"Clearly, genuine recorded FDI into China is overstated to the extent that total foreign direct investment includes round-tripped funds coming from tax havens," said Kar.
The financial flows reflect widespread frustration with China's government-controlled financial system, which channels most bank lending and other benefits to state-owned companies at the expense of savers and entrepreneurs.
The government has eased some controls by allowing families to move more money abroad to buy real estate or make other investments and reducing the number of approvals required for companies to invest abroad.
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