Steps to protect China’s currency could see a stop to investment in foreign wineries

The number of Chinese wine producers and businesses looking to buy wine properties overseas could be drastically hit by new Chinese laws tightening up the regulations regarding money being taken out of the country.

It has been quite a common event for a major Chinese investor or businessman to buy up prime estate property and land in key wine regions around the world, most notably in Bordeaux and Burgundy. It is thought that up to 160 chateaux are now under Chinese ownership. But there have also been moves in to Australia and New Zealand where investors hope to make use of good free trade agreements between the countries.

However that could now stop due to the  State Administration of Foreign Exchange (SAFE) that acts as a currency regulator said that it wanted to close down loopholes exploited for money laundering purposes and illegally channeling money into overseas property.

To legitimately take money out of China, applications must be made to SAFE, usually via a bank, to show proof that income taxes have been paid. This is to stop too much money leaving the country at one time, so diminishing foreign reserves and causing a further drop to the value of China’s own currency. It is being seen as a protectionist move by the government.

It now means that the maximum that any individual can take out of the country  each year is US$50000, and that figure has remained unchanged, but the government has been clamping down on the many loopholes.

Now anyone transferring money out of China must pledge that it won’t be used for the overseas purchase of property. While this has long been the case, now applicants must pledge this in writing.

“At this stage we are waiting to see what the impact is,” Michael Bayne of Christie’s International in Bordeaux told Decanter. “It is purely speculative what is going to happen, although we expect residential property to be more affected than vineyards.”

Around US$672bn poured out of China between January and November 2016, much of that into residential property around the world. The Chinese overtook the Canadians to become the biggest foreign buyers of US homes in 2015, forking out a total of US$28.5bn.

He said many of his clients had already taken money out of the country and so the real ramifications won’t be felt until 2018 at the earliest.

Not all Bordeaux agents are so bullish, however, with some reporting that sales are being held up by Chinese buyers waiting for confirmation they have sufficient funds.

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Neville Blech
 

Qualified as a chartered accountant in 1959 and became passionate about food and wine whilst working in Italy in the early sixties.

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