Chinese state-run media outlets are adding credence to speculation that an executive who helps wealthy families move their money to the US was among those detained last week for illegal currency trading, as President Xi Jinping’s government moves to prevent capital outflows in the face of economic woes.
Shanghai police announced Thursday they had detained five people for illegal foreign currency transactions worth some 100 million yuan ($13.8 million), including a woman surnamed He, age 54, who ran an immigration services company. Officials didn’t give He’s full name or identify the firm.
Since then, at least two state-media outlets have published stories citing online rumors that the person detained was He Mei, a Shanghai immigration executive. One video outlet owned by the Shanghai government said the police statement had been released in response to speculation over He.
Linda He, as she is known in English, is the chair and president of the Wailian Overseas Consulting Group Inc., a Shanghai-based firm that helps rich Chinese citizens acquire visas to Western nations, secures spots for their children in elite foreign schools and facilitates overseas investments, according to its website.
An employee at Wailian’s Shanghai office on Friday said they weren’t aware of reports of He’s detention, adding that the founder wasn’t around in “recent days,” without elaborating. Employees inside the office appeared to be working as normal. Shanghai police didn’t respond to a request for comment on He’s full identity.
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The case highlights China’s efforts to stop wealthy citizens from moving cash overseas, reflecting the dire state of an economy still reeling from strict Covid curbs, property struggles and tighter regulations of the private sector. Strict capital controls typically allow citizens to convert $50,000 worth of yuan into foreign currencies each year, making it hard for rich Chinese to move their money abroad.
Capital flight is expected to pick up speed as more people resume travel out of the country, following a dip during pandemic lockdowns. Natixis expects the amount to leave the country to reach $150 billion this year. Such outflows would put another strain on China’s faltering post-pandemic recovery as the nation slides into deflation.
China’s central bank unexpectedly reduced its key policy interest rates on Tuesday, another sign policymakers are trying to bolster the economy amid grim data.
“Once economic opportunity dries up, the political constraints in China — added to a terrible educational system, overpriced housing, corrupt medical system, lack of elder care — are driving anyone with the means to try to emigrate,” said Anne Stevenson-Yang, co-founder and research director of short seller J Capital Research Ltd.
“Emigration means taking money out because you need hard currency to survive overseas,” she added.
US Ties
In the decade-plus that He has made her living providing a bridge between the world’s two largest economies, geopolitical tensions between China and the US have worsened. President Joe Biden’s recent investment and trade curbs on China’s high-tech industries have only complicated the Asian nation’s recent economic struggles.
Wailian, meanwhile, has served as a conduit for hundreds of millions of dollars to flow into the US economy. The company’s website touts its expertise facilitating a US investment visa available to wealthy Chinese who pump between $500,000 and $1 million into American projects.
He has also been active in philanthropic work. She’s made donations to Columbia University’s Teachers College, according to its website, and in 2015 co-sponsored the US National Youth Orchestra’s Carnegie Hall China tour that was marked by a New York reception attended by guests including former Secretary of State Henry Kissinger.
She is also executive director of the Beijing-based Center for China and Globalization think tank, which declined to comment on her whereabouts.
Capital Crackdown
Shanghai police said Thursday that four other people were involved in the probe. A female employee surnamed Sun, 39, was detained for collecting yuan in China and providing foreign currencies overseas. Three other staffers were probed for facilitating underground money changers, officials added.
He and Sun are still detained while the others have been released on bail, according to Knews, the Shanghai-based video outlet, which didn’t say how it got the information.
Shanghai state media vowed to crack down on illegal currency moves, citing the impact of such activity on the smooth running of China’s economy. The financial hub endured one of China’s longest Covid lockdowns and is home to some of the nation’s wealthiest people.
“The purchase and sale of foreign exchange should be carried out in the trading venues specified by the state,” the Jiefang Daily, the official newspaper of the Shanghai Communist Party committee, said in a Thursday report.
“The illegal trading of foreign exchange seriously disrupts the order of the national financial market,” it added. “The police will severely crack down on those suspected of crimes.”
--With assistance from Xiao Zibang, Allen Wan, Jing Li and Charlie Zhu.
(Updates with interest rate cuts. A previous version of this story corrected the name of Columbia University’s Teachers College.)