The SAR government is refusing to take action against the recycling of mainland funds through Hong Kong, much of which experts say is involved with tax evasion but disguised as foreign investment.
The World Bank has estimated that almost half of the foreign direct investment (FDI) attracted by China may originate from mainland companies.
Some of it is clandestine but some also involves legitimate practices seeking to take advantage of loopholes in China's tax, foreign exchange and investment laws - known as 'round tripping'.
A large proportion of the clandestine movement of money is funnelled through companies in Hong Kong which are controlled by mainlanders, experts say.
The World Bank's calculation that half of the foreign investment directed to the mainland - made in March in the Washington-based lender's most recent yearly report on developing countries' external finance - outstrips other estimates by a considerable margin.
The United Nations Conference on Trade and Development said last month that about 30 per cent of the US$47 billion (HK$367 billion) in foreign investment earned by China last year came from 'reinvested earnings from foreign affiliates', which appears to be 'round tripping'.
