What is Capital Flight?

Capital evasion, also known as capital flight or capital transfer, refers to a phenomenon in which domestic capital flows rapidly abroad due to economic crisis, political turmoil, war, and other factors, thereby avoiding possible risks. It is an important indicator for measuring the stability of a country's economic growth and reflecting the potential crisis of a country's financial system. Not all capital outflows referred to in the concept of capital evasion are illegal. Under certain political and economic conditions, capital flight is also a legal and normal outward investment.

Capital evasion

In the short term, large-scale capital evasion will bring economic chaos and turmoil. In the long run, capital evasion reduces the amount of capital available to the country, reduces the tax revenue that the government can obtain from domestic assets, and increases the country's external debt burden, which will cause a series of serious economic consequences.

Since our country has always implemented strict

There are four commonly used measurement models for capital evasion:

Types of capital flight in China:

One is a normal capital outflow, but there are some abnormal reasons, or some noteworthy issues in capital outflows, such as private capital. Because our legal and practical protection of private property is not strong enough, private enterprises earn Money is deposited abroad, and their amount is quite large. The other is illegal income, which includes some officials, managers, and business personnel receiving illegal or black income from corruption, rent-seeking, and domestic and foreign companies. This money is transferred abroad, and it is also a lot of money every year. Another is the use of trade channels to underreport exports and overreport imports, especially by underreporting exports to achieve capital flight. For example, the export price is reported to be low, but the actual income is higher, and the higher part will try not to settle foreign exchange and leave the assets overseas. This situation has become more apparent in recent years, because the exchange rate problem includes speculative psychology, and people expect that the yuan will depreciate. Some companies will hold more foreign exchange and keep money abroad. This part of the escaped capital reaches the scale of US $ 120 billion each year.

Nevertheless, in terms of the current domestic capital that has fled, the academic consensus is that there are three main types: one is the state-owned assets embezzled through corruption, bribery, rent-seeking, and the sale of state-owned enterprises; the other is engaged in smuggling and smuggling Huge amounts of wealth obtained through fraud, fraud, tax evasion, etc .; the third type is private capital accumulated through legal operations. The occupants of the first two types of capital are concerned about the insecurity of illegal income at home and try to transfer them abroad; the owners of the latter type of capital are fleeing abroad because they are worried that legal property will not be effectively protected at home.

According to analysis, the main force of domestic capital flight is the owner of illegal assets. Some of the domestic capital that fled also chose to flee because legal property was not effectively protected. Objectively speaking, under the existing legal environment of our country, legal private property has not been well protected, and unreasonable appropriation of private property still occurs from time to time. Some private business owners are worried that one day their assets and their lives may be unpredictable, so they have taken measures to evade capital or purchase "green cards" abroad to protect themselves. This phenomenon is called "opening the sunroof" by the people. According to a survey by the Branch of the Beijing University of Economics and the Zhongguancun Experimental Area Branch of the Democratic National Assembly, among the private business owners with total assets of more than 5 million yuan in Beijing, more than 30% of them have evaded capital abroad, and this number is increasingly rampant. The capital flight not only caused a serious loss of state-owned assets and weakened the stamina of China's economic development, but also shook people's expectations of the stability of the renminbi exchange rate, increasing the difficulty of preventing the financial crisis, and may even directly induce a financial crisis. Because capital flight has reduced the supply of foreign currencies on the one hand, and increased the demand for foreign currencies on the other. If the continued flight causes the exchange rate to continue to fall, it will inevitably lead to panic, which will lead to a larger scale flight of funds, eventually leading to a financial crisis. Although from the current situation, due to the steady growth of the domestic macro economy in recent years, low inflation, stable exchange rates, and steady rise in foreign exchange reserves, the impact of capital flight on the domestic economy has not yet fully manifested; but if we take it lightly, Sooner or later it will pay a high price. In this regard, the lessons learned by Mexico and Southeast Asian countries are deep enough.