Just before Christmas, four men believed to be of South Asian ethnicity ambushed a Fujian-born traveler right outside the MTR Lok Ma Chau Station at the border.
The suspects, who were wearing caps, took away his backpack which contained US$448,000 and 80,000 euros, worth about HK$4 million in total.
The daring heist was over in just 10 seconds, indicating that it was well-planned.
While it’s hard to prove, the robbery might have something to do with the sliding value of the renminbi.
Mainland residents are allowed to remit foreign exchange worth up to US$50,000 offshore yearly. Buying and selling of this annual quota is a common practice.
Underground money houses act as the middleman in this process, buying the quota from individuals and remitting foreign exchange to offshore accounts of quota buyers.
Quota sellers get a cut of about 0.5 percent of the amount involved in the transaction while the underground operators charge quota buyers 3-5 percent for the remittance service.
It’s good money, but it is also cumbersome.
Imagine a deal involving US$5 million: it takes 100 quota sellers to fill such an order.
Lately, as fund outflows got worse amid the renminbi’s continued devaluation, the State Administration of Foreign Exchange (SAFE) tightened capital controls and threatened to blacklist those suspected of taking money out of the country through illegal channels.
The watchdog said it can track down quota sellers by focusing on cases where five or more people remit money to the same offshore account on the same day or within a short period of time.
In view of the clampdown, underground operators are forced to change strategy and resort to cash delivery to circumvent the regulator’s oversight.
In short, they hire someone to take the money physically offshore instead of wiring the money.
The mainland victim of the HK$4 million robbery is probably working for an underground operator, and the attack could have been planned and executed by a competitor.
The authorities have yet to announce whether the annual US$50,000 quota will be renewed next year. If that happens, we can expect a rush to transfer foreign exchange offshore in the new year.
The macro impact is more downward pressure on the Chinese currency. The side effect is probably more smuggling activities and perhaps more robbery cases involving smuggled money.
This article appeared in the Hong Kong Economic Journal on Dec. 28.
Translation by Julie Zhu
[Chinese version 中文版]
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