The growing wave of overseas property purchases by Chinese nationals could fuel money laundering, Chinese state media has warned, after it emerged recently that a Chinese student reportedly bought a C$31 million ($23.5 million) mansion in Canada.
In an unusually stern report over the weekend, Xinhua, the state news agency, said that some Chinese are buying homes overseas as a way to launder proceeds of illicit activities. “In fact, US, Canada, Australia and many countries’ property markets have become a hotbed for international money laundering,’ the report said. Adding that, “Governments of many nations have begun taking notice of this but overall regulatory difficulties remain.”
The official media report followed a revelation in the Vancouver Sun that the new owner of one of the city’s most expensive homes a 14,600 square-foot (1,350 square metre) mansion with views of the Pacific and of nearby mountains had been purchased by a Chinese student, Tian Yu Zhou, for a record C$31.1 million ($24 million).
“Tuhao” and Fugitives Parking Their Cash in Overseas Homes
Vancouver, where some estimates indicate a third of all homes put on the market are now snatched up by Chinese buyers, is also home to Chinese graft suspect Michael Ching Mo Yeung, who is now a prominent property developer in the city.
Calling many Chinese buyers “Tuhao”, derogatory Chinese slang for rich people who lack class, the article said that suspicions of money laundering via home buying are not “without basis.,” and cited warnings and reports released by government agencies and industry associations from Australia, the US and Canada.
The warning from Xinhua came amid intensifying scrutiny over an increasing number of property deals by Chinese individuals, who eclipsed Canadians last year as the biggest foreign buyers of US homes. Chinese are also pouring investment into property markets in other developed nations.
Australia — beloved by Chinese for its sunshine and clean air — has also proven to be popular. Last year, the wife of a PLA soldier turned business tycoon bought a $13.4 million home in one of Melbourne’s richest suburbs, just two months before a Chinese property developer snapped up a record $51 million estate from Australian tycoon James Packer.
Anti-Corruption Drive Targets Chinese Migrating Overseas
In linking money laundering to home purchases overseas, Xinhua is echoing President Xi Jinping’s anti-corruption drive, which has targetted dishonest Chinese officials, including those who have already fled beyond Chinese borders or moved their assets overseas.
Last year China included Michael Ching, whose father had been the head of Hebei province before being expelled from the party in 2003, on a list of 100 most wanted international corruption fugtiives. The younger Ching, who became a permanent resident of Canada in 1996, but has reportedly been denied citizenship, is accused by China of graft and illegal asset transfers involving proceeds from corrupt dealings by his now-deceased father.
In sentencing former state railways ofiicial, Zhang Shuguang, to life imprisonment for corruption, Chinese authorities also highlighted the former government employee’s 2002 purchase of an $850,000 Los Angeles home, in an area of the city which the Chinese newspaper Global Times called “the favorite place to settle down for Chinese corrupt officials who have fled.”
In 2015 alone, 850 fugitives have returned to China to face corruption charges as part of a sweeping campaign by Beijing to extradite corrupt Chinese officials living overseas. While the Xinhua report did not single out officials, in this latest report, the link between overseas home purchases and money laundering could be an indicator of official opinion on the trend.
US and Australian Authorities Examine Foreign Home Ownership
Concerned about illicit deals, the US Treasury Department announced this January it would require disclosure of personal information for all cash buyers who purchase real estate in Manhattan and Florida’s Dade County, including Miami, through shell corporations.
Similar moves are underway in other countries. In Australia, the government has stepped up a crackdown on illegal foreign investment in its domestic housing market, with almost 500 properties being targeted, the Wall Street Journal reported. In Canada, the authorities said this month they were tracking money laundering via home purchase as the country beefs up data collection regarding foreign buyers, according to local media.