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RiskArb
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More Corrupt Chinese $$$ On The Way - Articles

Thu Jan 24, 2013 3:13 pm

http://www.smh.com.au/world/the-great-c ... 2d3v5.html

The great China corruption fire sale
Date January 22, 2013

Malcolm Moore in Beijing

A wave of properties have hit the market in China as the government aims to clamp down on corruption

Thousands of Chinese communist officials have been panicked into a fire sale of their illicit properties and billions of pounds have been smuggled overseas as the country's new leaders intensify a campaign to root out corruption.

Luxurious properties are being dumped on the market in Beijing, Shanghai and Guangzhou for anyone able to pay in cash as officials try to cover their tracks. A report by the party's anti-corruption unit, the Central Commission for Discipline Inspection, said "a wave of luxury home sales began last November and has accelerated since December".

It said the volume of deals had intensified by "a hundred times" after Xi Jinping, the incoming Chinese president, warned that corruption could kill the party and put one of the country's most vigorous and resolute politicians, Wang Qishan, in charge of stamping out graft.

Fu Zongmo, an estate agent in Sanya, Hainan, said his colleagues had sold two houses recently for government officials. In recent years, the tropical beaches and golf courses of Sanya have attracted plenty of speculators but recently the market has stalled.

"They never register the houses in their own names and they use a string of agents to do the deals," said Mr Fu. He said one company had bribed an official by buying him a property at the Mountain Water International Complex. "The property was put in the name of the official's relative. After six months, it was sold for two million yuan ($302,000), around the same amount it cost. Then the official could cash out.

"The officials often use a special mobile number and when the deal closes they invite us for dinner to end the relationship. Then they throw away the number so we cannot contact them," he added.

The CDIC report, which was obtained by the Economic Observer newspaper, suggested that nearly 10,000 luxurious homes had been sold by officials in Guangzhou and Shanghai last year. It also claimed that $US 1 trillion, equivalent to 40 per cent of Britain's annual gross domestic product, had been smuggled out of China illegally in 2012. Economists and experts cast doubt on the figure, but said the flow of money was dramatic. Li Chengyan, a professor at Peking University, suggested that about 10,000 officials had absconded from China with as much as pounds $US100 billion.

Marco Pearman-Parish at Corporation China, a company in Beijing that helps clients find properties abroad, said there had been a strong rise in clients looking for homes in the Cayman Islands. "In Beijing, half our clients are government officials," he said. "Nine out of 10 claim to be businessmen, but it emerges over the course of the deal that they have government jobs."

The CDIC said 1,100 government officials had fled China during last year's national holidays in October and that 714 had been successful in getting away. In the United States, the National Association of Realtors said properties worth more than $US7 billion had been bought by Chinese in the US last year. Some high-end homes were now built for rich Chinese, with ponds for koi carp and a second kitchen for pungent cooking.

Jiang Ming'an, a professor at Peking University Law School and an anti-corruption adviser, said: "The government has been setting up a housing registration system and that may have scared some of the officials with too many houses. People will not take to the streets now because the economy is good. But when it slows down in the future, as the old saying goes, the fire cannot be covered with paper forever."

The Daily Telegraph
Last edited by RiskArb on Thu Jan 24, 2013 3:19 pm, edited 1 time in total.
 
RiskArb
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Re: More Corrupt Chinese $$$ On The Way - Articles

Thu Jan 24, 2013 3:18 pm

http://www.bloomberg.com/news/2013-01-2 ... -kong.html

School Dropout Convicted of Money Laundering in Hong Kong

By Shai Oster - Jan 23, 2013 12:01 AM GMT+0800.

A 22-year-old Chinese man who had dropped out of school and worked as a delivery man was convicted of laundering HK$13 billion ($1.68 billion) through a Hong Kong bank over eight months ending in 2010.

A jury of seven yesterday rejected Luo Juncheng’s defense that he had no knowledge of the funds flowing through accounts set up in his name. Luo faces a sentence of as long as 14 years, which Judge Esther Toh said would be decided today following further arguments.

Prosecutors accused Luo Juncheng of laundering around HK$50 million a day through a corporate account set up with Chiyu Banking Corp., a subsidiary of Bank of China Ltd.’s Hong Kong unit. Photographer: Jerome Favre/Bloomberg

Prosecutors accused Luo, a middle school dropout from south China’s Guangdong Province near Hong Kong, of laundering around HK$50 million a day through a corporate account set up with Chiyu Banking Corp., a subsidiary of Bank of China Ltd.’s Hong Kong unit. A bank spokesman said by e-mail that it complied with all relevant laws and has vigorous systems to control and mitigate money-laundering risks.

Luo told the court he was acting on behalf of a family friend, called Uncle Pang, who asked him to open the bank accounts and set up a company in Hong Kong called Ace Creation Development Ltd.

Luo said he was one of four brothers and worked as a delivery man for factories in the industrial export hub of Shenzhen until he quit to care for his ailing mother. His mother had introduced him to Uncle Pang, who had helped pay for his father’s medical bills before he died in 2002.

Uncle Pang approached Luo to go to Hong Kong to set up the company and accounts after Luo’s mother died in 2010, Luo testified.

The case is Hong Kong Special Administrative Region v. Luo Juncheng, HCCC159/2012 in the Hong Kong Court of First Instance.

