How to Get Cash or Assets Out of China
The decades-long boom in the Chinese economy has seen the Communist state's economy increasingly entangled with the wider world. Still, the government strictly limits the flow of money in and out of the country. PRC citizens are limited to $50,000 worth of currency exchange to USD each year, while foreigners are capped at a $500 daily limit.
With recent changes, getting money out of China has only gotten harder. It’s anything but easy and risk-free these days; nonetheless, people have always found loopholes to these onerous regulations.
Here’s how you can get cash out of China, and how we may be able to help.
What's Happening in China and Hong Kong?
China has always maintained greater control over the economy than the US and its allies, even after a partial liberalization in the late 20th century. For reasons as diverse as the ascendancy of Xi Jinping, growing confidence among the Chinese political class, and the fallout of COVID-19, as of 2021 the Chinese government is exerting more control over the economy than ever.
Many activities that were previously not legally sanctioned but were tolerated are now suffering under crackdown from the authorities. Cryptocurrencies have been a particularly high-profile example of this trend.
Chinese Cryptocurrency Ban
Over the years, the cryptocurrency markets have periodically tumbled due to exaggerated reports of India, China, or some other country banning crypto or decentralized finance outright.
As of 2021, we've got the real thing: the Chinese central bank has ruled cryptocurrency transactions illegal throughout the country.
There are numerous cited reasons, such as concerns around money laundering and fraudulent gambling. However, the core issue is most likely the perception of competition to the country’s new digital yuan and China's strictness around control of its own currency.
Indeed, this same issue – perceived threats to China's currency – also ties into the government's actions against tech giants like Alibaba in recent years.
Chinese Crackdown on Tech Giants
Jack Ma and Alibaba were once highly favored among Chinese leaders, but even the Chinese billionaire and his company haven't proven immune to political trends in China.
A combination of Jack Ma’s criticism of Chinese regulators and the specific workings of AliPay, the largest payment processing app in the world, have produced several problems for the company.
Due to the way that China operates its currency, this payment processor can't use actual Chinese currency; instead, it operates an internal currency that exchanges to the official fiat currency on a 1:1 basis. This poses some practical risks in the hypothetical event of Alibaba going bankrupt and not having the money to return to its former customers, but the situation was considered acceptable and functional for about a decade. Despite no apparent particular wrongdoing on the part of Alibaba, the People’s Republic struck the company with heavy regulatory penalties and demands for sweeping changes to how AliPay functions.
Other tech companies such as Tencent have had to grapple with similar problems, and the atmosphere in China is one of “waiting to see who's next.” This is true of the broader private sector and governing policy: who’s next in China's private sector?
Chinese State Companies Advance, Private Firms Retreat
In China, private companies have always operated at a disadvantage due to the many institutional advantages of state companies. This preferential treatment includes more favorable terms for bank loans and easier access to government contracts, which have proven especially important after COVID-19. The initial lockdown and global economic crisis saw China's economy retreat by 6.8%, and the government response has predictably favored state enterprises. It's even possible to view the action against private businesses as an outgrowth of Beijing's massive intervention in the economy.
With the government's increasingly heavy-handed approach to the private sector, more Chinese citizens and foreigners than ever are looking to take their assets out of China and repatriate money elsewhere.
It's hard to do so through legal channels, but there are a variety of loopholes (of varying legality) available.
How to Get Assets Out of China
The Chinese middle-class and upper-class have developed a handful of loopholes to support their currency repatriation goals throughout the years.
While it’s possible to transfer their money out of the country legally, this is so slow and ineffectual as to nearly defeat the purpose. Furthermore, the limit of $50,000 per year for Chinese citizens practically prohibits many methods of currency repatriation. As such, it often ends up being necessary to take less common routes with reduced oversight to get Chinese money abroad.
Inflated Value on Overseas Goods and IP
Buying some sort of good from an overseas partner for an inflated price is one way to get your money out of the country. The partner holds onto your money, and you eventually sell what you purchased for far less than you originally paid to free yourself of it and make up the value to your partner. Intellectual Property and other assets that are hard to value are particularly well suited for this, as it's easier to explain the discrepancy in the purchase price and sale price. However, even physical assets work, as you can often explain the devaluation of your asset as indicative of a change in the market, business mistakes, or a need to quickly generate cashflow due to personal needs.
Another frequently used way to repatriate Chinese yuan is through the purchase of real estate. Chinese investors were the largest purchasers of U.S. residential real estate for much of the past decade, according to the National Association of Realtors, and the Chinese are largely credited with Vancouver’s ballooning housing prices. That’s gotten much harder in recent years as the Communist Party goes hunting for these assets.
Many people have no need to use their currency exchange quota, which means that they have a service to offer. In Hong Kong, many companies have sprung up to offer their quota to other people. The person intending to repatriate hands off the amount they want to exchange, and the other person returns with the corresponding amount in another currency.
An advantage of two-way exchange is that there's very little to trace and that it's a remarkably simple way to sidestep the limitations. On the other hand, you're putting your faith and money in the hands of someone who's often a perfect stranger. Since these enterprises aren't legal, there's little recourse if an unscrupulous person steals your money rather than actually providing the corresponding foreign currency.
A VPN and Cryptocurrency
While cryptocurrency is now illegal in China, there were never any sanctioned crypto brokerages. The risk in trading coins has grown, but the actual process hasn't changed much. Using a reputable VPN to relocate their IP and access an exchange is one of the most straightforward ways to go about transferring large amounts of Chinese currency into dollars or other currency.
Typically, someone seeking to move their currency out of China will buy USDT, a tethered coin that's backed by USD reserves. It has the exact same value as the dollar, which makes it an excellent starting point to eventually convert money into Bitcoin or dollars.
Now that the authorities have taken a hardline stance against cryptocurrency, this can be a riskier prospect that can lead to the suspension of currency exchange allowance and even criminal charges.
Stock or Crypto Loans To Get Cash Out Of China
One of the more unique ways that Chinese businesspeople are getting cash out of China is through the use of stock or crypto loans. Everyone has their reason for holding on to their securities – crypto or stocks – and a loan against these assets can be an attractive approach for many people who don’t want to sell or can’t. Non-recourse loans allow even executives and insiders who may have trouble selling large blocks of equity to borrow against their stock in exchange for cash.
With our services, it can be done in almost every jurisdiction globally and delivered in the currency of choice.
For many public-market investors or entrepreneurs, stock loans are a convenient way to access capital overseas in a timely manner, as loans can be closed in as little as 72 hours. With crypto, the process is typically simple as well, with large blocks possible to use as collateral for most cryptocurrencies out there.
Moving Assets Out Of China: Conclusion
Repatriating cash from China isn’t always easy, but it can be done. There are a variety of approaches, including cryptocurrency transactions with a VPN, asset purchases outside of the country, two-way exchanges, and stock loan services.
Curious if a crypto or share loan might be right for you? It’s easier than you might think, with rapid closing and money delivered in the jurisdiction of your choice.