Illegal flows of such “grey capital” have not only had an impact on China’s foreign exchange management system, but also seriously disturbed the country’s financial and capital markets order, the People’s Daily, the Communist Party’s official mouthpiece, reported on its website.
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A total of 100 suspects from eight gangs have been detained since the police launched the investigation in September previous year.
China started a crackdown on underground banks in April and has so far uncovered more than 170 cases of money laundering and illegal fund transfers involving more than 800 billion yuan ($125.34 billion), mainland media reports.
In December 2014, arrest warrants were issued for 56 suspects and more than 3,000 bank accounts were frozen. It took nearly a year for police to sort through the over 1.3 million suspicious transactions. Those who seek to send capital overseas have sometimes resorted to money laundering ranging from fine art purchases to real estate investments in cities like Vancouver and Sydney.
The tactics used by Chinese citizens to defeat the controls include so-called smurfing, where large sums are moved by breaking them down into a series of smaller transfers using the bank accounts and foreign-exchange quotas of a range of individuals.
“The government wants to stem outflows and stabilize the yuan’s exchange rate, but the outflows can not be stopped unless people change their expectation on yuan depreciation”, Xi said.
China’s capital outflows rose to a record $194 billion in September, according to Bloomberg.
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China’s yuan edged up on Friday after the central bank set a firmer midpoint and a few major state-owned banks sold dollars to offset corporate dollar demand, traders said.
