Recently, the Chinese Ministry of Public Security announced its crackdown on the underground money changers known as the “money exchange gang” who provide large cash exchanges for gamblers. Economic experts believe that the authorities’ actions against the “money exchange gang” are related to the recent investigation into 30 years of tax evasion and the crackdown aims to stem the outflow of funds. Those familiar with underground money changers, including some from the “Red Third Generation,” also claim that the authorities’ crackdown on the “money exchange gang” is aimed at plugging the gap in fund outflows and restraining political foes.
The Chinese Ministry of Public Security held a press conference on July 5th to report on the recent deployment of the national public security agencies to combat illegal activities stemming from the “money exchange gang.”
According to the report from Jilin Public Security, they have cracked down on Multiple Rights who engaged in illegal exchange activities in Macau multiple times, involving an amount of 10 million yuan (approximately 1.38 million US dollars). Jiangxi Public Security reported the dismantling of a case involving Susie Mei and others selling entry and exit documents, with over 30 people arrested and more than 100 illegal immigrants identified who engaged in illegal foreign exchange activities in Macau.
The Guangdong Province Zhuhai Public Security reported the arrest of 13 suspects, the destruction of three underground money markets, the seizure of 100,000 Hong Kong dollars (about 13,000 US dollars) on-site, and the freezing of 3.9 million yuan (about 540,000 US dollars) in funds related to the case. Suspects such as Chen Xia and others used international travel agencies as cover to provide illegal foreign currency exchange for transit passengers and gamblers, involving a total amount of 200 million yuan (approximately 27.56 million US dollars). Suspects like Li Wei and others used business companies as a cover to exchange renminbi and Hong Kong dollars for transit passengers, illegally profiting a total amount of 800 million yuan (about 110 million US dollars).
Officials from the Chinese Ministry of Public Security announced at the press conference that the “money exchange gang” exchanges Hong Kong dollars through underground money markets in Zhuhai, then uses the “ant moving” method to bring Hong Kong cash to Macau and solicits exchange customers near Macau’s casinos, hotels, and negotiate exchange rates, implementing transactions of Hong Kong dollars and domestic renminbi accounts.
Amid the slump in Macau’s gaming industry, the Chinese government’s heavy-handed approach against the so-called “money exchange gang” and underground money markets has sparked various discussions.
Speaking to the Epoch Times, Yi Qiwei, a Red Third Generation member who has been frequenting Hong Kong and Macau and has experience with money laundering, noted that “money exchange” and “usury” are two essential businesses for Macau’s gaming industry. Since RMB cannot be freely exchanged, but there is a significant demand for exchange domestically, the free flow of funds in Hong Kong and Macau has become important gateways for currency exchange and fund outflows.
He gave an example of deals involving 700 million Hong Kong dollars (about 89.66 million US dollars) with a daily turnover of about 20 million Hong Kong dollars (about 2.56 million US dollars) that lasted for many days. Such large-scale transactions occur regularly.
Yi Qiwei, who is knowledgeable about the operations of the “money exchange gang” and underground money markets, explained that as long as RMB cannot be freely exchanged, the existence of the “money exchange gang” and underground money markets will continue in various forms.
He said, “There are normal and gray illegal exchange demands within the country and generally fall into four categories: 1. The demands of government officials; 2. The need for money laundering by bosses engaged in black production (illegal activities); 3. Business needs exceeding the government’s exchange limit; 4. Groups like students studying abroad.”
According to Yi Qiwei, the usual operation involves money changers depositing tens of millions of RMB (over 1.38 million US dollars) into designated domestic accounts, then choosing from two or three ways to withdraw foreign currencies such as Hong Kong dollars in Macau, including having an account in Macau casino’s VIP room to withdraw the corresponding Hong Kong dollars or receiving a credit black card to withdraw Hong Kong dollars at multiple Macau casinos, and possibly exchanging equivalent foreign currencies in other casinos like those in Las Vegas.
“This has been the operation for decades. It is not just ‘ant moving’; everything is operated under the guise of trading companies. In fact, the Chinese government is implicit in this,” Yi Qiwei explained. “Government officials have exchange demands in this area, so the crackdown from time to time is essentially due to the massive outflow of funds being connected to ‘political’ reasons.”
Yi Qiwei mentioned that just like when Xiao Jianhua got in trouble, involving the financial coup against Xi Jinping in 2015, Xi Jinping’s crackdown on political foes is easier when stopping the money flow to opponents. After the implementation of the National Security Law in Hong Kong, control over the ‘hidden flows’ of funds in Hong Kong has been established. Following the arrest of Sun City Group’s boss, Zhou ChaoHua, Macau is now undergoing further clean-up. “Hong Kong and Macau have been largely rectified; it will be more difficult for Chinese people to transfer money out of the country in the future.”
Economic analyst Li Hengqing from the American Institute for Information and Strategic Studies told the Epoch Times that the true purpose of the Chinese Communist Party’s crackdown on the “money exchange gang” is not merely the illegal activities derived but rather a measure to stem the outflow of funds under the guise of money exchange.
He mentioned, currently, two major factors have pressured wealthy individuals within China to urgently move their money out: first, the recent combined operation of “tax warnings” and the 30-year retrospective tax investigation; second, increasing pressure from the devaluation of the RMB. Given these pressures, for wealthy individuals within China, now is essentially the final opportunity to move their funds.
Li Hengqing also said, “The Chinese government is truly out of money now, and ordinary people are penniless too. Thus, authorities have targeted wealthy individuals, starting to reap them under the guise of tax investigations, and they must inevitably cut off these individuals’ means of transferring money out, hence the crackdown on the ‘money exchange gang’ is a ‘closing the door and catching the dog’ tactic.”
Li Hengqing stated that facing multiple pressures from domestic and international geopolitical and economic factors, Jinping Xi’s basic idea is to return to the era of planned economy and has intentions regarding the national gate. Within this context, whether the ordinary channels of funds flowing from China to Hong Kong, such as Shanghai-Hong Kong Stock Connect or Shenzhen-Hong Kong Stock Connect, have shown signs of being tightened can be observed. Additionally, in the past two to three years, many Chinese people have been purchasing insurance and other financial products in Hong Kong, opening bank accounts in Hong Kong, and whether there will be restrictions on withdrawing these funds in the future is also a reference point for observing domestic political trends.