According to a March 29 report by Reuters, after China implemented a Hong Kong version of its national security law in Hong Kong last year, people in Hong Kong moved tens of billions of dollars of money to the other side of the world to Canada, where many are looking forward to finding a new future.
According to FINTRAC, Canada’s anti-money laundering agency, a record amount of money flowed into Canada from Hong Kong bankers last year, with about C$43.6 billion ($34.8 billion) transferred into Canada through electronic transfers. All transfer transactions over C$10,000 are required to be reported to FINTRAC.
FINTRAC has been recording these data since 2012, and the movement of funds from Hong Kong into Canada is at a record high since the data became available, providing initial confirmation of the large amount of money fleeing overseas following the outbreak of security concerns in Hong Kong.
Canadian banker Equitable Bank also told Reuters that deposits from Hong Kong surged after the implementation of the Hong Kong version of the National Security Law in June 2020.
The Hong Kong Monetary Authority (HKMA) said on Feb. 4 that the banking industry faced many operational challenges, but no banks reflected their intention to withdraw from Hong Kong, and the HKMA did not see funds flowing out of Hong Kong.
Record transfer funds in 2020 compared with 2016 and 2019, an increase of 46% and 10%, respectively. Hong Kong police froze the accounts of several individuals associated with pro-democracy protests over the course of the year, raising concerns among some Hong Kong residents about the safety of their assets.
This outflow represents just 1.9 percent of Hong Kong’s total bank deposits in 2020. But FINTRAC spokesman Darren Gibb said the data captures only a small portion of the overall legitimate inflows into the Canadian economy, and that many transactions are not covered, such as those transferred through virtual currencies, between financial institutions, or under C$10,000.
And it’s not just about money.
In 2020, the number of Canadian visa applications from Hong Kong, excluding tourist visas, increased by 10% to 8,121, suggesting that there may be further financial flows from Hong Kong. The UK and Australia are also expected to be popular locations for Hong Kong residents.
Strong capital flows from mainland China into Hong Kong
Despite the exodus, overall there is a net inflow of funds into Hong Kong, with deposits increasing by a total of 5.4 percent to HK$14.5 trillion (US$1.9 trillion) in 2020, according to HKMA figures.
“As an international financial center, Hong Kong money comes and goes all the Time and there is a variety of different needs,” an HKMA spokesman told Reuters in response to questions about the flow of funds to Canada.
“This situation is normal and consistent with the nature and function of an international financial center.”
Analysts and banking sources said the strong inflow of funds from mainland China through the Shanghai-Hong Kong Stock Connect and the strong buying demand for some initial public offering (IPO) stocks in Hong Kong last year have played a role in the flow of funds into Hong Kong.
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