Import Invoices to Disguise Capital Flight

choi

Surging China-Hong Kong Trade Raises Doubts Over Recovery. Bloomberg, Jan 13, 2016.
www.bloomberg.com/news/articles/ ... oubts-over-recovery
(In December 2015 compared with a year earlier: "Imports from Hong Kong surged 65 percent, the most in three years, to $2.16 billion. * * * The imports gain 'points to potential renewed fake trade activities' "  to send money out from within China)

My comment:
(a) Yesterday I had a posting (posting No 1 of the two) introducing China’s economy | The Yuan and the Markets."  There Economist says, the same as Financial Times, that capital flight is the root cause of China's economic problems.

(Since a few months ago (when the former common owner sold the to different buyers), Economist and Financial Times have distinct ownership.)

There, Economist prescribes, "A sharp devaluation would wrong-foot speculators. But * * * Better would be for China to strengthen capital controls temporarily."

What Economist is saying is: Investors have anticipated renminbi depreciation (engineered by China). So they have pulled money out of China -- hot money or not, domestic investors or foreign.  The desire is natural. However, capital flight causes sharp depreciation of renminbi, contrary to China's plan of gradual depreciation (against dollar).  Thus Economist recommends China bar the door, so that money can not escape; then China just depreciate renminbi at the pace -- and to whatever level -- it wants.

(b) Yet those in the know have sent money out one way or another, through means legal  and illegal. This Bloomberg report illustrates the former (legal). How can a government ban this?