China said that it would launch a three-month crackdown on underground banking to curb money-laundering and illegal fund transfers as unstable markets stoke fears of capital flight.
Worries over China’s economic slowdown and possible interest rate hike by the US Federal Reserve have led to a wave of capital outflows this year.
Chinese law prohibits individuals from transferring more than $50,000 out of the country per year, but the underground banking industry has thrived in recent years as a channel to send money out of China.
“Some ‘grey funds’ have been transferred through underground money shops across the border, which not only poses a serious risk to our foreign exchange management but also disturbs the order of financial and capital markets and threatens our financial safety,’’ Vice Minister Meng Qingfeng said on the website.
In April, a similar campaign found 66 underground banks responsible for illegally funnelling out more than 430 billion yuan ($67.5 billion), the ministry said.
($1 = 6.4130 Chinese yuan renminbi)