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Comment by O__________O | Hacker News Reader

TLDR: “Li and his fellow Chinese money launderers married market forces: drug lords wanting to get rid of dollars and a Chinese elite desperate to acquire dollars. The new model blew away the competition.”

Comment: Nation states have been waging asymmetric warfare for long time, this is not new. China has become a major player in the illegal drug trade by supplying money laundering and chemicals [1]. Oldest modern reference I am aware of on the topic as it relates to China is a book on military strategy written in 1999 by two colonels in the People's Liberation Army titled Unrestricted Warfare.[2]

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[1] https://google.com/search?q=china+fentanyl

[2] https://wikipedia.org/wiki/Unrestricted_Warfare

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I really do wonder where China might even have got this idea from.

Yes, "The First Opium War (Chinese: 第一次鴉片戰爭; pinyin: Dìyīcì Yāpiàn Zhànzhēng), also known as the Opium War or the Anglo-Sino War was a series of military engagements fought between Britain and the Qing dynasty between 1839 and 1842, during the Century of humiliation. The immediate issue was the Chinese seizure of private opium stocks at Canton to stop the banned opium trade, and threatening the death penalty for future offenders. The British government insisted on the principles of free trade and equal diplomatic recognition among nations, and backed the merchants' demands."[1]

https://en.wikipedia.org/wiki/Opium_war

I was going to guess they were thinking of the CIA's "Golden Triangle", which operated similarly and makes a narratively nice "turnabout is fair play" argument[1]

[1] https://en.wikipedia.org/wiki/Allegations_of_CIA_drug_traffi...

As the OP says, every state has been doing this stuff since forever.

The US has had maintain a certain "better than that" image at times but states have managed their images for a long time too.

Are you referring to the Opium Wars?

Sun Tzu?

Isn’t the Chinese government trying to curtail capital outflow?

No, their entire economy revolves around exporting value-added goods.

They restrict currency movements, but that doesn’t work when you can ship out goods and deposit payments overseas. Drugs is one way to do this, but so is virtually any other good.

This doesn't seem to be the case here as most of the "value add" is occurring in the US. Bitcoin is another Chinese export that enable capital outflow, but China is taking a lot measures to crack down on it. I'm sure the Bitcoin miners that are still allowed to operate have connections in the CCP, but that doesn't mean the party itself is particularly happy about mining.

For drugs yes, but China is a machine that takes raw materials and manufactures them into finished goods. Just look for the "Made in ______" label on so many goods.

Sure there's lots of margins on the marketing side that's captured and retained wealthy countries, but China is capturing some percentage of so many finished products.

But that’s not capital outflow. That’s exporting useless cheap goods for an inflow of capital (USD).

All of those exported goods are expected to be sold at a markup in other countries, in that countries currency.

Exactly, so China exports goods valued at less than markup, and pockets the markup, resulting in a net cash inflow. This is what is referred to by the “trade deficit” between the US and China. The deficit refers to the fact that China is exporting less valuable things and pocketing the money, and not buying back as many US goods, resulting in a deficit that net moves capital to China.

Yeah, that is why people are using Li's money laundering services. They cannot get cash out of China legally so they do it illegally.

My point is that the Chinese establishment does not actually want this. It’s the private citizens trying to sneak the money out.

I don't think they're complaining about drug dealers paying part of their forex bill for them. Colombia has done the same thing for the past 50 years too (Google "black market peso exchange" or "sinister window"). But they probably don't like that high level people can have assets they don't know about or can't touch when they're in the process of a big corruption crackdown.

What do you mean by “paying forex bill”?

It’s not just high level people moving capital our of China. It’s any well-to-do Chinese. Look at what happened to Vancouver. Basically a lot of people wanted to bring their cash out of China to avoid things like taxation, government crackdowns, etc. in general just protect their wealth because western governments are more predictable and friendlier to wealth inequalities.

But more importantly, all of that cash going to Canadian real estate and property owners is money taken out of the domestic Chinese economy.

> What do you mean by “paying forex bill”?

It allows capital flight to occur without draining the official central bank reserves of dollars.

> But more importantly, all of that cash going to Canadian real estate and property owners is money taken out of the domestic Chinese economy.

If you read the article it talks about how the money is used to buy goods in China that are then sent to Mexico so it's not a total loss.

China tries to curb capital outflows but they are so huge they're essentially institutionalized despite these efforts.

This is a fantastic and vastly underrated book

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