China and domains : Investments, or a form of tax evasion?

chinese-domain-market

The Chinese domain market boomed in 2015.

As the focus of domain investing changed to China for the better part of 2015, many investment analysts followed closely.

In an article for DNW, domain investor and analyst, Joseph Peterson, carefully examined the trends behind the numbers of Chinese domain investing.

Many speculate that there has been an ongoing “pump and dump” scheme regarding the seemingly endless craving of short domains by the Chinese.

A new article expands even further on the reasons many Chinese invest in domains: to avoid government restrictions on how questionable or very risky investments in the stock market are made.

In 2015, in the middle of China’s ongoing financial crisis, the government tightened some forms of capital control; the Chinese citizens have strict limitations on the amount of money they can withdraw while traveling abroad, plus restrictions on how much money they can transfer overseas.

After testing the waters of Bitcoin and its obvious volatility, Chinese investors switched to domain names as a vehicle for transferring funds overseas:

“Chinese aren’t looking to make money. They’re not buying domains as investments– they’re using domains to TRANSPORT money.”

This approach appears to be a form of tax evasion, and it should make many wonder how long it can continue without the Chinese government finding out and cracking down on this practice.

“So later, you travel overseas, open a foreign bank account, then sell your domain to someone else.

The proceeds of that sale get paid to your new bank account abroad. And, presto! You’ve just moved a lot of money overseas, completely circumventing capital controls.”

For the full article, titled “Here’s the ultra-clever way that Chinese are circumventing capital controlsclick here.

 

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