Causes of capital flight

Generally speaking, asset flight is mostly caused by economic reasons, but China's asset flight is mainly caused by a large number of corrupt officials fleeing with money through misappropriation, fraud and other means. Asset flight may have a negative impact on investors. Asset flight is generally accompanied by drastic changes (depreciation) in the exchange rate.

Some owners have doubts about the protection of private property rights; Corrupt elements and smuggling groups transfer funds. The economic system is not perfect and the management is weak. A country's political instability, the implementation of foreign exchange control or restrictions on investment applications: just as the asset market is an economic barometer, when assets flee, it is usually a precursor to economic recession. The large-scale asset flight event was the Asian financial crisis of 1997. After domestic and foreign funds fled from Asian countries, it took the region 2-3 years to get rid of the recession. As China also implements strict foreign exchange control under assets, it is unlikely that there will be a large-scale asset flight.

In China, asset flight refers to the unauthorized and illegal outflow of assets beyond the actual control of the government. Asset outflow cannot be regarded as asset flight. Most of the asset outflows are approved and compliant outflows. For example, approved debt service, foreign direct investment, deposit or release of assets of financial institutions to overseas peers, purchase of overseas securities, purchase of trade credit, etc. Even in the unauthorized illegal outflow, some of it is used for normal investment and business purposes. The reason for illegal outflow is mainly to avoid complicated approval procedures, or to reduce other transaction costs. Asset flight exists not only in developing countries, but also in developed countries. Asset flight is not only to evade foreign exchange control, but also to evade domestic political and economic risks, evade tax collection and management, or launder money and transfer assets. Judging from the actual situation in China, the reasons for asset flight mainly include the following aspects: fearing that private legal assets will be occupied, some private entrepreneurs take measures to withdraw their assets or buy foreign "green cards" and turn their assets to so-called "safe haven" countries. At the same time, because China still strictly controls assets, the property of immigrants can only be remitted from the income part, while the gold part cannot be transferred out, which will also lead to disguised flight.