To contact the reporter on this story: Shai Oster in Hong Kong at soster@bloomberg.net
 
RiskArb
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Re: More Corrupt Chinese $$$ On The Way - Articles

Thu Jan 24, 2013 3:26 pm

So if it isn't obvious enough, the money laundering circle is as follows:

1. Chinese businessperson bribes Government official, usually with property
2. Chinese Government official sells property and launders $$$ through Hong Kong / Macau (mostly Macau casinos)
3. Hong Kong nationals and representatives of Chinese officials purchase homes in London, SF, New York, Sydney and Vancouver

............and that's just the flow from government officials.

The businessmen who actually fund the corruption move far far greater amounts out themselves!


I've been harping on about this for years. There's simply no fundamentals involved when it comes to Vancouver west side / West Van (and to a lesser extent BBY and RMD property).....we haven't really seen the tip of the iceberg..... and the increased anti-corruption enforcement with Xi Jin Ping at the helm seems to be setting off the real money outflows.
 
rofina
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Re: More Corrupt Chinese $$$ On The Way - Articles

Thu Jan 24, 2013 5:03 pm

I am curious to know if these capital flows really do have as marked of an impact on the local market.

The recent shift in the market seems to suggest that perhaps its mostly a homegrown bubble. It seems to me that if changing amortization periods has had a serious negative impact, that would suggest buyers are largely at the mercy of local credit conditions.

Being bearish home owner myself, I have to admit it would be infinitely amusing to see the market go parabolic in the spring.

BTW; How is life in Singapore?
 
gse36
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Re: More Corrupt Chinese $$$ On The Way - Articles

Thu Jan 24, 2013 7:54 pm

I would think that you would want a series of offshore bank accounts/investments as they are more liquid. Real estate is not liquid, has a trail, and if the heat is on, you cannot quickly cash out and take the money elsewhere. There is fear that CRA (or other governments) may cooperate with Chinese government and this may lead to seizing assets or freezing assets. So obviously something non traceable is ideal.
 
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Re: More Corrupt Chinese $$$ On The Way - Articles

Thu Jan 24, 2013 8:56 pm

by gse36 » Thu Jan 24, 2013 7:54 pm

I would think that you would want a series of offshore bank accounts/investments as they are more liquid. Real estate is not liquid, has a trail, and if the heat is on, you cannot quickly cash out and take the money elsewhere. There is fear that CRA (or other governments) may cooperate with Chinese government and this may lead to seizing assets or freezing assets. So obviously something non traceable is ideal.
I have had conversations with a few filthy rich business owners on this topic. Real estate is probably the only thing they think they fully understand both here and back home. There are too many unknowns for them in other types of investments. They are very alert about scams. One of them bought 6 houses and 2 condos including 2 in British Properties, 2 in South Surrey and 2 in Richmond, in one year. He told me actually he really wanted to do some active business here. He really wants his son to do something rather than fooling around. But he is afraid of traps. He did once put 200k in a restaurant, but end up lost all of it in 6 months. Another guy who also bought and sold half a dozen houses in the past few years, was more ambitious. He does not know English. His secretary does all the translation. He made an offer on a major revenue property/business, wrote a cheque for 7.5 mil as down payment and thought he had rest of financing in place. He was wrong or his secretary translated wrong. He had a bank offering letter for the financing. but it was not a commitment letter and the bank backed off. He was totally screwed. Just an example of the kind of stumbling they encounter in a totally different business environment. That is why they all park their money in real estate.
 
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Re: More Corrupt Chinese $$$ On The Way - Articles

Thu Jan 24, 2013 10:41 pm

I guess being corrupt is the only way to make big and easy money. If the Canadian Government knows about this and isn't doing anything about it, then we might as well all be criminals. Our law system stinks and we will all get away with it anyways. What are they going to do? Put everyone in jail? They can't even afford to build and maintain more jails. That's why other country knows Canada is a safe have for criminals to wash their dirty money. We will soon have all these rich criminally minded foreigners take over our country.

I don't believe they will be able to come in flocks like previously, but if they did, I could see the HAM territories stabilizing sooner than later. The other areas and condos are still going to see a decent size correction (25% +).
So jimmy said I missed the dip in Richmond last year. And now prices have fallen even more with no balance in sight! The poor old man is just too old and grumpy!
 
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jesse1
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Re: More Corrupt Chinese $$$ On The Way - Articles

Fri Jan 25, 2013 3:16 am

If prices don't rebound substantially I have a hard time seeing why a bank account wouldn't be the preferred option over such an obviously depreciating asset. Or maybe... Vancouver's market is a giant sausage party.
There is no shame in overpaying
 
jimtan
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Re: More Corrupt Chinese $$$ On The Way - Articles

Fri Jan 25, 2013 8:38 am

If prices don't rebound substantially I have a hard time seeing why a bank account wouldn't be the preferred option over such an obviously depreciating asset. Or maybe... Vancouver's market is a giant sausage party.
What brilliant reasoning. Already Jesse can see the future when he couldn't before. He's an expert on Chinese RE as well as Vancouver RE. There's no doubt that there will be a surge in RE supply in Vancouver.

Meanwhile, where else can the Chinese hot money park themselves?

http://www.bloomberg.com/news/2013-01-2 ... -asia.html

"Singapore’s latest curbs -- from higher taxes to tougher mortgage requirements -- have been described by broker Knight Frank LLP as the “most severe” since the government started cooling the market more than three years ago. Announced acquisitions of Singapore property companies and real estate investment trusts were worth $37.3 billion last year, the top destination for property deals behind the U.S., according to data compiled by Bloomberg.

“It’s a game changer,” said Bryan Go, an analyst at Phillip Securities Research Pte. “The new measures are some of the key considerations in both of these M&A deals. They will now evaluate differently on discounting deals.”

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