Mystery of China's illegal capital outflow

The massive foreign exchange reserve build-up by East Asia in the past year is a major reason for improving foreign sentiment in the region. China's resolve to tackle economic inefficiency via structural reforms and its upcoming entry to the World Trade Organization (WTO) has further reinforced foreign confidence. The reserve build-up is most noticeable in the Greater China region, where China, Hong Kong and Taiwan's reserves are ranked among the largest five in the world. However, some people suspect that China's illegal capital outflow may have accelerated again. If true, this would not only affect China's future growth adversely, it may also dampen foreign investors' participation in China's economic restructuring and their appetite for Asian assets as a whole.