By Major Chinese investors have been used to count on the countries which are Tax Haven, to avoid huge taxes. But reportedly, the Chinese government is tightening up on investors that hold significant wealth in overseas markets. This step can lead the investors towards the crypto market.
Markets that helped Chinese investor to hoard millions of dollars worth of properties, assets, and cash outside of mainland China, are the Swiss offshore banking industry, Hong Kong real estate market, and foreign stock markets, mainly. Though, local financial authorities have started to be strict on these investors having a large amount invested outside of mainland China.
In the last couple of months, the Chinese government has started to coordinate with agencies in 83 countries that follow the Common Reporting Standards (CRS) established by the Organization for Economic Cooperation and Development (OECD). With that, China declared, “all 83 countries under CRS and OECD will share data related to financial accounts held by Chinese citizens, allowing the government to target high profile millionaire investors.”
The movement by the Chinese government with the OECD and CRS is supposed to result in direct communication and collaboration with the Virgin Islands, Bermuda, Luxembourg, Switzerland, and the Bahamas, five regions that investors chiefly rely upon to save significant amounts of capital in the offshore banking sector.
The real estate sector of Hong Kong has become the easy choice for Chinese investors. Individuals from China can simply set up a shell company in Hong Kong and get a bank account with the name of the firm to move funds from China to Hong Kong. They can buy properties using these funds, easily.
In the scenario wherein the rush of investors from China to the real estate market of Hong Kong have created difficulties for local residents to acquire properties.
The Chinese government is finding it challenging to regulate money flowing from China to the Hong Kong real estate market. To control this, it needs a highly impractical process of banks cooperating with the government to censor and monitor every large transaction.
Though, the government can put the restriction on individual investors holding large amounts of foreign assets and cash in offshore savings accounts.
Apart from the Hong Kong real estate and the stock market, the only option for the investors is cryptocurrencies like bitcoin and Ethereum. As there is no connection between crypto and the broader financial market, it could attract investors as a safe haven against the global economy.
Talking about crypto, Terence Tsang who is a digital asset exchange executive based in Hong Kong and Taiwan, noted in an interview that, “the over-the-counter (OTC) crypto market of China still remains active subsequent to the imposition of a blanket ban by the government.” He added, “The latest warning and potentially increased monitoring of foreign platforms is targeted at a batch of smaller exchanges that had claimed to be foreign entities, but are in fact operating in China claiming they have outsourced their operations to a Chinese company”.
