Escaping China's currency controls: A "gambling" trip to Macao

Mainlanders looking to skirt the Chinese government's strict currency controls for a little high-stakes gambling need not look far after reaching the city of Macao.

[...] mainland authorities in recent months have been taking a closer look at the ways that gamblers dodge the official, 20,000 yuan limit on the amount of cash that a mainlander is allowed to take abroad (including Macao and Hong Kong).

One way around the currency rules begins with the purchase of an expensive watch or jewelry at a Macao pawn shop using a UnionPay debit card tied to a mainland bank account. UnionPay, China's state-run credit card company, bars the use of its cards in casinos but lets each card holder spend up to 1 million yuan every day at shops of point-of-sale machines, including pawn shops.

[...]

In the summer, Macao's streets are packed with mainlanders bustling from one casino to another. They also frequent the city's myriad pawn shops, which are overflowing with watches and jewelry. Gamblers use these pawn shops to obtain cash, so they don't flinch at steep price tags. After a purchase, a gambler-shopper quickly re-sells that expensive watch or piece of jewelry to the pawn shop for the same amount, less commission, and pockets the cash for later use in a nearby casino.

If it's so easy to skirt currency controls, why hasn't Beijing plugged this hole? My theory is that China allows the "Macao way-around" (as well as the "Hong Kong roundabout") as a sort of "safety valve"--the way pressure cookers have a hole built in, through which steam continuously seeps out. If China were really serious about currency controls, this low-tech evasion wouldn't happen.

Consider this: Now Beijing is getting upset that the money laundering/currency control evasion is getting out of hand. What do they do?

Under orders from Macao's secretary for economy and finance, Francis Tam Pak Yuen, a moratorium on new point-of-sale UnionPay machines in casino-attached jewelry shops took effect in July. The city's Office of Financial Information, meanwhile, and its Director Deborah Ng Man Seong are busy watching local casinos for signs of money laundering.
[...]
Yuen's moratorium order is expected to cap but not eliminate this pawn shop practice. It does not, for example, stop the use of existing UnionPay point-of-sale machines nor prevent casino operators from moving machines from one venue to another.

Doesn't sound particularly heavy-handed.

Macao provides other ways for "high rollers" from the mainland to evade capital controls. Read the whole piece, at CaixinOnline.

P.S. If you're interested in the topic of illicit financial flows in and out of China, check out the Global Financial Integrity website.