Taipei: Taiwan
BrookesNews.Com
Monday 17 November 2003

A great irony about capital mobility in China is that while Beijing has left no stone unturned to find ways of attracting foreign investment capital, a torrent of capital has been gushing out of the country through various illegal channels.

On August 3 and 5, for example, more than 60 Chinese officials claiming to be going abroad on official tours of duty to attract foreign investors were reportedly detained at airports and harbors across the country for attempting to spirit out bags of cash. The poorest among them was carrying 600,000 euros, and all of them were carrying legitimating documents issued by Chinese banks and customs offices.

Particularly shocking is data released June 30 by Chinese disciplinary and security departments listing the number of officials, party cadres and managers of state-run enterprises who were either missing or known to have fled abroad. The figures in these two categories, respectively, are 790 and 1,240 for Canton, 112 and 442 for Beijing, and 187 and 354 for Shanghai. Figures for other locales are similarly staggering.

Although it is impossible to get an accurate picture of the full extent of the problem, analysis of Chinese official statistics indicates that in 2000 alone, more than US$48 billion in capital was bled from the country under questionable pretexts--exceeding total foreign investment for that year.

It may therefore be said that China is not only one of the world's largest importers of foreign capital but, almost certainly, the world's number one exporter of illicit money. The severity of the problem has prompted Beijing authorities to issue new regulations stipulating stricter procedures for the issuance of passports and travel permits to officials and party cadres.

In addition to crass greed, a major reason for the snowballing illicit outflow of capital from China is widespread lack of confidence among Chinese officials and private entrepreneurs in the country's political stability and economic soundness. Another reason is that upward of 25 percent of capital flowing into China is dirty money sent there for laundering. Once cleaned, it must be returned to the criminal elements from whom it came.

Attempting to hide their dirty laundry, the Beijing authorities have imposed a news blackout internally. Meanwhile, it is reported that they are attempting to get back lost capital by making special deals.

In light of the fact that even Chinese officials and entrepreneurs lack confidence in China's long-term stability, Taiwanese entrepreneurs are well-advised to take a cold second look before putting their eggs in the China basket.