Chinese Shadow Liquidity and the Scam Economy
Chinese shadow liquidity networks, built to shield against external pressure, have mutated into a force of global instability.
This article is a preview of an article I wrote for the New Lines Institute. You can find the full text for free here.
A soldier stands guard as workers cover their faces while authorities raid the offices of Central One, an alleged scam hub masquerading as a call center company, on Oct. 31, 2024, in Bagac, Philippines. (Photo by Ezra Acayan/Getty Images)
The explosive rise of Southeast Asia-based scam networks targeting victims globally is no accident; it is the byproduct of China’s vast offshore shadow liquidity systems. Scammers from the region have increasingly targeted victims in the United States, who lost at least $5 billion to such scams in 2024 alone. Scam hubs, some of which comprise entire cities built using offshored Chinese wealth, threaten stability across Asia by draining middle-class savings into a self-perpetuating parasitic ecosystem. These criminal enterprises are now actively expanding their operations in Africa and Latin America, positioning themselves closer to Western societies where aging populations are especially vulnerable to sophisticated cybercrimes. These systems also threaten regional stability, with recent military clashes between Thailand and Cambodia underpinned by rising scam activity and capital flows to the Cambodian side of their disputed border.
Over the past decade, China built a secret offshore capital reservoir to shield itself from an increasingly hostile outside world. That reservoir, combined with massive capital outflows, has spawned a vast criminal ecosystem that threatens social and economic interests the world over. Moreover, the networks constituting this ecosystem now serve their own ends, not merely those of Beijing. In the absence of safeguards, this pooled liquidity has fueled criminality that now threatens China despite Beijing’s ongoing efforts to reassert control over it. This offshored criminal ecosystem demonstrates a fundamental truth by its very existence: liquidity systems, once externalized beyond state oversight, become self-reinforcing, corrosive infrastructures.
In Southeast Asia, sprawling scam hubs now siphon an estimated tens of billions of dollars or more annually, turning a defensive buffer into a parasitic financial ecosystem threatening regional and global stability. This criminal ecosystem exposes a significant contradiction at the heart of China’s model: a regime built on centralized control increasingly entangled with systems it can neither regulate nor contain. These networks – once designed to strengthen China’s financial sovereignty – now threaten it, eroding domestic stability and undermining the very narrative of control the ruling Communist Party depends on to maintain legitimacy.
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