2014-07-11

BOC Pilot Program Temporaroly Suspended; 1 Home in Beijing Becomes 6 in Houston

Bank of China has temporarily suspended You Huitong to facilitate the central bank investigation.

The pilot reform was supposed to be low key and bank employees making outrageous statements about money laundering to potential customers was far from low key. Several banks were involved in the pilot program, including Citic and ICBC, but only at a specific branch. The bank was not supposed to allow any government officials or their relatives to use the service. The service is for wealthy clients with legitimate business needs, but only for investment emigration or overseas property purchases. Proof in the form of contracts or immigration papers were needed.

One banker points out that funds would need to be washed before they went through You Huitong or a similar service. It's a service to move money overseas, not to hide the source of the funds. Supposedly, if the funds exceeded $300,000 (6 times the current legal limit), special approval was needed from regulators. However, since the bank could break up the transactions, technically there may have been no limit.

ZeroHedge speculates that the service may have partially been a way for the central bank to move hot money (dollars) out of China and that trouble for this service could hurt the U.S. housing market. Did China Just Crush The US Housing Market?
Which is why it is not at all surprising that as SCMP reports, the scheme was launched in 2011, just as China's scary encounter with soaring inflation was unfolding and Beijing needed a fast way to solve the overabundance of domestic liquidity. Basically at that point the central bank agreed to keep its eyes shut as wealthy oligarchs transferred funds to developed world nations, something the US government and NAR were delighted by as it kept real estate prices (if only at the very top) soaring, dragging the entire housing market higher with them. Furthermore recall: the one thing the Fed has wanted more than anything for the past several years is inflation. And since the US economy is nowhere near strong enough to create the kind of inflation needed, with the bulk of the Fed's reserves ending up in the capital markets and the latest and greatest credit bubble, the Fed would be more than happy to import some of China's inflation from it, even if that means a housing market which at the upper end is no longer accessible to anyone but the 0.0001%.
A slowdown in China's real estate market may be the bigger threat, but depending on how much money was flowing through this service (estimates are for more than $10 billion in the first half of 2014) an end or restriction on the pilot program could have a serious impact on the luxury market. According to the National Association of Realtors, Chinese bought $22 billion worth of U.S. property in the year ended March 2014, or 24% of the foreign purchases of U.S. real estate. Total international sales are only about 7% of the market, but Chinese were making the largest purchases. Compare that to the 10 billion yuan ($1.6 billion) estimated to have flowed through Bank of China's service alone in 1H 2014. More on China's U.S. real estate appetite: China's Colonization Of America's Luxury Real Estate Market In One Chart

Here's evidence of Chinese buying overseas: 中国人卖房海外抄底楼市:北京1套换休斯顿6套. One home in Beijing becomes six homes in Houston. (Full Google translation below). In this example, Ms. Li sells her Beijing apartment for 6 homes (or apartments) in Houston. She earns more than $400 in monthly rent on each home, with that money she can rent a similar apartment to the one she owned in Beijing and have 10,000 yuan left over.
Last year, a Beijing native Lee sold her only a house, this is located in Chaoyang District shuangjing old floor for her two-bedroom Bed raised more than 300 million yuan . Use the money, she successfully start a six suites in Houston. Lee's thinking is: a monthly rental house in Houston can gain more than 400 dollars, you can put the original back to Beijing to rent a house with rent, remove this part of the expenses, they can earn nearly 10,000 yuan per month, per year a gain of more than 100,000 yuan.

Despite the recent news about Bank of China, neither this article nor many of the articles before it have asked how Chinese are able to move so much money out of the country. The difference may simply be that, unlike the BOC employee caught on camera, people like Ms. Li did not describe their method of moving cash overseas as "money laundering."


中行被疑洗钱暂停优汇通 监管层:客户不得是官员
After nearly two days of fermentation, about the Bank of China [0.00% funding research report ] discussed "excellent Huitong" business continues. For some front-line employees, untold fortune in this fashion, a requirement has been low-key regulators of "pilot business", and finally "Sudden Impact."

