July 02, 1999
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| July 02, 1999 | atimes.com | |
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| China Falsified export claims boost capital flight in China BEIJING - Capital flight has been on the rise in China in recent years. According to a preliminary estimate in research completed by the National Economic Research Institute of the China Reform Fund recently, about $48 billion fled China in 1998, a figure quite beyond what had been expected. Capital flight includes private capital and proceeds from trade. Private capital in flight makes a considerable proportion, as a result of inadequate protection. Capital flight also includes illegal proceeds, such as those from corruption. Capital fled through foreign trade amounts to between $10 billion and $20 billion as a result of malpractice in reporting fewer exports at low prices to stop the proceeds in excess of the actual amount. People used to think capital mainly fled through exports. But a recent seminar in Beijing revealed that just the contrary was true. The bulk of capital fled through falsified imports as 52 percent of import customs declaration forms last year were found to be false. Economists attribute capital flight to two factors: Misgivings about the Renminbi and a sense of insecurity due to tightened capital controls. Capital flight is universal in all developing countries and there are no effective measures to hold it in check, says the institute. Capital controls, which succeeded in helping China withstand the Asian financial crisis, are correct and useful in the short run and effective in controlling some state-owned or semi-state-owned trading and financial organizations. First of all, says the institute, it is necessary to effectively protect private property. The latest statistics from the State Administration for Industry and Commerce show that by the end of March of this year, there were more than 30 million private industrial and commercial enterprises. Secondly, it is necessary to carry out reforms of investment and enterprise systems and to grant national treatment to foreign-funded enterprises. There are now many foreign-funded enterprises that have been launched by Chinese companies. Thirdly, the exchange system should also be readjusted. There is no problem in keeping the RMB unchanged in the short run. But in the long run, the foreign exchange rate has to be made flexible. At present, what China should do is to improve the exchange system under the current account, making the service minute and the procedures more flexible and efficient, says the institute. (Asia Pulse/XIC) | |||||||||
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