Chinese Capital Controls Threaten Property Bubbles All Over The Globe As Buyers Lose Access To Cash

For months/years we've covered the many real estate bubbles that have been inflating all over the world courtesy of Chinese billionaires looking to launder money offshore (here are just a couple of examples:  Vancouver, Sydney and New York).  But a new set of capital controls enacted in China on January 1st, and aimed specifically at curbing foreign real estate investments, may just be the needle that finally pops all those bubbles.

As Bloomberg pointed out earlier this month, the following new restrictions on foreign currency transaction were implemented earlier this year.

• Customers must pledge money won’t be used for overseas purchases of property, securities, life insurance or investment-type insurance. While such rules aren’t new, citizens previously didn’t have to sign such a pledge
• Customers must give a more detailed account of the planned use of funds, such as business travel, overseas study, family visits, medical treatment, merchandise trade or purchases of non-investment insurance policies, including the timing, by year and month
• Violators of foreign-exchange rules will be be added to the currency regulator’s watch list, denied foreign-exchange quota for three years and subjected to anti-money-laundering investigations
• Customers must confirm compliance with restrictions on money laundering, tax evasion and underground bank dealings
• Customers must now confirm they aren’t lending or borrowing quotas to or from other citizens

And while some of the new capital controls above may not seem that onerous, they're already threatening real estate deals from London to Melbourne as Chinese buyers are finding it increasingly difficult to fund down payments.

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