According to bankers close to the pilot's estimate of this business, the stock of the current BOC Remittance excellent business has nearly 20 billion yuan, only the first half of this year amounted to tens of billions of scale.

According to the Bank of China in the 21st Century Business Herald reporter obtained inside information presentation, excellent Huitong full name is "excellent BOC Remittance wealth" is "in order to achieve the RMB internationalization, the relevant state departments of commercial banks in some pilot cross-border renminbi business in large transfers environment, for the Bank of high net worth clients achieve compliance through legitimate channels will be used to fund clients overseas customers reasonable business purpose. "

This business is the biggest breakthrough point, to export directly in the territory of large renminbi by foreign banks exchange foreign currency swap lines to break the current individual does not exceed 50,000 annually dollar limit. According to the 21st Century Business Herald reporter who place from which to understand the relevant business lines, regulators pilot file, did not mention the size of large cap funds.

For media reported the central bank anti-money laundering bureau, SAFE has been assigned to the Bank of China news, people close to the Central Bank and the Bank of China were to 21st Century Business Herald reporter gave a denial. Bank of China in Guangdong Province who also confirmed that after CCTV reported, now the business has basically been suspended, is to accommodate self-examination.

In addition, domestic banks' foreign exchange business is managed by the SAFE, but the Land of cross-border RMB business is excellent central management. July 10, the central bank governor Zhou Xiaochuan said answering reporters' questions related activities in the open, "just happened yesterday, not enough time, take time to figure out the problem."

Pilot scale not set limits

Remittance business presentation materials based on excellent, excellent Huitong's main target customers for the head office level migration cooperation agency cooperation with BOC customers. Specific business processes is that customers need to deposit funds in advance a month within BOC account BOC Remittance one week before the official audit of customer information, capital "T +1" working on client overseas accounts.

Charges constitute include "the amount of remittances (foreign exchange purchase price after) +0.1% remittance fee (minimum 50, maximum 260 yuan) + cable charges (currently temporarily exempt)." CCTV reported that before the "Bank fee rate of 0.3% -0.4%."

Many bankers said that compared to underground banks, to accept the strict supervision of state-owned banks have more stringent audit in the relevant documents on capital flows more easily monitored. The breakthrough $ 50,000 annual limit, it is the pilot of "innovation lies."

For single limit problem, another Shenzhen understand this business bank account manager, said the relevant departments are not clearly defined, because each transfer is reported, the central bank has a single and total control, you can always halt. "Because that in itself is a pilot value-added services, and primarily to high net worth clients, so do the Shenzhen area is not large, there are many branches did not launch this business." Said customer manager.

But this trial is quite low-key, is strictly limited to the Bank of China, ICBC, China CITIC Bank, several branches of the extremely limited scope includes, and is limited to the scope of the pilot business for two purposes, namely in an open project, only investment immigration or Overseas purchase of real estate for the use of funds. The target customers are required not to be sensitive to national civil populations, including government officials and their relatives.

"What I know is that, despite the regulatory agencies did not limit the scale of the single business, but in the course of the Bank of China intends to drive down the amount of specific business, is to guard against the risk of money laundering, while the specific business assessment index, did not requirements in accordance with the scale of operations for staff assessment, but in the number of customers. "said the above Shenzhen client manager.

Excellent Huitong not "cross-border remittance"

This business with the general international monetary remittances biggest difference is that the export of general international foreign exchange remittance is to be replaced, then swift (for Worldwide Interbank Financial Telecommunications Association) to export, and excellent RMB Remittance is directly exported to After the overseas branches, and then by overseas branches to swap.

A Bank of Shanghai, who confirmed to reporters, after the business only in the Guangdong branch of the pilot, customers nationwide can, landing Guangzhou branch line, but then some of the key areas of primary branches also have a desire to participate in the pilot. Customers mainly from the north of the business, on the broad, deep, Shandong, Liaoning and other regions. BOC has a clear standard for document review, including at least the following three items, namely proof of income sources, uses proven identity.

