Beijing is cracking down on trade firms and officials breaching foreign-exchange regulations, threatening to send black marketeers to prison, amid increasing worries that irregularities would jeopardise yuan. A State Administration of Foreign Exchange (Safe) official yesterday told Xinhua the Supreme Court had made black-market foreign-exchange transactions a criminal offence. Other moves in the nationwide crackdown included inspection of financial institutions and trading firms, amendments to close loopholes in foreign-exchange regulations, and more efforts to increase computerisation in foreign-exchange departments, banks and customs. The aim was to stop capital flight and a repeat of the financial crisis in Southeast Asia, Xinhua said. However, the Safe official said the tougher regulations did not mean Beijing would return to its old days of total foreign-exchange control, as Malaysia did recently. He said the resurgence in black market activities had already exerted a negative impact on mainland's foreign exchange balance. Beijing has repeatedly vowed to keep its currency stable but intense rumours of devaluation have made many mainland trade firms and individuals scramble for US dollars, creating increasingly active black markets. Many trading firms have also breached regulations by hoarding hard currency in their overseas accounts and have even forged documents to buy foreign exchange. One result is that, although the mainland posted a trade surplus of more than US$31 billion in the first eight months, its foreign-exchange reserves have remained stagnant at about $140 billion since the beginning of this year. The Safe spokesman said the national auditing campaign, already under way, would focus on checking the accounts of trading firms and other enterprises. The auditors would make sure every purchase or payment in foreign exchange was truly connected to import dealings, with proof of imported commodities. Financial institutions, if found breaching regulations, would have their licences in foreign-exchange settlements suspended while foreign-trade licences of trading firms would be revoked.