As we’ve observed on many occasions, Beijing has this brilliant habit of working in the Australian national interest when Canberra refuses to do so.
We saw it in the 2014-2017 Chinese capital influx property boom. As Chinese buyers poured wealth from China into Aussie houses, pricing out many locals, Canberra cheered it on.
The Chinese raiders dissipated only when Beijing slammed the capital account to stop the trade from hitting the yuan.
Likewise, Beijing overreached in Aussie parliaments and universities during the same period. This exposed Canberra’s toxic bribery culture and forced it to push back when all it wanted to do was keep taking the cash.
And, of course, COVID delivered the mother of all shocks to a grovelling Canberra when Beijing launched a trade and rhetorical war, forcing the treasonous Australian capital to fight back.
Regarding China, Canberra is very unreliable, so Aussies have much to be thankful for in Beijing’s backfiring heavy-handedness.
Today, we can only cheer as Canberra looks on in horror as, once again, Beijing begins to crack down on capital flight that is ending up in Aussie property:
China has told its securities firms and their offshore units to stop conducting illicit cross-border business, including brokering shares and selling funds to domestic investors, in a bid to plug regulatory loopholes.
The overseas units must stop all marketing activities and promotions aimed at mainland investors and close all channels for new account openings, including onshore apps and websites, by Oct. 31, according to a notice from the China Securities Regulatory Commission that was seen by Bloomberg News. The CSRC didn’t immediately respond to a faxed request for a comment.
Chinese authorities are increasing scrutiny to prevent people from evading domestic capital controls in a bid to tamp down on cross-border capital flows that could risk financial stability. At the same time, they have been rolling out a series of measures to restore confidence in local markets after stocks have tumbled.
There are many other avenues to get money out. As we have previously noted:
…opportunities to move cash legitimately from China are severely limited, with individuals normally allowed to wire only $50,000 a year overseas. They also have a one-time opportunity to move their money when they emigrate. Plugging the gap is where the underground networks come into play.
“These agencies have sprouted to meet soaring demand,” says Joel Gallo, an adjunct professor of finance at New York University Shanghai. “They act as quasi-banking firms, yet operate without the scrutiny of one and adroitly engage in regulatory arbitrage by standing in a gray zone.”
…It’s “highly likely” that underground banks will have pools of funds ready in key locations, so recipients can receive their cash quickly, and in the local currency, according to a 2019 intelligence assessment by the UK’s National Crime Agency (NCA).
…there is a dark side to remittance operations. To ultimately settle exchanges via hawala, Chinese underground banks regularly use cash generated by criminal groups through activities such as drug trafficking, cigarette smuggling, organized illegal immigration and human trafficking, according to the NCA.
However, there is a strong possibility, likelihood even, that Beijing will come after the smurfs at every opportunity.
As the Chinese economy shunts to lower growth owing to its vast and endless property adjustment, interest rates will keep falling, and the yuan will remain under pressure.
Beijing is determined to slow this process lest it trigger capital outflow from banks just as their assets come under strain from the property crash.
The best way to do that is to restrain all capital outflows from China.
Once again, Beijing is coming to the rescue of Aussie homebuyers when all Canberra wants to do is dehouse the locals at record speed.
God bless!