Among them, the sources of income, including, without limitation, proof of personal tax clearance certificate, lease or own real estate dealings proof of income, audited financial statements of companies, holding companies dividend proof to prove that the loan contract other sources such as remittances of funds materials.

The uses include, without limitation, the purchase proved (to) contract, investment immigration related documents, over the validity of the contract must provide relevant text documents such as notary witness and so on. As evidence for the full English version, is required to provide Chinese translation.

"We believe that the business itself is no problem, in 2011, the central bank will give the Bank of China in Guangdong pilot qualifications, all processes are refereed, are reported each business regulation. BOC head office level business is to promote unity, the line leading research Shihai special mention in Guangdong been to this product. "Bank of China branch in Guangdong an official said.

The possible problem is that some employees false propaganda, and even forged material lax audit related materials, etc., but he thinks it involves the issue of illegal operations, and can not be completely linked to "money laundering."

Earlier reports indicated that the staff at the Bank of China and immigration intermediary conspiracy, forgery company by the immigration agency and false water contract, the customer funds from unknown sources whiten as legitimate commissions, and these contracts were given forged bank staff admissible Bank staff, or be used to customers for deposits pledged, then pledge loan, then go through this business to blame.

But insiders also pointed out that any payment instruments are likely to become "money laundering" channel, the gifted Huitong itself, its essence is RMB cross-border transfers of business, as the RMB funds from the formal channels to overseas channels, these funds are suspicious Prior to this it had been "washed" so simple to excellent Huitong equivalent to money laundering is not appropriate.

However, in this business, the Bank should assume the functions of the corresponding verification of funds, there is no clear statement.

Business has yet to explain the legality of

Then "the warranty loan" for example, the business is also doing similar remittance of funds business.

City firm, according to people who participated in the "loans backed" business introduction, "the bail loan" aimed at corporate customers, locked inside a bank RMB, foreign currency corresponding sum lent, and breach of contract by a foreign entity, Banks back lock yuan, is essentially equivalent to the remittance of funds. Some cases, the various branches of the material audit standards are not entirely consistent, there may be opportunity for material audit lax and even forgery materials, there is "money laundering", but not necessarily with the "money laundering" essence.

May 19 this year, the State Administration of Foreign Exchange issued "on the release "cross-border foreign exchange regulations guarantee" notice "(" Circular 29 "), and further realization of the basic foreign exchange management policy can guarantee cross-border and cross-border guarantees unity Exchange, cancel or significantly simplify cross-border security-related administrative examination and approval, to further promote capital account convertibility. Especially for the canceled amount of the loan within the warranty control, unnecessary restrictions on eligibility conditions.

City firm pointed out above, the new rules will help Chinese enterprises in overseas markets to raise funds to ease the plight of Chinese enterprises overseas financing and support its overseas expansion.

So the pilot has its significance Huitong excellent help immigrants or foreign purchase of real estate investment, but in the specific operational level, how to ensure that operational staff related materials carefully verified to ensure that the intended use of funds compliance, there needs to be strengthened and perfected.

In fact, the banks participating in the pilot, and although there is no formal documentation guidelines, but there is an unwritten rule that "if the upper limit of more than 300,000 yuan annual remittance required to apply to SAFE branch or central bank."

Bank of China (Canada), marketing director of personal finance Jiang Donglin had previously said in an interview, although the upper limit of the highest priority of every Huitong has 10 million yuan (about 170 million Canadian dollars), but the operation can be exported through a multi-pen . Therefore, with regard to the export amount of money through the actual operation, technically there is no limit on the maximum amount of.

A North American immigration agency so, the general acceptance of personal funds is immigration to the sea, there are three main ways that personal remittances in accordance with the provisions of the SAFE limit of $ 50,000 in the Bank of China Remittance gifted, find a friend to swap. The first way most insurance, but the longest; second way to swap the slightly higher cost; convenient third way, but the risk of being challenged immigration Friend funding sources exist.

