There are rumors about China’s elite circumventing capital controls. This is all thanks to Hong Kong’s precious jewelry market. A very interesting anomaly was recently detected with China’s trade data. Chinese wealthy clients seem to be overpaying for precious gems from Hong Kong. This seems to be a very interesting way for wealthy Chinese clients to move capital out of the country.
This will easily explain the huge rise of imported gemstones from Hong Kong to China. To put things into perspective, the rise is so large that it recently made up for almost 53% of China’s total imports from Hong Kong. Gem imports from Hong Kong were making up more or less 3% than the total imports back in February 2018.
The most used gemstones to move capital are diamonds and opals. Some experts believe that this is a very ominous sign for the direction of the Yuan. With the recent appreciation for the Yuan some citizens might have lost the incentive to move capital offshore. Nevertheless, as the Yuan’s value was dropping back in 2018, capital outflow was a major concern for China.
Those who are preparing to move capital out of China should be on alert
There are already many Chinese analysts on alert. They seem to be watching if the overvalued imports from Hong Kong increase or decrease heavily. If capital outflow keeps being shrouded by the imports devaluation of the Yuan is a real possibility.
The capital controls which China imposes are beyond strict. There is a $50 000 limit to the funds an individual can transfer out of China for a single year.
Additionally, an exchanging the Yuan to USD and other currencies is only allowed with special approval. Many experts have noted that in recent times these measures have been tightened even more.
There are already numerous reports of countless wealthy Chinese citizens leaving the country. This means that capital outflow is bound to increase. A few surveys note that over 30% of China’s millionaires plan to leave the country at the first opportunity.
There is even bolder information out, claiming that over 60% of the country’s wealthy is already leaving or making plans to do so.
China is also slowing down investments into companies. This shows that the country is looking to offset a potentially cooling economy by keeping money closer to home soil. Encouraging inward investments seems to be a priority since China has allegedly doubled the amount allowed to flow into the country’s equity markets via institutional investors.
Experts are already predicting a possible global recession that might be triggered by a possible slowdown in both Europe and China.
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