Getting Money Out of China: What the Heck is Happening?

Help me to figure out what is happening in terms of getting money out of China.

My law firm’s basic mantra about getting money out of China is that if you consistently follow China’s laws, it ought to be no problem.

This though has not been true lately.

In the last week or so, our China lawyers have probably received more “money problem” calls than in the entire year before that. And unlike most of these sorts of calls, the problems are brand new to us. It has reached the point that yesterday I told an American company (waiting for a large sum in investment funds to arrive from China) that two weeks ago I would have quickly said the Chinese company’s excuse for not sending the money was a ruse, but with all that has been going on lately, I have no idea whether that is the case or not.

So what has been going on lately?

Well if there is a common theme, it is that China banks seem to be doing whatever they can to avoid paying anyone in dollars. We are hearing the following:

1.
Chinese investors that have secured all necessary approvals to invest in American companies are not being allowed to actually make that investment. I mentioned this to a China attorney friend who says he has been hearing the same thing. Never heard this one until this month.

2.
Chinese citizens who are supposed to be allowed to send up to $50,000 a year out of China, pretty much on questions asked, are not getting that money sent. I feel like every realtor in the United States has called us on this one. The Wall Street Journal wrote on this yesterday. Never heard this one until this month.

3.
Money will not be sent to certain countries deemed at high risk for fake transactions unless there is conclusive proof that the transaction is real — in other words a lot more proof than required months ago. We heard this one last week regarding transactions with Indonesia, from a client with a subsidiary there. Never heard this one until this month.

4.
Money will not be sent for certain types of transactions, especially services, which are often used to disguise moving money out of China illegally. This is not exactly new, but it appears China is cracking down on this. For what is ordinarily necessary to get money out of China for a services transaction, check out Want to Get Paid by a Chinese Company? Do These Three Things.

5.
Get this one: Money will not be sent to any company on a services transaction unless that company can show that it does not have any Chinese owners. The alleged purpose behind this “rule” is again to prevent the sort of transactions ordinarily used to illegally move money out of China. Never heard this one until this month.

What are you seeing out there? No really, what are you seeing out there? Let’s make this a forum for trying to figure out what is happening.

5 responses to “Getting Money Out of China: What the Heck is Happening?”

  1. Things are actually getting rather bad now. They are looking for any possible excuse to refuse exchanges and will haggle over the amount you are trying to exchange. In Beijing I have already seen flat out refusals for no reason. Just wall of silence and next number when met with a customer wanting to exchange more than a few thousand dollars worth.
    It’s getting worse.

  2. I had my partner in our Shenzhen office call banks and inquire about any new restrictions, and we were informed that the same protocol applies. We also found this link: http://gold.hexun.com/2016-01-13/181771994.html that implies via the whisper network the State Administration of Foreign Exchange Bank received “verbal guidance” from government that in the near future manage the RMB capital account net outlflow, reducing the offshore renminbi positions and liquidity in a effort to protect the further devaluation of the Yuan.

  3. I had more trouble than usual buying USD recently from Bank of China. They will no longer sell USD unless you have booked the transaction one day in advance even if they have the USD cash on hand in their branch. I will still able to get it the next day and it wasn’t a large amount but my experience aligns with what I am hearing and reading.

  4. China’s Central Committee is quite serious about implementing capital controls, which is actually sound economic policy advised by the best economists such as Krugman.
    Except it turns out to be very hard to actually *enforce* capital controls, and they haven’t been enforcing them before, so the bureaucrats are overreacting to their new orders and are entrapping people who are well within the capital controls in the net. This probably isn’t the intent of the central government, but it’s what you’d expect the lower-level bureaucrats to do.

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