1.
Illicit Financial
Flows in China
Presented by Ha Thu Luong

2.
What is illicit financial flows?
 Illicit Financial Flows (IFFs) is “money illegally
earned, transferred or used,” with money
understood as funds or assets. (World Bank
2015)
 2 main areas:
• Proceeds of criminal activities.
• Legally generated revenue and income that
become illegal either because of their use.

3.
IFFs’ effects on developing
countries?
 Direct: IFFs as an important source of public
domestic financing for development goals.
 Indirect: IFFs affect investment, interest rates
and inflation.
A crucial issue since if we solve it, development
process will be improved.

4.
Illicit Financial Flows from Developing
Countries: An Upward Trend

5.
Illicit Financial Flows in China
from 2003 to 2012
 China was the country with highest IFFs in the
world (Global Financial Integrity’s Report
2014).
 Hit $249.57 billion in 2012.
 Led in the unsanctioned outflows in almost
years during that period.

6.
Source: Global Financial Integrity (GFI)

7.
Why should China focus on
IFFs?
 Cumulative loss from China over 10 years (2003-
2012) totaled $1.25 trillion.
 IFFs was equivalent to 11.1% of GDP.
 Up to 47% of all illicit financial flows from
developing countries between 2001 and 2010 to
China.
Therefore, solving illicit financial flows is an
urgent task for Chinese Government.
Source: Global Financial Integrity (GFI) Reports

8.
Obstacles to solve IFFs Issue in
China
 Rising Inequality
 Illicit Money comes back to country in the
form of foreign direct investment
 High level of corruption
 Weak controls from Government

9.
Suggestions to Solve IFFs Issue
in China
 Setting up new regulations to remove commercial
tax evasion, criminal activities, public corruption.
 Increasing Citizen Engagement by raising trust in
public institutions, avoiding inequality between
citizens.
 Curtailing the flow of dirty money by reforming
customs and trade protocols.
 Learning from some successful examples of
solving IFFs Issue, e.g.: Bangladesh to get
positive results.

10.
Bibliography
 Global Financial Integrity, Illicit Financial Flows from
Developing Countries: 2003-2012
 Stella Dawson, Dirty money costs developing world $6
trillion, led by China: report. Retrieved from:
http://www.reuters.com/article/us-funds-global- illicit-
idUSBRE8BH00220121218#UkpkEZpIgP1TpCZH.97
 Global Financial Integrity, Illicit Financial Flows from China
and the Role of Trade Misinvoicing
 Gabriel Wildau, Analysis: Spectre of capital flight slows
China FX reform drive. Retrieved from:
http://www.reuters.com/article/us-china-economy-
idUSBRE8BI1GR20121219#IPijEkZeLCyzhX4K.99