It is worth noting that if you choose Bank of China Remittance excellent, occasionally appeared recently received from USCIS on excellent customer Huitong remittances additional documents required, and the need to prove the legitimacy of this service.

"We tried to contact the Bank of China-related business staff, but have no way to get excellent Huitong expressly provided proof of legitimacy. Documents mainly materials are provided by the bank unilaterally, not very convincing." He said the pilot had three , the urgent need to give regulators more clear about this business.


中国人卖房海外抄底楼市:北京1套换休斯顿6套
to adjust the domestic property market, as overseas buyers fiery Tim a wood. July 8th U.S. National Association of Realtors released report shows that in the year ending in March, the Chinese people ho throw 220 million dollars to buy a house in the United States, an increase of 72%, accounting for 24% of total foreign buyers. In other words, overseas buyers to buy a house in the United States for every $ 1, there are 24 cents from the Chinese.

It is noteworthy that, people wave of overseas buyers are from the original "rich class" to "middle class" spread, small overseas property investment gradually warming. Analysts believe that the domestic value of the property overdraft, the economic slowdown has become a major cause of the recent surge in the number of overseas people to buy a house. Meanwhile, the uncertain policy variables, changing the overseas real estate market, traps and other investment transactions sea brings many risks surfaced.

Overseas Chinese fishing gold buy off "middle class" is also to have a share

Last year, a Beijing native Lee sold her only a house, this is located in Chaoyang District shuangjing old floor for her two-bedroom Bed raised more than 300 million yuan . Use the money, she successfully start a six suites in Houston. Lee's thinking is: a monthly rental house in Houston can gain more than 400 dollars, you can put the original back to Beijing to rent a house with rent, remove this part of the expenses, they can earn nearly 10,000 yuan per month, per year a gain of more than 10 million.

"Investment in the United States to buy a house, except property taxes and other fees, the yield can reach 8%, coupled with higher rental Bibi, six or seven years could cost recovery; contrast, a property to recover the cost of investment in Beijing and perhaps spend 100 years, which is also a relatively small number of overseas investment. "as a real estate investment company specializing in overseas institutions, azelaic Guoxin Lu Crane, president of the United States to vote in an interview that the real estate channel BEIJING, current in addition to the traditional sense of the rich keen to invest overseas to buy a house, the proportion of middle-class home to sea is increasing year by year.

Miss Crane azelaic analysis pointed out that "Chinese people overseas to buy a house, basically divided into owner-occupied and investment. Overseas investment type house price lower in the U.S., the total price of the majority of buyers to purchase a house in the $ 100,000 or less, which is more the financial crisis of foreclosure law, even lower than the cost of the construction costs, so the higher the value of investments. "

"A lot of people ask me why Americans are so cheap they do not buy a house?" Miss Crane azelaic that it was because of the different American and Chinese people's consumption concept, they are not so keen to buy a house, many people have not so much money to buy .

It seems in the land crane azelaic, U.S. real estate market is more mature, although because of the impact of the financial crisis had hit bottom once, but now has begun to steadily warmer, and therefore the value of investments is also more obvious.

In fact, as Ms. Lee as "smart," the Chinese foreign customers to buy a house and a few this year, the number is growing rapidly. U.S. National Association of Realtors released July 8 report, one year from April 2013 to March 2014, the total amount of Chinese buyers in the United States reached $ 22 billion, soared nearly 80 percent year on year, accounting for foreigners in the United States about 24% of the total purchase.

The report also shows that the trading price of existing homes in the United States is $ 199,000, while the Chinese people in the United States to buy a house in the value of each transaction price of $ 523,000, 2.6 times the U.S. average. Moreover, Chinese people prefer cash buyers, more than three-quarters of Chinese buyers opt for cash to pay back the principal guest.

