China marked the new year by clamping down on how its citizens can convert the Yuan into foreign money.
Chinese residents are still restricted to the $50,000 U.S. quota for foreign currency per person a year, but they now have to pledge the money won’t be used for overseas purchases of property.
If caught skirting the foreign-exchange rules, the Chinese currency regulator says they will be subject to anti-money-laundering investigations and banned from the quota for three years.
In a statement on December 31, the regulator said it wants to close loopholes used in money laundering and illegal channelling of money into overseas property.
So will it work and what impact will it have on real estate here?
Business Analyst Robert Levy says it’s one of those things you see with state-run economies all over the world and throughout history. They can’t in the long-run actually control funds from leaving abroad.
Levy says money will still leave China through business or through nominees as it has in the past and it will still continue to pour into our real estate market.
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Christine Duhaime is an expert on money laundering and Asian real estate investment.
Duhaime says foreign investors are still skirting the rules by driving corporate vehicles like trusts and corporations into the market.
“People will get together and set up a corporation of British Columbia so that it’s a company or companies that are being setup here and then buying real estate to ensure the purchasing entity is quote-on-quote ‘enough Canadian’ not to trigger the tax payment.”
Duhaime says we are now seeing more and more corporate vehicles being setup, driving foreign investment like shell corporations or trusts.
“They can make arrangements so that the person that is buying the home is not the one who shows up on paper as being a foreign national, because a trust is a legal entity in Canada, just like a person.”
And until the province helps banks and realtors grasp money laundering she says it won’t stop.
Even with growth outside the tax boundary, Duhaime says Vancouver is still the number one destination for Asian buyers.