Across The Border | Crackdown on underground banks intensifies as concerns over outflows increase
The State Administration of Foreign Exchange (SAFE) has uncovered 56 illegal banking cases involving more than one trillion yuan, according to an official
The latest statement from a mainland official about the intensity of the authorities’ crackdown on underground banks suggests that worries about currency outflows are growing.
On Thursday, the state-owned China Financial News published an interview with a senior director at the State Administration of Foreign Exchange (SAFE), Zhang Shenghui, in which Zhang said that as of September 9 this year the agency, in collaboration with public security bureaux, had uncovered 56 illegal banking cases involving more than one trillion yuan.
Denis Suslov, an analyst at Shanghai-based financial industry consultancy Kapronasia, says that while SAFE have been trying to stop illegal capital outflows for a while, this crackdown “seems to be more intense than before, mostly because of the rising outflows”.
What is new is that [people] are now much more aware of the available ways to move capital abroad
“Concerns from both the middle classes and high-net-worth individuals about yuan depreciation have been building up for a while now, but what is new is that they are now much more aware of the available ways to move capital abroad,” said Suslov.
Judging by Zhang’s statements, Chinese citizens seem to be making use of this knowledge, and this is a worry for China’s authorities who have been concerned about the amount of capital leaving the country by both legal and illegal means, particularly since the sudden devaluation of the yuan last August.
Suslov says that the classic ways of moving money out of China illegally include fake trade invoices and disguised card spending abroad though new methods are emerging, such as buying insurance policies in Hong Kong.