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The HK$2.64 million
question
By Alan Fung
HONG
KONG - The media have been lauding the case of a recent
real-estate deal involving a visiting mainland tycoon,
saying that the border should be further opened up to
"individual visits" as a way of stimulating Hong Kong's
moribund real-estate industry.
In their
enthusiasm, however, the media have failed to ask some
obvious and troubling questions about how this tycoon
got around customs and other regulations to bring
HK$2.64 million (nearly US$338,500) in cash from
mainland China into Hong Kong.
In the past,
mainlanders visiting Hong Kong for sightseeing could
only come as members of group tours. But under a new
policy, residents of seven cities in neighboring
Guangdong province are eligible for individual-visit
visas to the special administrative region (SAR).
The new policy has boosted Hong Kong tourism,
which was badly hurt by this year's severe acute
respiratory syndrome (SARS) epidemic. The streets once
more teem with shoppers, and tourism-related businesses
clearly stand to gain from a greater influx of visitors
from the mainland.
Recent headlines have been
dominated by one "individual visitor" in particular, who
reportedly purchased five residential units in one lot
for a cool HK$2.64 million. More sensationally, the
visitor was so rich that he paid the complete amount in
cash without any mortgage, quite a rarity in Hong Kong.
Newspapers have stressed that when the individual-visits
policy is applied to more cities, more mainlanders will
purchase property in Hong Kong, which would then be a
dynamo for recovery of the SAR's flagging property
market.
Whether more "individual visits" would
result in enough HK$2 million property transactions to
stimulate the property market is a discussion for
another forum. The interesting question about this
particular case is where this mainland big spender's
money came from. Hong Kong media have chosen to remain
silent on this matter; why they have done so is also an
interesting question.
According to Regulations
on the Foreign Exchange System of the People's Republic
of China promulgated by the State Council in 1996, all
Chinese citizens, when making exits from China, are
allowed to carry no more than 6,000 yuan (US$723) plus
US$2,000, or equivalent, with them. In light of such a
law, there is obviously a big problem with this big
spender: how could he bring more than HK$2 million in
cash into Hong Kong? As we all know, the mainland has
strict regulations on foreign exchange, and the yuan is
still not freely convertible. So this visitor would not
have been able to remit the money to Hong Kong in
advance.
Lacking any legal channel, he must have
used one of the following alternatives:
1) Carried
the whole sum in cash and passed customs checks both in
leaving China and entering Hong Kong.
2) Transmitted
the amount to Hong Kong through the black market.
3)
Entered into a joint-finance deal with relatives in Hong
Kong (the Hong Kong media version).
If the buyer
chose Option 1, then the customs departments of Hong
Kong and the mainland should be held responsible for
this illegal act. On the Hong Kong side, customs has
vowed to crack down on arrivals with tax-unpaid
cigarettes and to strengthen customs inspections, so it
would be quite unacceptable if this man had been allowed
to pass customs unchecked. Was he just lucky, or did the
customs officials on both sides of the border fail to
fulfill their duties?
If the buyer adopted
Option 2, then the Commercial Crime Bureau (CCB) of the
Hong Kong police force should bear responsibility.
According to United Nations Security Council Resolution
No 1373, the UN Convention against Transnational
Organized Crime, and the Asia-Pacific Economic
Cooperation's (APEC) anti-terrorism measures, Hong Kong
must spare no effort in smashing money-laundering
activities. If the CCB is doing its work, then how can
underground banks find safe a harbor in Hong Kong?
This particular case involved only about HK$2.6
million. However, Kenny Tang, a Hong Kong stock analyst,
has revealed that tens of billions of yuan are
transferred to the SAR from the mainland annually,
through illegal channels of course. As members of the UN
and APEC, both Hong Kong and mainland China are clearly
failing to do their job.
If it was Option 3 that
the buyer selected, then the Hong Kong media are to
blame. If the tourist entered the SAR carrying only
US$2,000 (about HK$15,600) plus 6,000 yuan, his Hong
Kong partner must have had to pay an additional
HK$2,624,400 (nearly US$336,500), plus the attorney
fees, stamp duty and the property agency's commission.
The last item alone would have cost HK$26,400 (US$3,384)
for a transaction worth HK$2.64 million.
Does
that make sense? Assume you are a Hong Kong resident and
a relative of yours on the mainland proposes to share
the purchase of a property with you. Would you accept
the offer if he could only pool about HK$20,000, and
leave the remaining 99 percent cash payment to you?
It is surely possible that someone of wealth and
generosity would accept such a suggestion, paying more
than HK$2 million on behalf of a relative and allowing
the latter to repay the debt in installments of
HK$21,600 (US$2,769) brought into Hong Kong on each
"individual visit". But if this is really how the story
unfolded, the headline is not "Mainlanders' visits heat
up property market", but rather the much less
interesting "Hong Kong people invest in property". Yet
the Hong Kong media have extolled the story as an
example of unleashed individual visits spurring the
property market.
So which story is true? As one
alternative would dismay Hong Kong media and either of
the other two would embarrass the mainland and Hong Kong
governments, we may never know.
(Copyright 2003
Asia Times Online Co, Ltd. All rights reserved. Please
contact content@atimes.com for
information on our sales and syndication policies.)
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