Gold bars and Tokyo apartments: How money is flowing out of China

Chinese are using their savings to buy overseas apartments, stocks and insurance policies

Keith Bradsher & Joy Dong

Affluent Chinese have moved hundreds of billions of dollars out of the country this year, seizing on the end of Covid precautions that had almost completely sealed China’s borders for nearly three years.
 

They are using their savings to buy overseas apartments, stocks and insurance policies. Able to fly again to Tokyo, London and New York, Chinese travellers have bought apartments in Japan and poured money into accounts in the United States or Europe that pay higher interest than in China, where rates are low and falling.
 

The outbound shift of money in part indicates unease inside China about the sputtering recovery after the pandemic as well as deeper problems, like an alarming slowdown in real estate, the main storehouse of wealth for families. For some people, it is also a reaction to fears about the direction of the economy under China’s leader, Xi Jinping, who has cracked down on business and strengthened the government’s hand in many aspects of society.
 

In some cases, Chinese are improvising to get around China’s strict government controls on transferring money overseas. They have bought gold bars small enough to be scattered unobtrusively through carry-on luggage, as well as large stacks of foreign currency

Real estate is an option, too. Chinese have emerged as the main buyers of Tokyo apartments costing $3 million or more, and they often pay with suitcases of cash, said Zhao Jie, the chief executive of Shenjumiaosuan, an online real estate listing service in Tokyo. “It’s really hard work to count this kind of cash.”
 

Before the pandemic, he said, Chinese buyers typically bought Tokyo studio apartments for $330,000 or less to rent out. Now they are buying much larger units and obtaining investment visas to relocate their families. All told, an estimated $50 billion a month has been taken out of China this year, mainly by Chinese households and private-sector companies.
 

Experts said the pace of money leaving China probably did not pose an imminent risk to the country’s $17 trillion economy, in large part because exports of many of the country’s key manufactured goods are strong, returning a steady stream of cash.
 

A broader move by families to send their savings elsewhere could be cause for alarm. Large-scale money outflows have set off financial crises in recent decades in Latin America, Southeast Asia and even China itself, in late 2015 and early 2016.

So far, the Chinese government is indicating that it believes it has the situation under control. Money sluicing out of China has weakened the currency, the renminbi, against the dollar and other currencies. And that weakness of the renminbi has helped sustain China’s exports, which support tens of millions of Chinese jobs.
 

The flow of money out of China “is very manageable,” said Wang Dan, the chief economist for China in the Shanghai office of Hang Seng Bank.
 

Chinese policymakers are still relying on some of the limits on taking money out of the country that they imposed to stem the currency crisis eight years ago. Other restrictions imposed then, like scrutinising exports and imports to catch disguised schemes for international money transfers, were allowed to lapse and have not been reimposed this year even as money outflows have resumed.
 

The movement of money out of China has roughly matched the money brought in by the country’s large trade surpluses. To the dismay of many countries elsewhere, particularly in Europe, China is exporting rising numbers of solar panels, electric cars and other advanced products even as it has replaced more imports with domestic production. Beijing has also banned most overseas investments in hotels, office towers and other assets of little geopolitical value. But households and companies are still managing to send money overseas.
 

On a recent afternoon, Bank of China and China Merchants Bank branches in the mainland were selling gold bars for 7 percent more than their affiliated banks in adjacent Hong Kong. That price difference indicates that inside China, demand is high for gold, which can be readily moved out of the country. Another trick that mainlanders are using to get money out of China is opening bank accounts in Hong Kong and then wiring money to buy insurance products that resemble bank certificates of deposit.
 

At a Bank of China branch on Hong Kong’s Kowloon peninsula, mainlanders were waiting on a recent morning at 7:30 to open accounts, 90 minutes before the bank was set to open. The line was so long by 8 am that anyone arriving later was lucky to reach the front of the line before the end of the workday, said Valerius Luo, a Hong Kong insurance agent.

Money Moves

 

Estimated $50 billion a month has been taken out of China in 2023

People are improvising to get around strict government controls

They are buying small gold bars that can be scattered unobtrusively through carry-on luggage

Chinese have emerged as the main buyers of Tokyo apartments, paying with suitcases of cash

©2023 The New York Times News Service