Chinese investors have sped up their capital outflows to other countries. Japanese regulators recently found that Chinese investors were remitting virtual currency to Japanese companies and then converting it into Japanese yen.
According to The Asahi Shimbun, Japan’s National Tax Agency discovered, in the course of an investigation into corporate fund flows, that a Japanese photography company opened a virtual currency trading account to accept virtual currency sent from China that would then be converted into Japanese yen. The company accepted a total of 27 billion yen ($235 million) in funds over a three-year period ending March 2019. After charging a handling fee, the Japanese company then invested in areas such as real estate, as instructed by three Chinese investors who communicated via Chinese social media WeChat.
The three investors, deemed to be intermediaries handling funds for Chinese tycoons who intend to invest in Japan, converted funds into virtual currencies and sent them to the Japanese photography company, which then exchanged them into Japanese yen to be used for investment purposes.
The Epoch Times contacted Japan’s National Tax Agency for comment, and one official said he could not disclose any information because of the relevant regulations.
According to China’s State Administration of Foreign Exchange, Chinese citizens are not allowed to remit more than $50,000 per person per year, and they need to pass a corresponding audit if they exceed the limit.
Impacted by China’s restrictions, cryptocurrency has become an important channel for Chinese capital outflow because of its anonymity, convenience, and globalization.
In September 2017, seven Chinese Communist Party ministries jointly announced a ban on the exchange of RMB (Chinese yuan) for cryptocurrencies such as Bitcoin. On May 21, China’s Vice Premier Liu He stressed at a financial conference the need to strictly control financial risks and crackdown on bitcoin mining and trading.
Despite unrelenting bans, strong demand for money transfers enrich a thriving cryptocurrency exchange market in China. Taiwan’s CM media said a large number of cryptocurrency users have been active on underground intermediary networks to circumvent the ban imposed by Beijing authorities.
Some crypto exchange companies, although having moved their services out of China, continue to serve Chinese investors through offshore platforms and over-the-counter transactions.
According to the Chinese state-owned legal network, on June 9, in a national raid, the public security arrested 1,100 suspects in 23 provinces for using cryptocurrencies to transfer and launder money.
Peckshield, a China-based blockchain security firm, said in its annual Digital Asset Anti-Money Laundering report that in 2019 the total amount of capital flowing out of China through digital currencies was estimated to be about $11.4 billion, and climbed to $17.5 billion in 2020.
