China Crackdown on Illegal Money Flows Sees 450 People Arrested

  • Suspects said to use offshore companies, ‘underground banks’
  • Officials grappling with risk of more capital outflows

Chinese authorities said 450 suspects have been arrested this year in a crackdown on using offshore companies and “underground banks” to transfer money illegally, underscoring the scale of the task for officials trying to control capital flows. 

The cases involved almost 200 billion yuan ($30 billion) of transactions, the Ministry of Public Security said in a statement on its website Wednesday.  

In China, individuals sometimes use unofficial channels described as underground banks to bypass government restrictions on moving money across the nation’s borders. While the potentially destabilizing outflows of capital have slowed in 2016, weakness in the yuan could encourage another pickup.

A net $55 billion exited in July, compared with $49 billion in June, Goldman Sachs Group Inc. analysts wrote in a note. Outflows surged during the second half of last year, rising to as high as $171 billion in December, according to a Bloomberg estimate.

Agencies including the People’s Bank of China and the State Administration of Foreign Exchange are involved in the campaign against illicit flows, the public security ministry said.

— With assistance by Paul Panckhurst, and Stephen Tan

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