cheat their clients.
https://www.nytimes.com/2017/11/23/business/china-underground-bank-3-billion.html
In the end, more than 10,000 people had used an underground bank to effectively funnel $3 billion out of the country before the authorities put a stop to it, Xinhua, China’s state-run news agency, reported on Thursday.
The discovery of the underground bank in Shaoguan, in the southern province of Guangdong, demonstrates the furtive lengths that Chinese citizens go to in order to skirt government limits and get more of their money out of the country.
The sums involved are enormous, large enough to not only affect China’s economy but resonate around the world. Two years ago, a loss of confidence in China’s outlook led many of its people to send their money abroad — a flow that helped drive a $1 trillion drop in China’s stash of surplus foreign money. The exodus was enough to darken the country’s long-held image as a major global economic growth engine.
China appears to have since stemmed the surge of money abroad, thanks to an improved economic outlook and tough new efforts to keep the money at home. But the underground bank bust announced Thursday showed the lengths that the authorities will pursue to enforce limits on money leaving the country.
The Chinese police have detained seven people believed to be involved in the bank, according to the Thursday reports. The authorities discovered 148 “illegal and fraudulent accounts” from the bank, involving more than 10,000 people, the Xinhua report said.
Underground banks are illegal but common in China. According to China’s Ministry of Public Security, underground banks handled more than $137 billion in transactions last year. There are also lawful ways of moving princely sums out of China without surpassing government limits: directing money to casinos in Macau — the only Chinese territory where gambling is legal — as well as using credit cards to buy luxury goods abroad and purchasing insurance policies that can be cashed out overseas.
China imposes strict limits on how much money can leave the country. Those limits help the government keep a firm hand on the value of its currency, and the Chinese authorities credit the limits with helping keep its financial system steady during emergencies like the 1997 Asian financial crisis and the global crisis that began in 2008.
The government sets a $50,000 limit on the money Chinese citizens can move out of the country in a year, though businesses and those making strategic investments can send out much more.
But growing numbers of people began dodging the limits two years ago, when a stock market crash, a surprise government-led currency devaluation and prospects of slowing economic growth led many to seek safer havens for their money.
President Xi Jinping has made it a top priority to keep more money in China. His government has shut down platforms that trade cryptocurrencies; announced controls on outbound investment in property, entertainment and soccer; and imposed curbs on payments overseas.
Much of China’s underground banking activity is centered in cities that border Hong Kong and Macau, special administrative regions of China that are governed by their own laws.
In Shaoguan, the police were alerted to a suspicious bank account that was opened in 2011 in the city by a Mr. Zhong, a resident from the southern city of Zhuhai that borders Macau, according to Guangzhou Daily, an official newspaper. It did not further identify Mr. Zhong. After almost no activity for years, there were 121 transactions involving $15 million in 2016, prompting the authorities to look more closely at who was involved.
Ultimately, the Xinhua report said, the authorities discovered that the people running the underground bank had illegally bought and stole the identity documents of more than 200 people to open the fake accounts that underpinned the enterprise. News reports did not disclose detailed information about how the underground bank worked.
The Shaoguan government and the police did not respond to requests for comment.
The trail appeared to lead to Macau, according to the news reports. The suspicious bank account that prompted the investigation was opened specifically for a gambler in Macau called Mr. Peng to transfer money, Xinhua said. “Several members of the criminal gang” then converted the renminbi into Hong Kong dollars for Mr. Peng, according to the report. Hong Kong has its own currency, which tracks the value of the United States dollar.
The Xinhua report did not offer details about Mr. Peng.
Macau is under pressure to keep a tight rein on capital outflows. Most recently, it installed automated teller machines with facial recognition software to monitor transactions for people using Chinese bank cards, according to Macau Daily Times.
The Xinhua report acknowledged that underground banks are “seductive,” especially for people who struggle to get financing, but warned that “the people will suffer tremendous loss” if the banks abscond or cheat their clients.
https://www.nytimes.com/2017/11/23/business/china-underground-bank-3-billion.html
....
Bolded above: looks like we have a motive behind china shutting down crypto exchanges earlier this year.
Its interesting to note that while china strives to keep money inside its borders, nations like the united states utilize measures such as high corporate taxes, seemingly with an end goal of keeping money outside its borders. There's also an interesting backstory to chinese and american domestic policy whereby american politicians often propose legislation identical to measures adopted by china. In the past american politicians have proposed a giant censorship firewall and internet kill switch. Two policies china is known for.
Over the long run, this could imply america's leaders will propose similar measures intended to keep cash inside the countries borders. A proposed move from paper money to digital transactions could represent a prelude to this.
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