China’s Ministry of Public Security is cracking down on illegal money operations with economic experts believing the move is largely intended to stem the flow of capital out of the country.
As per the official definition, money exchange gangs illegally provide individuals or organizations with large-value cash exchange and loan-sharking services in underground money mills in many cities and Macao’s casinos.
The public security authority said this has resulted in other crimes being committed.
“This has led to an increase in the number of violent cases, thefts, frauds, robberies, kidnappings, homicides, and other crimes,” according to authorities.
At the meeting, the Public Security Bureau of Jilin in northeastern China reported cases of illegal money exchange activities involving 10 million yuan (approximately $1.38 million).
The Public Security Bureau in eastern China’s Jiangxi province reported cases on the sale of entry/exit permits, arresting more than 30 suspects, and identifying more than 100 stowaways who had traveled to Macao to engage in illegal money exchange activities.
Capital Outflow
U.S.-based economist Li Hengqing believes that the real purpose of the crackdown on money exchanger gangs is more than the so-called derivative of illegal activities—it is to cut off capital outflow under this pretext.Mr. Li said the Chinese Communist Party (CPP) authorities are targeting rich people to collect money in the name of tax investigations while also blocking the rich from transferring their capital.
He said it is too early to say if the CCP will tighten the Shanghai-Hong Kong Stock Exchange Market and the Shenzhen-Hong Kong Stock Market.
“In the past two to three years, many Chinese people have been traveling to Hong Kong to buy insurance and other financial products, and they have also opened accounts with banks in Hong Kong, which is a large amount of capital,“ Mr. Li said. ”Therefore, whether or not there will be any restrictions on the withdrawal of such capital in the future is also a point of reference to observe the domestic political movements.”
Politics Factor
Yin Qiwei, a member of the CCP’s princelings, told the Chinese language of The Epoch Times that the political factor cannot be ignored when delving into the reasons behind the regime’s crackdown on capital outflows.Mr. Yin indicated that since the Chinese yuan cannot be exchanged freely, Hong Kong and Macau, where capital flows freely, have become important channels of funds.
Moreover, money exchange operations and loansharking are two main businesses in the gaming industry in Macao, with the tacit approval of the Chinese communist regime.
“Therefore, the crackdown on money exchange gangs may be a sign of Xi Jinping’s purge on his political rivals as he can easily confiscate their money,” Mr. Yin said, citing that after the implementation of the National Security Law in Hong Kong, the CCP has mastered the ‘undercurrent’ of capital in Hong Kong.
Mr. Yin said he had spent a lot of time in Macao and Hong Kong, and he was familiar with how the money exchange works there.
“The usual modus operandi is that after saving or remitting tens of millions of yuan to a designated account in China, you can choose how to withdraw foreign currencies in Macao,” he said.
“For instance, owning an account in the VIP rooms of Macao’s casinos and withdrawing the corresponding amount of Hong Kong dollars or obtaining a credit black card that allows the cardholder to withdraw Hong Kong dollars from some Macao casinos, and it is even possible to exchange corresponding foreign currencies at other casinos such as Las Vegas, in the United States.”
However, if the CCP does cut off capital outflow, he said it may be more difficult for China’s rich people to get their money out of China in the future.
