In his grocery store near the Hong Kong border, a man surnamed Zheng sells the usual products: cigarettes, tissues, drinks and snacks. But he also offers a very different kind of service.
Behind his counter is a drawer filled with stacks of banknotes. Zheng is one of a number of traders operating illegal foreign exchange services in this city and he makes no attempt to hide it.
"A lot of people choose to come to us rather than the bank because we offer much more favorable exchange rates," he said. "I have many clients who come to me with millions of yuan; they can save a lot of money trading with me."
PHOTO: AFP
Zheng also offers an underground money transfer service in which yuan are exchanged for Hong Kong dollars and deposited in Hong Kong bank accounts.
The cash is then taken out in Hong Kong and used to make investments in the city's stock market, which has boomed in recent months, partly on the back of such illicit activity.
It's no coincidence that Zheng's shop lies on a route used by thousands of Hong Kong and Chinese cross-border travellers every day. He has a steady stream of customers, both individuals and companies, who eschew the bank nearby.
Five other stores near Zheng, including a pharmacist, offer the same services, indicating strong demand.
Such illicit traders are flourishing as cash-rich Chinese, facing limited investment opportunities, search for ways to make their savings grow -- sparking huge capital flows into Hong Kong.
Authorities launched a crackdown last month, limiting cash withdrawals from Shenzhen banks and ATMs in a bid to stem the flood of illegal money out of the mainland and into Hong Kong's bullish stock market.
Chinese police also busted a rogue Shenzhen bank that allegedly handled transactions totaling 4.3 billion yuan (US$581 million) in 18 months, serving investors from 31 provinces and cities.
Billy Mak, an associate professor of Hong Kong Baptist University's finance department, said underground banks have existed for many years, particularly in Shenzhen because of its proximity to Hong Kong.
But billions more are believed to have been poured into Hong Kong stocks through underground channels since August, when officials began touting a scheme to allow Chinese to invest directly in Hong Kong stocks for the first time.
The project has apparently since stalled -- but not before the Hong Kong bourse soared a staggering 40 percent.
Experts estimate 5 percent of the Kong stock market's turnover comes from mainland individuals.
Lu Xiongwen, dean of the school of management at Shanghai's Fudan University, said the expanding Chinese middle-class is no longer happy with regular income from their jobs and the small returns from bank deposits.
So they are striving to boost their savings with new investments, Lu said.
An HSBC survey released last week found 42 percent of the middle classes in Guangzhou, Shanghai and Beijing invested in property, while 34 percent ploughed money into China's unpredictable stock market.
"Some people have money but there are not many ways to invest so they seek opportunities not only in Hong Kong but also overseas to expand their wealth," Lu said.
CLASH OF WORDS: While China’s foreign minister insisted the US play a constructive role with China, Rubio stressed Washington’s commitment to its allies in the region The Ministry of Foreign Affairs (MOFA) yesterday affirmed and welcomed US Secretary of State Marco Rubio statements expressing the US’ “serious concern over China’s coercive actions against Taiwan” and aggressive behavior in the South China Sea, in a telephone call with his Chinese counterpart. The ministry in a news release yesterday also said that the Chinese Ministry of Foreign Affairs had stated many fallacies about Taiwan in the call. “We solemnly emphasize again that our country and the People’s Republic of China are not subordinate to each other, and it has been an objective fact for a long time, as well as
‘CHARM OFFENSIVE’: Beijing has been sending senior Chinese officials to Okinawa as part of efforts to influence public opinion against the US, the ‘Telegraph’ reported Beijing is believed to be sowing divisions in Japan’s Okinawa Prefecture to better facilitate an invasion of Taiwan, British newspaper the Telegraph reported on Saturday. Less than 750km from Taiwan, Okinawa hosts nearly 30,000 US troops who would likely “play a pivotal role should Beijing order the invasion of Taiwan,” it wrote. To prevent US intervention in an invasion, China is carrying out a “silent invasion” of Okinawa by stoking the flames of discontent among locals toward the US presence in the prefecture, it said. Beijing is also allegedly funding separatists in the region, including Chosuke Yara, the head of the Ryukyu Independence
GOLDEN OPPORTUNITY: Taiwan must capitalize on the shock waves DeepSeek has sent through US markets to show it is a tech partner of Washington, a researcher said China’s reported breakthrough in artificial intelligence (AI) would prompt the US to seek a stronger alliance with Taiwan and Japan to secure its technological superiority, a Taiwanese researcher said yesterday. The launch of low-cost AI model DeepSeek (深度求索) on Monday sent US tech stocks tumbling, with chipmaker Nvidia Corp losing 16 percent of its value and the NASDAQ falling 612.46 points, or 3.07 percent, to close at 19,341.84 points. On the same day, the Philadelphia Stock Exchange Semiconductor Sector index dropped 488.7 points, or 9.15 percent, to close at 4,853.24 points. The launch of the Chinese chatbot proves that a competitor can
‘VERY SHALLOW’: The center of Saturday’s quake in Tainan’s Dongshan District hit at a depth of 7.7km, while yesterday’s in Nansai was at a depth of 8.1km, the CWA said Two magnitude 5.7 earthquakes that struck on Saturday night and yesterday morning were aftershocks triggered by a magnitude 6.4 quake on Tuesday last week, a seismologist said, adding that the epicenters of the aftershocks are moving westward. Saturday and yesterday’s earthquakes occurred as people were preparing for the Lunar New Year holiday this week. As of 10am yesterday, the Central Weather Administration (CWA) recorded 110 aftershocks from last week’s main earthquake, including six magnitude 5 to 6 quakes and 32 magnitude 4 to 5 tremors. Seventy-one of the earthquakes were smaller than magnitude 4. Thirty-one of the aftershocks were felt nationwide, while 79
RSS