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For many years China has attracted an influx of capital.
Recently, China's capital outflow is gradually escalating.
Chinese research institution showed that 60% of China's
annual GDP goes away as a foreign capital.
Central Committee for Discipline Inspection's data shows
China's illegal capital outflow continues to increase and has exceeded $1 trillion last year.
Reports of international organizations indicate, the outflow
of funds comes back to China as direct foreign investments, and enjoys government's tax incentives.
China is subjected to suffering from both perspectives.
Thus experts think China faces the danger of being hollowed.
On January 18, Chinese media cited internal announcement
of the Central Commission for Discipline Inspection.
According to incomplete statistics,
in 2010, illegal capital outflow was $412 billion,
in 2011, was $600 billion, exceeding $1 trillion in 2012.
It is expected this number will be $1.5 trillion in 2013.
University of South Carolina' Aiken Business School
Professor Xie Tian thinks,
China's illegal capital outflow causes two others
damages in addition to the loss of wealth.
Xie Tian: "They return to China as foreign investments,
and take advantage of tax, land transfer benefits, etc.,
which actually cause the 2nd damage to China.
Of course, if these investments produce something,
the earnings will be transferred to overseas again, causing wealth loss for the third time."
If the goods manufactured are for exports, they can take
advantage of the tax rebate policy and exploit China again.
Xie Tian further pointed out that while these investments
cause multiple exploitation to China's wealth, they also cause confusion to China's economy.
Xie Tian: "Of course these money have an impact on China's
GDP. It falsely raises the GDP. It is actually deceptive."
VOA reported that China's capital outflow
usually follows the same scenario.
Namely, leaving the country as cash; setting up a company
in an offshore financial center; faking import-export books;
exploring other secret ways for transferring money.
Xie said, often when Chinese companies buy assets abroad,
they report a price 10 times higher than their real value.
They conspire with the Chinese Communist Party (CCP)
senior officials to transfer money overseas.
Another way is to purchase patents,
which is also a common approach.
Data shows after the new CCP leader Xi Jinping took power,
CCP's corrupt officials accelerated their money transfers.
Xie Tian: "Except for effective supervision on CCP's power
with central accounting system, legal system,
and the media, it is hard to put an end to the capital outflow.
I think the loss will continue and will exacerbate.
Along with the collapse of the CCP, corrupt officials
will accelerate the outflow of funds out of fear."
Fudan University' Professor Chen Dingli told VOA,
that China is 'bleeding.'
Capital outflow by Chinese is only a small portion.
The money taken away by foreign investments is 60% of China's GDP.
Renowned economist He Qinglian discusses
"fake foreign investments" in an article.
He Qinglian points out that for a long time,
a good part of China's foreign investments are fake.
Money are transferred to overseas by Chinese, who register
a company, and the money come back as foreign investments.
According to CCP's official information,
there are three types of "fake foreign investments."
The first is Chinese funded enterprises with business entities
in HK, Macao and foreign countries,
who come back to establish "foreign investment"
with the need for development.
The second is companies originally with domestic funding,
which came to invest after registering a company overseas.
And the third type is the original domestic company
which register as a shell in financial centers overseas.