For overseas customers buy Chinese fishing gold warming reasons behind Centaline analysis, principal analyst Zhang Dawei said the Beijing real estate channels, "the domestic real estate value and advance the economic slowdown in the overall economic recovery and abroad, real estate investment in higher value. So there are a lot of people to sell in the domestic real estate, to foreign investment. "

Dawei that there is a certain gap compared with developed countries, environmental quality, education level, etc., are also considerations people choose home or emigrated. At the same time, he pointed out, does not rule out that some gray income outflow through this route.

In Shanghai E-House Real Estate Institute researcher Yan Yuejin seems that overseas investment boom is currently the restriction area credit limit under the decentralization policy embodied strategy.

Overseas hidden risks or trapped in the "Chinese thinking"

"In the U.S., buyers and sellers have no direct financial transactions, through to key members of the legal team for the Housing Management Centre transaction. Whether the debt the agency will house, whether trading, housing quality background investigation. "Miss Crane azelaic expressed WASHINGTON real estate channel.

But that does not mean you can sit back and relax foreign investment, not everyone can achieve "hunters", "appreciation", "foreign fishing gold" dream.

Miss Crane azelaic example, saying that there are buyers had bought some cheap house in Detroit, may be priced low, it may have a high rate of return, but more chaos surrounding security, it is difficult to find a suitable tenant, the rent will be facing trouble. "This house sounds beautiful, but it is difficult to operate, may eventually become a hot potato." In her view, the root causes of the failure of such investment buyers is that the lack of concrete on the real estate investment, a comprehensive understanding .

Shanghai E-House Real Estate Institute researcher Yan Yuejin also pointed out that part of the agency for the promotion of results gained, it may overstate the return of such overseas investments, but deliberately concealed the risks.

Centaline Dawei, chief analyst at the real estate channel on the new network, admits: "Chinese people overseas investment by Chinese real estate thinking this decade, is likely to go wrong."

In Dawei seems that many domestic buyers in the past decade has accumulated a lot of speculative investment in wealth, but most of all by means of a high credit leverage. This pattern of skyrocketing housing prices in the process, will be lucrative, but in a more balanced economy, buy investment property abroad is not high, it is likely there will be a lower rate of return on real estate divestment difficult issues.

In addition, Zhang Dawei analysts believe that the impact of events such as the beginning of Malaysia Airlines, Canada announced the end of the investment immigration program, Jeju Island, Korea recently raise the threshold for investment immigration policy variables, also pose potential risks for overseas real estate investment.

How to avoid risk? Industry: Select intermediaries need to be cautious

Economic, market fluctuations, exchange rate changes, cultural differences, geographical, political factors, have become an important weight may affect China buy off overseas investment success. Exotic face do not understand the market, how the greatest extent in the overseas buyers avoid the risk?

It seems that in many of the industry, overseas investment to buy a house, whether it is occupied or investment immigrants from rental housing should be of particular concern to local good or bad, high and low prices, property rights and other aspects of the evaluation criteria, such as the tax system even for real estate taxes, also need to understand, not in accordance with their investment in the country to choose inertia.

Miss Crane azelaic suggested the risk may exist in a variety of overseas real estate investment transaction environment, policy, etc., can be prevent by choosing a reliable investment intermediaries.


According to Miss Crane azelaic, under normal circumstances, would reasonably recommended by the agency or owner-occupied investment demand, as buyers. In the United States, if the type of housing investment, in determining the transaction, the buyer must first pay the ten percent deposit to the housing management company, and locked houses. Subsequently housing management center houses the background investigation, settlement paying back the remaining ninety percent after the investigation is completed. This process can be completed in about a month or so. There is demand for loans from living the type of housing you need three to four months.

Meanwhile, Miss Crane azelaic also remind interview intention to purchase real estate overseas consumers, intermediaries companies have good and bad, for the background investigation can not be ignored. "In other countries, intermediaries must hold a license practitioners to provide professional services."

"Intermediary is certainly helpful, but also good and bad choice of intermediaries, can save the thing; .. wrong choice, the trouble is even greater," Zhang Dawei said so.

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