China cracks down on illegal forexes
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As the government strives to cool China's excessive asset prices, foreign exchange regulators have stepped up measures to curb the cross-border flow of capital through illegal foreign exchange transactions.
As of November 31, the State Administration of Foreign Exchange (SAFE), in alliance with other departments, had cracked down on 10 illegal private banks this year, some of which had a maximum daily turnover of over 10 million yuan ($1.5 million), the Xinhua News Agency reported Sunday.
The regulators also destroyed 17 online and offline illegal foreign exchanges, in addition to the destruction of the "underground" banks, involving a total of $3.5 billion, according to SAFE, which published the report on its website.
Li Youhuan, a researcher at the Guangdong Academy of Social Sciences, told the Shenyang-based Chinese Business Morning View Monday that the inflow of hot money has surged since June, and the increasing speed has been the highest since 2002. He did not provide specific figures.
According to a survey of the irregular flow of overseas fund to the mainland by Li and his colleagues in August, over $300 billion in foreign money slipped into the country through the illegal private banks, and a considerable amount was invested in the red-hot property market. The survey polled over 30 "underground" bankers.
According to data released by the Shenzhen municipal department of land and resources, average housing prices rose nearly 100 percent from 11,000 yuan ($1,611) per square meter in January to 21,661 yuan ($3,171) in October.
If the hot money flow is unchecked, the loose monetary and fiscal policies adopted by governments around the world could lead to another major financial crisis in five to seven years, and the impact will be felt most severely in emerging markets, Li said.
SAFE said that it will take more stringent measures to check the authenticity of foreign currency exchanges and payment and will organize ad hoc strikes in the regions where "underground" banks and online foreign exchange speculations are rampant.
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