The impression China has over the housing market in Canada seems to be coming to an end as a result of the latest regulations that has their funds on hold. New rules for the exchange of the yuan which will have the outflow of currency confined has been announced by the Chinese government. Chief economist with Dominion Lending Centres, Dr. Sherry Cooper made mention in a note to brokers recently; “As capital flight intensified, China’s reserves have plunged, causing the country to sell US treasury bonds. In response, China has introduced new rules, which now require disclosure of the intended use of the Yuan being converted. In addition, they must pledge the money won’t be used for the purchase of property, securities, or insurance products.”
There won’t be any chance for Chinese nationals to have any cash borrowed or lend on behalf of another person, anyone guilty of such will be stripped of exchanging funds for two years and also undergo investigation for money laundering. Even though preceding rules had a $50,000 frontier on a number of funds that could be exchanged, quite a number of investors found a backdoor which allowed an outpour of $1 trillion yuan from the year 2014 to 2016.
Sherry inscribed; “Much of this money found its way into global real estate markets causing prices to boom. Property prices surged in some parts of Canada, the US, the UK, New Zealand and Australia, all countries that had relatively low barriers to importing large volumes of capital and liquid currencies. Some analysts believe that the party might be over. However, China has a massive underground banking market that operates in the shadows. In August 2016, the Chinese government shut down one operation in Shenzhen, but no one knows just how many more such shadow banks there are.” It is still not yet evident how the control on the outflow of cash would be affected by this new rule. However, as Cooper noted, some are prepared to try and go against the law.