Heavy Fines for Forex Trading Violations Can't Stop Capital Fleeing China

An article, published in 2006 by the Chinese Academy of Sciences, said the scale of capital fleeing China has been rising since the 1990s, with China's loss of capital reaching $87 billion in 1998.

The SAFE website states that from 2017 through 2021, its policing exposed over 300 cases of forex trading through underground banks and investigated over 6,000 illegal foreign exchange cases.

Mike Sun, a North American investment consultant familiar with China, told The Epoch Times that after the CCP tightened its foreign exchange trading policies, businesses and individuals began transferring more money out of China through underground banks.

He said, "Since the CCP cracked down on Chinese stocks in the U.S., capital outflow from China has accelerated, and the Hong Kong stock market, Hang Seng Technology Index, and Shanghai Stock Exchange Index have been falling. Another corroboration is that China's trade surplus last year was $676.4 billion, but foreign reserves only increased $33.6 billion, indicating a massive capital flight."

As to why capital outflow had accelerated, Wu says, "The capital outflow is related to the trade war between China and the United States, the uncertainty of the CCP's policies, and how the outside world views the CCP's unconstrained power. These are why foreign investors have lost confidence in China's economic outlook."

Wu said, "The Fed's interest rate hike will also cause capital outflow from China. With the outflow of capital to the United States, China will have a difficult time attempting to retain its capital unless the CCP raises interest rates."

This was the first time this inversion occurred since 2010 and is indicative of the flight of capital from China that is happening despite the CCP's enhanced policies to regulate foreign exchange trading.
 

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