Renminbi

Chinese State TV Takes Aim At Bank of China – Confusion Reigns Supreme

Mainland China has largely ignored the obvious breaches in money laundering – until perhaps now.

In a rare public tussle between two powerful arms of the Chinese government, China’s state broadcaster took aim at Bank of China on Wednesday, accusing the lender of laundering money and helping clients skirt the country’s controls on cross-border fund transfers.

State TV CCTV has taken on the giant Bank of China and left commentators utterly confused.  Bank of China is State owned as well.

China officially restricts the ability of individuals and businesses to move money across its borders. Chinese individuals aren’t allowed to exchange and move more than $50,000 a year out of the country. Chinese companies can exchange yuan for foreign currencies only for approved business purposes, such as paying for imports or approved foreign investments.

Yet we know that is nonsense, just have a look at the spending and investing habits of Mainland Chinese let alone the tsunami of cash flowing over to Hong Kong and sloshed into the property market.

Bank of China claims that the reports are false.

The answer may lie somewhere here

For years, China’s economy benefited from large flows of cash into the country from exports and from foreign investors. Incoming dollars were exchanged for yuan at China’s central bank, putting more yuan into the economy. That made it easier for banks to lend and companies to grow, but it also stoked inflation and contributed to real estate and stock-market bubbles.

When money leaves, that system swings into reverse, and there is less money available to fund growth. Chinese regulators in recent months have said they would step up monitoring of illegal fund flows.

The world should wait with weak knees if Beijing gets its act together and decides to get some of that cash back through enforcing their actual laws or heaven forbid, actually having a sophisticated taxation mechanism to stem the flow of the fleeing masses.