HONG KONG – China’s capital controls remain among the world’s strictest. Individuals are generally limited to transferring US$50,000 (S$64,000) overseas each year, while emigrants are given a one-time opportunity to move their assets abroad. Concerns about China’s economic outlook and a drive by President Xi Jinping to reduce inequality have prompted many wealthy families to seek a financial foothold overseas. Households, institutions and companies moved a record US$807 billion, roughly, out of the country in 2025, according to estimates from the Institute of International Finance.
But demand for overseas assets – as well as the rapid accumulation of private wealth – has fuelled a vast underground industry dedicated to circumventing capital controls. While the true scale of illicit capital flight is impossible to quantify, court records, regulatory disclosures and interviews with industry participants point to sprawling networks that move billions of dollars offshore each year. This has drawn increasing scrutiny from authorities. China’s latest crackdown on overseas brokers accused of helping mainland clients trade offshore is the latest sign that
regulators are intensifying efforts to monitor cross-border capital and ensure tax compliance on such money flows. Here are some of the most common ways mainlanders circumvent the government’s strict rules to get money out of China. Smuggling cash across the border Historically, one of the simplest ways to evade China’s capital controls was to physically move cash across the border. Money was often concealed in suitcases, vehicles and on boats typically traveling to Hong Kong or Macau. Tighter enforcement has made the practice riskier and
less efficient than other schemes, although it still occurs. In 2024, Hong Kong authorities arrested a 62-year-old woman at the Lok Ma Chau border crossing after they found about HK$330,000 (S$54,000) worth of undeclared banknotes concealed in a tailor-made vest. “Smurfing” involves recruiting people on the mainland who have not used their annual foreign-exchange quota of US$50,000. By pooling the quotas of dozens of individuals, brokers can aggregate large sums of money and move them overseas in a series of seemingly legitimate transfers. Government investigations
show the practice can operate on a vast scale. In one case reported by state media, a man recruited 102 individuals to help transfer about C$6.8 million (S$6.3 million) overseas in 2020. Mirror transfers or underground banking One of the most common ways of moving money out of China is through underground banks, which operate an informal transfer system known in many parts of the world as hawala. Typically, a customer on the mainland transfers money to a local facilitator. Rather than physically moving those
funds across the border, members of the facilitator’s network arrange for an equivalent amount to be paid into an account controlled by the customer outside mainland China. The system depends largely on trust between participants and the underground bankers who coordinate the transactions. According to the UK’s National Crime Agency, Chinese underground banking networks often settle transactions using funds generated by criminal activities such as drug trafficking, cigarette smuggling, illegal immigration and human trafficking. A gang with operations in both China and the UK, for
example, might front the money to a recipient in London and later be reimbursed by underground bankers in Shanghai. Investigations disclosed by authorities suggest these networks operate on an enormous scale. In one case in China’s western Gansu province, authorities uncovered an underground banking operation with 75.6 billion yuan (S$14.3 billion) in assets, according to a state media report in 2021. Inflated or fraudulent invoices Another common method involves businesses manipulating import contracts that require payments to be settled overseas. This is done by inflating
the value of imported goods, with the overseas supplier agreeing to funnel excess funds into a separate offshore account. Sometimes the trades themselves are entirely falsified. In one case in the eastern city of Wenzhou, a company fabricated commercial transactions and falsely claimed it had paid US$9 million for imports. Another company in Shenzhen used sham trades to transfer almost US$18 million overseas. There are often telltale signs that a transaction might not be genuine. High-value goods such as diamonds, emeralds and electronic items are
a common ruse for fabricated trades. Other red flags include an unusually large numbers of payments to the same supplier from unrelated accounts. Refund schemes This is where a person or a business in China uses a mainland bank card to buy expensive goods from an overseas merchant. The transaction is later cancelled, refunded or otherwise settled outside the normal banking system, allowing the money to end up offshore. For years, jewelry stores and pawn shops in Macau provided a popular channel for moving money
out of mainland China. Visitors on gambling trips would use bank cards to purchase expensive items such as watches or jewelry, then quickly resell them or exchange them for cash. Macau’s casinos also served as an avenue for getting cash out. However, authorities cracked down in 2014 on the use of hand-held payment devices within casino resorts amid concerns that tens of billions of yuan of illicit funds were being funneled out of the mainland. Cryptocurrency Crytocurrencies are another way in which Chinese residents can
move money offshore, despite a series of regulatory crackdowns. China banned cryptocurrency exchanges in the country in 2017, but users continued to circumvent restrictions through a network of under-the-table brokers that converted yuan for digital assets. Authorities intensified their efforts in 2021, announcing they would root out the mining of digital assets and in 2022 made it a criminal offense to use cryptocurrencies for fundraising activities. There’s no reliable estimate of how much cryptocurrency is leaving China. However, blockchain analytics firm Chaconversioninalysis estimated that Chinese-language
money-laundering networks processed about US$16.1 billion in illicit cryptocurrency transactions in 2025, highlighting the role that digital assets can play in moving funds out of China. BLOOMBERG
China capital controls, smurfing, underground banking, hawala, mirror transfers, inflated invoices, refund schemes, Macau casinos, cryptocurrency illicit transactions, cross-border capital, Xi Jinping inequality