The mainland's foreign exchange regulator said it intended to squeeze the illicit flow of funds into the country by cracking down on banks handling foreign exchange to ease the pressure of rapidly growing foreign reserves.
In a statement released yesterday on its website, the State Administration of Foreign Exchange said it would focus this year on monitoring for unusual short-term foreign cash inflows, citing the conclusions of an unspecified recent working conference in Dongguan.
Beijing has been battling to limit the money flooding into the country, concerned that it will contribute to overheating the economy and add appreciation pressure on the yuan.
SAFE said that last year it completed 1,915 cases related to unusual cash inflow and short-term capital speculation, imposing fines totalling 138 million yuan, and shut down more than 70 illegal foreign exchange trading spots and so-called 'underground banks'.
Underground banks are usually illegal lending organisations run by company heads, employees from certain bank branches or other lenders, which charge higher interest rates than standard banks but without the restrictions that often serve to dampen speculation.
In a separate statement, SAFE said last year it examined more than 2,000 branches of 29 foreign and domestic authorised foreign exchange banks. It said it imposed fines of 16 million yuan for violations of foreign exchange rules at 265 bank branches.
