China's wealthy have spent a mammoth US$22 billion on real estate in the U.S.; US$5.6 billion in Australia and billions on real estate elsewhere such as London, Vancouver and Hong Kong.

This flood of Chinese money has driven up real estate prices abroad to record levels while stoking fears of dangerous property bubbles in London and Australia. The Chinese are now the biggest investors in Australia's commercial and residential property markets.

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The question is how rich Chinese can spend so lavishly abroad when China's foreign-exchange rules cap the maximum amount of yuan an individual Chinese is allowed to convert at a paltry US$50,000 each year.

The law also bans individuals from transferring the currency abroad directly.

It turns out the only way rich Chinese can spend their riches overseas is for the government to break its own laws.

China's state-owned banks with the tacit consent of the central government have been assisting wealthy Chinese place unlimited amounts of yuan abroad each year beginning 2011.

They're breaking their own laws with impunity using an illegal money laundering scheme hidden under the guise of a "banking experiment" called "Youhuitong."

Youhuitong, which means "superior foreign-exchange channel," is a secret government "banking experiment" that allows enables individuals to transfer unlimited yuan amounts abroad and to convert these sums into dollars or other currencies in violation of the law.

Supposed to be a "trial program," Youhuitong, was quietly launched in 2011 by a few banks in Guangdong. Among these banks was state-owned Bank of China, Ltd (BOC) picked by the Guangdong branch of China's currency regulator, the State Administration of Foreign Exchange (SAFE), to let individual Chinese transfer yuan abroad using Youhuitong.

BOC refused to comment on its Youhuitong deals after state-run China Central Television (CCTV) charged the bank with money-laundering in news reports.

Chinese business newspaper the 21st Century Business Herald estimated that BOC moved US$3.2 billion abroad through Youhuitong, clearly a violation of China's foreign exchange money cap regulation.

CCTV's news stories blew the lid off Youhuitong, forcing SAFE to suspend the controversial trial program.

Youhuitong transactons by the BOC and other banks are now being investigated by the People's Bank of China (PBOC), the central bank, and its anti-money laundering bureau.

BOC claims its Youhuitong operation didn't constitute money laundering. It said the money transfers were allowed by SAFE and PBOC and reported to these regulators.

"Clearly the property market wouldn't nearly be so robust as it is today without mainland money," said Jim Antos, a Hong Kong-based analyst at Mizuho Securities Ltd.

"How did they do it? With Bank of China's help. There has been a tremendous amount of mainland money flowing offshore and it couldn't have happened without" official approval.