4 ms·

Isn’t the Chinese government trying to curtail capital outflow?

Scoundreller 4y ago
No, their entire economy revolves around exporting value-added goods. They restrict currency movements, but that doesn’t work when you can ship out goods and deposit payments overseas. Drugs is one way to do this, but so is virtually any other good.
- Aunche 4y ago
  This doesn't seem to be the case here as most of the "value add" is occurring in the US. Bitcoin is another Chinese export that enable capital outflow, but China is taking a lot measures to crack down on it. I'm sure the Bitcoin miners that are still allowed to operate have connections in the CCP, but that doesn't mean the party itself is particularly happy about mining.
  - Scoundreller 4y ago
    For drugs yes, but China is a machine that takes raw materials and manufactures them into finished goods. Just look for the "Made in ______" label on so many goods. Sure there's lots of margins on the marketing side that's captured and retained wealthy countries, but China is capturing some percentage of so many finished products.
    - chrischen 4y ago
      But that’s not capital outflow. That’s exporting useless cheap goods for an inflow of capital (USD).
      - SgtBastard 4y ago
        All of those exported goods are expected to be sold at a markup in other countries, in that countries currency.
        chrischen 4y ago
        Exactly, so China exports goods valued at less than markup, and pockets the markup, resulting in a net cash inflow. This is what is referred to by the “trade deficit” between the US and China. The deficit refers to the fact that China is exporting less valuable things and pocketing the money, and not buying back as many US goods, resulting in a deficit that net moves capital to China.
joe_the_user 4y ago
China tries to curb capital outflows but they are so huge they're essentially institutionalized despite these efforts.
garmanarnar 4y ago
Yeah, that is why people are using Li's money laundering services. They cannot get cash out of China legally so they do it illegally.
- chrischen 4y ago
  My point is that the Chinese establishment does not actually want this. It’s the private citizens trying to sneak the money out.
  - from 4y ago
    I don't think they're complaining about drug dealers paying part of their forex bill for them. Colombia has done the same thing for the past 50 years too (Google "black market peso exchange" or "sinister window"). But they probably don't like that high level people can have assets they don't know about or can't touch when they're in the process of a big corruption crackdown.
    - chrischen 4y ago
      What do you mean by “paying forex bill”? It’s not just high level people moving capital our of China. It’s any well-to-do Chinese. Look at what happened to Vancouver. Basically a lot of people wanted to bring their cash out of China to avoid things like taxation, government crackdowns, etc. in general just protect their wealth because western governments are more predictable and friendlier to wealth inequalities. But more importantly, all of that cash going to Canadian real estate and property owners is money taken out of the domestic Chinese economy.
      - from 4y ago
        > What do you mean by “paying forex bill”? It allows capital flight to occur without draining the official central bank reserves of dollars. > But more importantly, all of that cash going to Canadian real estate and property owners is money taken out of the domestic Chinese economy. If you read the article it talks about how the money is used to buy goods in China that are then sent to Mexico so it's not a total loss.

No, their entire economy revolves around exporting value-added goods. They restrict currency movements, but that doesn’t work when you can ship out goods and deposit payments overseas. Drugs is one way to do this, but so is virtually any other good.

Aunche 4y ago
This doesn't seem to be the case here as most of the "value add" is occurring in the US. Bitcoin is another Chinese export that enable capital outflow, but China is taking a lot measures to crack down on it. I'm sure the Bitcoin miners that are still allowed to operate have connections in the CCP, but that doesn't mean the party itself is particularly happy about mining.
- Scoundreller 4y ago
  For drugs yes, but China is a machine that takes raw materials and manufactures them into finished goods. Just look for the "Made in ______" label on so many goods. Sure there's lots of margins on the marketing side that's captured and retained wealthy countries, but China is capturing some percentage of so many finished products.
  - chrischen 4y ago
    But that’s not capital outflow. That’s exporting useless cheap goods for an inflow of capital (USD).
    - SgtBastard 4y ago
      All of those exported goods are expected to be sold at a markup in other countries, in that countries currency.
      - chrischen 4y ago
        Exactly, so China exports goods valued at less than markup, and pockets the markup, resulting in a net cash inflow. This is what is referred to by the “trade deficit” between the US and China. The deficit refers to the fact that China is exporting less valuable things and pocketing the money, and not buying back as many US goods, resulting in a deficit that net moves capital to China.

joe_the_user 4y ago

China tries to curb capital outflows but they are so huge they're essentially institutionalized despite these efforts.

garmanarnar 4y ago

Yeah, that is why people are using Li's money laundering services. They cannot get cash out of China legally so they do it illegally.

chrischen 4y ago
My point is that the Chinese establishment does not actually want this. It’s the private citizens trying to sneak the money out.
- from 4y ago
  I don't think they're complaining about drug dealers paying part of their forex bill for them. Colombia has done the same thing for the past 50 years too (Google "black market peso exchange" or "sinister window"). But they probably don't like that high level people can have assets they don't know about or can't touch when they're in the process of a big corruption crackdown.
  - chrischen 4y ago
    What do you mean by “paying forex bill”? It’s not just high level people moving capital our of China. It’s any well-to-do Chinese. Look at what happened to Vancouver. Basically a lot of people wanted to bring their cash out of China to avoid things like taxation, government crackdowns, etc. in general just protect their wealth because western governments are more predictable and friendlier to wealth inequalities. But more importantly, all of that cash going to Canadian real estate and property owners is money taken out of the domestic Chinese economy.
    - from 4y ago
      > What do you mean by “paying forex bill”? It allows capital flight to occur without draining the official central bank reserves of dollars. > But more importantly, all of that cash going to Canadian real estate and property owners is money taken out of the domestic Chinese economy. If you read the article it talks about how the money is used to buy goods in China that are then sent to Mexico so it's not a total loss.