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BIZCHINA / Biz Media Digest
Finance: Shenzhen underground finance center busted
By Xin Zhiming (China Daily)
Updated: 2007-08-07 11:09
Foreign exchange and public security authorities have broken up a
Shenzhen underground bank that was doing business nationwide, the State
Administration of Foreign Exchange (SAFE) said yesterday.
The bank provided illegal funding for its clients to invest in the stock
and property markets as well as other businesses.
The funds could amount to tens of billions of yuan, according to a
statement on the SAFE's website.
Some major State enterprises were also involved in the illegal deals, the
SAFE said, without naming them.
As the domestic stock and property markets continue to boom, analysts
said many enterprises, including some major State firms, have ploughed
money into the markets for quick profit.
Last week, the State-owned Assets Supervision and Administration
Commission (SASAC) said the China Shipping (Group) Company and the China
Nuclear Engineering and Construction (Group) Corporation had used bank
loans to invest in the stock and property market respectively. The SASAC
discovered the irregularities in its performance appraisal of 150 central
State enterprises under its control.
The foreign exchange regulator has stepped up its efforts to crack down
on illegal funding and has conducted nationwide checks to prevent foreign
speculative capital, or hot money, coming into the country to push up
domestic asset prices.
"Some of the funds of underground banks may have come from overseas in
the form of speculative money," Li Zhikun, analyst with the China Jianyin
Investment Securities, told China Daily.
The SAFE said 55 accounts had been frozen in the Shenzhen raid, involving
4.2 million yuan ($556,000).
The bank, however, had conducted transactions totaling 4.3 billion yuan
in its seven years of operation.
Six people have been detained, including the boss of the bank, surnamed
Du, the SAFE said.
Du's clients were from all 31 provinces and regions of the country. The
bank's major clients were from the coastal provinces of Guangdong,
Jiangsu and Zhejiang.
(For more biz stories, please visit Industry Updates)
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