Following a recent report in The Art Newspaper on an academic study of the discrepancy between import and export values of works of art leaving and entering China, CNN takes a broad look at the ways in which the international art trade is being used by wealth Chinese to export capital. The art market is useful vehicle for these capital transfers because it regularly makes cross-border all-cash transactions in objects that have “fuzzy” value and opaque ownership.
What’s especially significant about the report is the way in which the global art trade infrastructure must be complicit in this activity.
The rush of money out of the country is taking place in spite of Beijing’s strict capital controls — which limit the amount of money an individual can move out of China to $50,000 per year. […]
Here’s how it works: Rich Chinese purchase a piece of art in mainland China, then sell it at a hefty price across the border. The profits — in foreign currency — are then pocketed.
Another method is to buy artwork from outside China — often at an inflated price from an associate. The associate, who’s in cahoots, takes a cut and then deposits the remaining payment in an offshore bank account of the buyer’s choosing. If the authorities come knocking, it’s easy for the buyer to produce a receipt and the art — even if it was fabricated for the laundering scheme. […]
That makes it difficult for anyone reviewing purchases, including the Chinese government, to accuse a buyer of over-paying, said Steve Dickinson, a China-based lawyer with Harris & Moure.
“It’s just beautiful, because no one can challenge you on the prices,” he said. “It could be five bucks; it could be 50 million bucks.”
Chinese snap up fine art for use in laundering schemes (CNN Money)
