(Adds background, details)
BEIJING Oct 12 Police in China's southern
province of Guangdong have busted underground banks that handled
230 billion yuan ($35 billion) in illegal money transfers this
year, state news agency Xinhua reported, underscoring the
challenges Beijing faces in blocking illicit outflows.
China has become increasingly concerned about capital flight
and the potential fallout on the country's foreign exchange
market as well as efforts by policy makers to shore up
confidence in the world's second-largest economy.
Police arrested 350 people suspected to be involved in 140
cases of underground banking and money laundering, Xinhua said,
citing the Guangdong provincial public security department.
Illegal banking has been rampant in some parts of the
province such as the capital Shenzhen, where an underground bank
that handled 30 billion yuan in transactions was busted in
The story also cited a bust by Shenzhen police this month,
where 10 suspects illegally moved 48 billion yuan ($7.20
billion) out of the mainland from 2014-2015 by establishing fake
trading companies in Shenzhen and neighbouring Hong Kong.
Guangdong police revealed this week that at least 207
billion yuan was channelled out of the province last year in
illegal money transfers, striking at the heart of one of China's
Beijing started a campaign against illegal banking in April
last year and uncovered over 170 cases of money laundering and
illegal fund transfers involving more than 800 billion yuan as
of last November.
The crackdown included an investigation into the country's
biggest underground banking case involving $64 billion worth of
China's latest bid to tackle illegal outflows comes as its
yuan currency weakens to six-year lows. Hong Kong is the most
popular route, analysts say, because of its proximity to China.
The Ministry of Public Security (MPS) said in August that a
special task force launched by the MPS, the central bank and the
foreign exchange regulator have busted underground banks that
handled 200 billion yuan ($30.2 billion) in illegal money
transfers this year.
Officials from the Guangdong provincial public security
department said the police would keep cracking down on
underground banking to ensure order in the financial system,
Global Financial Integrity, a Washington-based watchdog,
estimated that in the decade between 2004 and 2013 China was the
world's biggest source of illicit outflows, accounting for about
28 percent of the $4.885 trillion in illegal funds moving from
the 10 biggest source economies.
($1 = 6.6685 Chinese yuan renminbi)
(Reporting by Yawen Chen and Nicholas Heath; Editing by Anne
Marie Roantree & Shri Navaratnam)