For the last few months, I alone have been averaging a call or email a day from someone inquiring about getting money out of China. I had three phone calls and one email on this topic yesterday (and woke up to two more such emails this morning), and they run the gamut.
Two of yesterdays calls were highly typical. One was from a realtor wanting to know how the Chinese buyer of a two million dollar house could get her money out of China to pay for it. The other was from the General Counsel of a large housing construction company with essentially the same question, but more general.
I try to make the single house purchase calls as short as possible and I do that by spewing out the following as quickly as I can:
China law forbids anyone from sending out of China more than USD$50,000 in any given year without government approval and it is virtually impossible to get this approval to buy a house overseas. So the odds are overwhelming that we will not be successfully in helping this person get more than $50,000 out of China and we are not going to help in getting the money out illegally. There are sometimes some legal workarounds, but for us to know if there are any in this case, we would need to be retained and we would need to know a lot more facts. And doesn’t it make more sense for your buyer to retain her own Chinese attorney in her hometown since she is Chinese and this is an issue of Chinese law?
Our China lawyers have been hired on single purchase house deals, but only by sellers who want to use our services to justify getting out of the deal with their Chinese buyers because they now have a higher offer on the table and they are tired of waiting. This makes sense.
My phone calls with the real estate company and the home building company lawyers last a few minutes longer. I tell those callers the same thing about the law, but I also tell them that in light of this, they should consider requiring larger initial nonrefundable deposits from overseas buyers.
Then there are the near daily emails from people who think that they have come up with THE solution for getting money out of China. These emails propose things like bitcoin, loans, company to company transfers and various other things, far too often with a tone that they have discovered the one method that can trump Chinese government restrictions and would I just confirm this for them. It was one of those that spurred me to write this post:
What’s the best way for a Chinese investor to send RMB out of China to the U.S.? We are setting up this transaction as a services deal from corporation to corporation.
That’s it. No explanation of the parties involved in the deal. No explanation of the deal itself. No explanation of the money involved. Not even really a question; just a statement as to how they are going to do the deal, and essentially a request that we bless it. Here is my standard response to these kinds of emails:
There is no way I can even come close to answering your question on the best way for a Chinese investor to get RMB out of China without knowing, at the bare minimum, the following:
1. The nature of the transaction.
2. The nature of the parties (a lot more than just their structures).
3. The histories of the parties.
4. The location of the parties.
5. The nationalities and even the ethnicities of the parties (especially the receiving party).
In our experience all of these things (and a whole host of other things) are factors in whether the Chinese government will allow money to leave. If you think just doing it corporation to corporation will get the money out, the odds are overwhelming that you will end up being sorely mistaken
The more legally interesting calls — and the ones on which our China lawyers can often help — come from Western companies facing the following sorts of situations:
- Western company selling some really expensive item (usually a piece of industrial equipment) to a Chinese company and the money isn’t leaving China.
- Western company waiting for funds to arrive on an IP licensing deal.
- Western company waiting for funds to arrive from a Chinese company which is supposed to be investing into the Western company.
- Western company waiting for funds in payment of services provided.
In part two of this series, I will set out the framework our China attorneys believe the Chinese government uses in deciding when money leaves and when it does not and start analyzing how China treats the various situations it sees from the list above. Most importantly, we will set out what exactly you can and should be doing to increase the odds of money leaving China.
This article was written by Dan Harris and published on China Law Blog. Original Post: http://www.chinalawblog.com/2016/12/getting-money-out-of-china-its-complicated.html