Money is leaking out of China. By one estimate, just the illicit outflow amounted to $600 billion in 2011. Using other data, The Wall Street Journal put both legal and illicit outflows, net of inflows, at $225 billion in the 12 months to Sept. 2012.
A good bit of the movement is illicit because the communist state doesn’t permit free movement of currency in and out. Residents and companies can take out no more than $50,000 a year without special permission. And while a lot of funds are moved electronically, a significant portion is simply carried out of the country physically by the money’s owners, their friends or family members, or transfer agents.
The Wall Street Journal this week focused on the physical exit of currency from China, publishing an investigation into seizures of undeclared cash from Chinese travelers at North American airports: Toronto and Vancouver combined seized C$12.9 million between April 2011 and June 2012 from 741 travelers from mainland China and Hong Kong. US seizures from Chinese amounted to $5 million between 2009 and 2011, including $1 million just at Los Angeles International. Presumably a lot more undeclared cash went undetected, but even the money seized was usually returned subject to a fine.
Property investment abroad is a common motive for the cash movement. The Annual Report on Chinese International Migration 2012, published by state researchers, counted 150,000 Chinese successfully seeking permanent residency as immigrants to the US, Canada, Australia and other major destinations, in large part for their safer investment environments. Of entrepreneurs with wealth of more than 100 million yuan ($16 millon), 27% have emigrated and another 47% are considering doing so.
In any case, the cash outflow begs the question of why China doesn’t deploy body scanners at its airports to root out sweaters lined with $100 notes. While the machines have been controversial in many places for providing the equivalent of a naked body image, they are in trial or regular use at airports in more than a dozen countries, including Thailand, South Korea and Japan.
China’s top aviation official said in 2010 that the machines were being considered for major airports in the country to improve safety but that the government was still weighing the impact on privacy. “Passengers should not feel deprived of dignity or freedom when going through security checks,” he said.
As it happens, two months later, the US put export controls on its body scanners, ruling out Chinese sales. But there are other non-US suppliers, including a number of manufacturers in China.
One, Shanghai Dashing Scan Technology, began advertising its wares via the websites of Chinese embassies in the Middle East and other countries in late 2010. In a presentation on the commerce ministry’s website, it describes itself as a partner of the public security ministry and says its scanners can detect objects hidden inside and outside the body, including cash, while protecting privacy by not displaying images of the body surface. In early 2011, another Chinese company, Tianjin Chongfang Technology, showed off the body scanner it had developed, with similar claims to Shanghai Dashing but complemented by wide media coverage. Company officials talked of rolling out 1,000 machines at airports and other locations.
But there’s been little said about the machines since. Tianjin Chongfang’s website (in Chinese) gives no sign of activity since the unveiling. Shanghai Dashing’s website is gone. Among several websites tracking the global spread of the scanners by those who object to their use, none show any deployment in China nor have the researchers at the Centre for Aviation in Sydney registered any.
Could it be that Chinese officials believe even the domestic models don’t protect privacy enough to put them to work on China’s cash smuggling problem? Or maybe the interest of the elite in keeping open this cash channel is too strong?