Wan Zhe: China is no money-laundering hub


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Wan Zhe: China is no money-laundering hub


By Wan Zhe  Source: China.org.cn    Published: 2016-4-9

Has China become a money-laundering center?

Money laundering is a worldwide activity seen in many countries. It is not easy for any one country to become a "hub" or a "center."

As aforementioned, the United States ranks first in the world with over half the amount of US$1.07 trillion laundered in 2011. And that situation has never changed since 2000. Following the United States was Germany with US$161.14 billion in 2011 accounting for 15 percent of the global total, and Britain with US$76.58 billion or 7 percent.

In China the inflow and outflow are not directly proportional, with a strong net outflow as previously mentioned. Therefore, China is not a "channel" for international money laundering.

Currently, China is still a country with capital and exchange controls. Standardized capital flow management is not convenient for illegal activities such as money laundering.

China needs to face up to the hidden dangers

From an economic perspective, a large-scale outflow of illegal income or illicit outflow of lawful earnings will likely trigger domestic asset prices to fall and exchange rates to become unstable. As a result, the domestic financial market and real economy will encounter great confusion leading to possible financial and economic crises.

On the political level, money made through corrupt activities is one of the main sources of laundering activities in China – US$36.56 billion yuan in 2011, accounting for 65 percent of the total. During the current anti-corruption work, high efficiency and accuracy in identifying and seizing corrupt money are important and effective ways to tackle corruption.

From a public security viewpoint, experiences in tackling international terrorism show that cutting off the capital source is one of the most effective ways to fight against terrorists. China is also facing various threats. To effectively control and reduce the possibility of terrorist attacks, it is necessary to strengthen financial supervision and resolutely fight against terrorist financing.

China adopted the Anti-Money Laundering Law in 2006. A series of related regulations and measures were also issued by the People`s Bank of China, the central bank of China. Related anti-money laundering organizations were also established. However, there are still many defects in regard to early warning and feedback.

China has to do a lot to improve its capacity of overseeing its financial markets. It must not ignore and whitewash any problems that are emerging.

Wan Zhe is a visiting research fellow at the Chongyang Institute for Financial Studies, Renmin University of China.

This article was translated by Li Jingrong based on the original unabridged version published in Chinese.