New 100-yuan notes wheeled out in the factory of China Banknote Printing and Minting Corporation, Oct 29. (Photo: Xinhua)
New York Times: Chinese Start to Lose Confidence in Their Currency
HONG KONG — As the Chinese economy stumbles, wealthy families are increasingly trying to move large sums of money out of the country, worried that the value of the currency will fall and their savings will be worth less.
To get around the country’s cash controls, individuals are asking friends or family members to carry or transfer out $50,000 apiece, the annual legal limit in China. A group of 100 people can move $5 million overseas.
The practice is called Smurfing, named after the blue, mushroom-dwelling cartoon characters, and it is part of an exodus of capital that is casting doubt on China’s economic prospects and shaking global markets. Over the last year, companies and individuals have moved nearly $1 trillion from China.
Some methods are perfectly legal, like investing in real estate elsewhere, buying businesses overseas and paying off debts owed in dollars. Others, like Smurfing, are more dubious, and in certain cases, outright illegal. Chinese customs officials caught a woman last year trying to leave the mainland with $250,000 strapped to her chest and thighs and hidden inside her shoes.
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WNU Editor: Fortunately for the Chinese government they have huge foreign cash reserves to shore up their renminbi. And while a decline in their currency has spurred more Chinese exports, it has also spurred more demands from foreign countries that may result in prohibiting Chinese imports. My prediction is that the Chinese will handle this currency decline adequately that would not result in a crisis, but the days of China's economy booming each year in the double digits are now gone .... and that will create other problems for the Chinese.
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