Some of China’s largest banks have temporarily suspended a scheme that allowed customers to send large sums of money to relatives outside the country, getting round official capital controls, the Wall Street Journal reported Tuesday.
Their move comes after the Chinese central bank, the People’s Bank of China, started to look into claims by state TV broadcaster China Central Television that the scheme was illegal.
The issue expresses the dilemma faced by the Chinese authorities as they pursue apparently conflicting policy goals.
On the one hand, they want to integrate the Chinese financial system more with the rest of the world, hoping to channel investment and spending more efficiently than the centrally-planned Chinese economy has done in the past. On the other, the government, which is in the middle of a high-profile anti-corruption campaign, wants to stop officials moving assets abroad, especially if it suspects those assets have been acquired illegally.
The now-suspended service, known as “You Hui Tong”, allowed individuals to take part in programs set up by other countries to encourage immigration in return for investment. The investment involved typically exceeds the annual cap of $50,000 that Chinese citizens are allowed to invest abroad.
The WSJ said Bank of China Ltd, Industrial Commercial Bank of China Ltd and China Citic Bank had all halted the program. It said Bank of China denied suggestions that the remittance scheme was illegal.
The PBoC had allowed a few select banks to set up the scheme on a pilot basis two years ago in Guangdong in southern China.
Curiously, the TV company that first aired the allegations of illegality has also encountered problems of its own in recent days, as eight staff members of CCTV’s financial channel have been detained recently, including one star presenter. The CCTV program that made the allegations about the banks had however run on another channel. There is no evidence to suggest the two incidents are connected.