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It would not shock anyone in Vancouver to be told that wealthy Chinese immigrants have played a role in propelling the city's gravity-defying real estate market to ever greater heights in recent years. But what has long been murky is exactly how money is moving out of China, a country that in theory has tight controls on capital movement.

The mechanics of the money transfer may now be clearer after an investigation by China Central Television, which reported last week that a low-profile government-approved program has been quietly enabling affluent Chinese clients to transfer unlimited amounts of yuan out of the country, despite rules that limit the maximum amount of currency that Chinese citizens are allowed to convert to $50,000 (U.S.) a year.

China's major banks have halted the transfer program, The Wall Street Journal reports, but what is still uncertain is how that action will affect the countries that were the major destinations for the Chinese money. According to Bloomberg, much of the cash was being used to buy expensive real estate in New York, Sydney and Vancouver.

A halt to the transfer program could temporarily cool off Vancouver's hot real estate prices by limiting the amount of offshore money flowing into the city. In the long run, though, Vancouverites should brace themselves for a much wider liberalization of the Chinese currency that will open the floodgates to even more Asian buying power in key real estate markets.

The Bank of China, one of the financial institutions involved in the program, has rushed to assure the public that its actions did not constitute money laundering. The country's central bank launched the program as a trial effort as part of China's efforts to promote the use of the yuan overseas, according to the Journal.

However, the program, which began about two years ago, grates on public sentiment in China because of the perception that some officials may be taking advantage of loopholes to hoard cash overseas, often with the help of family members who emigrate.

The impact of Chinese money on Vancouver's real estate market is hotly debated. Vancouver Mayor Gregor Robertson told the South China Morning Post last year that assertions that Chinese immigrants are driving up the city's real estate prices are "ridiculous." But David Ley, a professor at University of British Columbia, found a close correlation between foreign migration to Vancouver and property prices in his book, Millionaire Migrants.

If nothing else, the situation highlights the sorry state of Canadian real estate data. Unlike most countries, Canada does not collect information on foreign buyers of residential real property.

In contrast, the National Association of Realtors in the United States issues an annual report on international buyers. In its most recent report, it found that Chinese buyers accounted for more sales dollar volume than any other group of foreign buyers. Total sales to Chinese buyers soared to $22-billion (U.S.) in the year to March, the realtors group reported.

To be sure, that still accounts for less than 2 per cent of all sales of existing U.S. homes. But because Chinese purchases are concentrated in a few areas, notably California, Washington and New York, the effect is likely to be much larger in those areas.

The halt to China's money-transfer program may take some of the heat out of those markets, as well as Vancouver's. Most observers, though, believe the cessation is likely to be temporary as China seeks to increase the yuan's role in international transactions.

The bankers at HSBC predict the Chinese currency will be fully convertible within three years. If so, the stream of Chinese buyers looking for foreign real estate is likely to grow, not shrink.