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China Reform Monitor - No. 997

Beijing trying to put a lid on massive capital outflows;
China to set up 11 drone bases along coast

Edited by Joshua Eisenman
November 8, 2012

October 19:

A Chinese-backed copper mine in northwestern Myanmar’s Letpadaung Mountains will continue to operate despite a growing public outcry. The governor of Sarlingyi, the township where the mine is located, sent a notice to six local villages saying that the mine is a “friendship” joint venture with China and would not be halted, Radio Free Asia reports. The Myanmar military’s powerful Union of Myanmar Economic Holding Ltd. and Wan Bao Co., a subsidiary of state-owned Chinese arms manufacturer North China Industries Corp. (Norinco) jointly own the project. Villagers and rights groups have staged demonstrations against the mine over the past few months claiming that developers have illegally confiscated more than 8,000 acres of farmland from 26 villages without providing adequate compensation. Some 2,000 villagers protested near the mine again this week. Company officials said villagers were given complete compensation. China’s Ambassador to Myanmar Li Junhua said: “If this project brings no benefit to the Myanmar people the Chinese government will not support or endorse it. Because it not only concerns the image of the Chinese company, but also the image of China and the Chinese government,” New Delhi-based Mizzima News reports.

“Police are carrying out a major operation against money-laundering and other crimes linked to criminal networks of Chinese origin in various provinces of Spain,” Spain’s interior ministry said in a statement carried by the BBC. More than 300 Spanish police officers have searched more than 100 premises mainly in Madrid and Barcelona and arrested at least 80 in connection to a nationwide criminal conspiracy to defraud the state of 150 million euros a year. The criminal ring had been smuggling containers of Chinese products and running loansharking in Chinese immigrant communities in Spain. Part of the profit was reinvested in illicit businesses and the rest was smuggled out of Spain in travellers’ suitcases or packed in vans carrying textile products to Italy or Hungary, the Spanish newspaper ABC reports. After leaving Spain the criminals used forged Chinese passports to transfer 3,000 euros every 90 days to four different China-based bank accounts, a process that disguised the transfers as remittances from Chinese migrants.

October 20:

Beijing has confirmed that it will set up two drone bases in Liaoning for marine surveillance of its coastal waters, the official China Daily reports. According to the province’s oceanic and fishing department one of the bases will be built on reclaimed land in Yingkou to cover the Bohai Sea and the other will be in Dalian to cover parts of the Yellow Sea within the province’s jurisdiction. The marine surveillance drones will feature quick response, high-definition remote sensing, which will allow them to respond to emergencies and monitor the marine environment along the coast. By 2015 China will have 11 drone bases along its coastline.

October 21:

Leaders at China’s State Council have asked policy think-tanks in Beijing to draw up ambitious economic reform proposals to curb powerful state firms and give more freedom to float the yuan and interest rates. Reuters interviewed policy advisers involved in writing the reform proposals who said the goal was to contain the government’s meddling in the economy and clip the wings of more than 100,000 state-owned enterprises (SOEs), which enjoy privileges including preferential access to bank lending and government contracts. Other reforms include allowing markets to set the cost of bank credit, land and various natural resources. Credit is currently allocated by the government, which tells state-backed banks how much to lend and when. All land and resources are owned by the state, with private ownership limited to temporary lease rights.

October 27:

In 2011 Chinese investors evaded government regulations to move $602.9 billion out of country and the outflow is increasing. Last year’s outflow was part of a $3.8 trillion flood of capital that left China over the last 11 years, rising from $172.6 billion in 2000. Public frustration with a banking system that subsidizes state companies at the expense of savers, as well as profiteering from loopholes in China’s pervasive economic controls, are the primary causes of the outflows, the Associated Press reports. It is unclear how much money came from crime or corruption but by aiding tax evasion the illicit outflow could widen China’s wealth gap and exacerbate existing social, economic and political tensions.

Related Categories: China; China and East Asia Program

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