| SHANGHAI, July 9
SHANGHAI, July 9 State-owned Bank of China (BOC)
denied on Wednesday a TV report alleging
some branches had helped clients launder money to take out of
China, saying these branches were involved in a legitimate
programme to move capital offshore.
The report, aired by China Central Television (CCTV), was an
undercover investigation that focused on a programme offered by
BOC called "You Hui Tong". The programme is designed to help
Chinese individuals taking part in investment emigration
programmes in other countries to move cash offshore in amounts
the exceed the current $50,000 annual cap.
The report featured what CCTV said were BOC employees
explaining the programme, which they said routed funds through
BOC branches in Guangdong province. The employees also said they
were not allowed to openly promote the scheme to customers. The
state broadcaster, quoting unnamed BOC sources, said the bank
kept the programme secret because it knew it was illegal.
In a statement, BOC said You Hui Tong was a legal investment
programme permitted under a wider pilot project testing the
opening of China's tightly managed capital account.
"Reports of 'underground money farms' and 'money laundering'
have no basis in fact," it said.
The bank said the project was part of the government's
efforts to open the capital account and increase the
international popularity of the yuan, and that branches of other
banks in Guangdong province offered similar services.
The foreign currency regulator, the State Administration of
Foreign Exchange (SAFE), which oversees the movement of money
across the China's borders, did not respond to faxed requests
for comment on the report.
Shares in Bank of China closed down nearly 3 percent in Hong
Kong on Wednesday, lagging the main index ended down 1.6 percent
lower. In Shanghai, the shares closed 0.8 percent down.
The ongoing anti-corruption campaign in Beijing has
triggered concerns that officials fearful of being targeted are
proactively smuggling assets outside of the country, but not all
money moved offshore is linked to graft.
Investment programmes that grant Chinese passport holders
citizenship or residency in exchange for substantial investment
have become popular with wealthy citizens. Many Chinese also
move money abroad to buy property in cities such as London, Hong
Kong and Vancouver.
A network of gray-area offshore mortgage companies in has
sprung up to circumvent the $50,000 annual cap on offshore
transfers. Investors have found other loopholes as well,
including using Chinese bank cards in Macau to buy non-existent
products in exchange for hard currency.
The introduction of multiple pilot programmes testing the
limited opening of China's capital account has complicated the
matter, with different regional regulators implementing various
Economists have warned that such regional programmes, like
those in Shanghai's free trade zone and in Guangdong's Qianhai
free trade zone, will be difficult for regulators to "ring
fence" from the rest of the country.
($1 = 6.1994 Chinese Yuan Renminbi)
(Reporting by Pete Sweeney, Xie Heng in BEIJING and the
Shanghai Newsroom; Editing by Miral Fahmy)