Capital flight from China: 1984–2001

Abstract

This study provides a range of estimates for capital flight using both balance of payments and the residual measures for the People's Republic of China (PRC; 1984–2001) and Hong Kong (1998–2001). These measures are adjusted to reflect the legitimate assets of the banking industry, misinvoicing of PRC and Hong Kong trade with their major trading partners, and the failure of official debt data to capture certain bank transactions. During the period 1998–2001, the adjusted measures are consistent with a cumulative capital flight of approximately $920 billion for the PRC and about $60 billion for Hong Kong. Based on the adjusted capital flight data for the PRC, the capital control policies adopted in 1998–1999 were not as effective a reducing capital flight as was originally believed. To a significant extent, the restrictions on certain financial transactions simply changed the methods used for capital flight.