Chinese hold 53 in raids on illegal bank operations

Flouting the law * Because China strictly limits amounts of currency its citizens are allowed to take abroad, many customers have turned to illegal banks and dealers that offer better rates. * Among suspects detained were people from Taiwan, Macau and Hong Kong.

Chinese authorities detained 53 suspects in raids on illegal banks suspected of helping Chinese citizens skirt restrictions on money changing and transfers abroad, the official China Daily said yesterday.

The raids last week shut down 11 operations in the southern province of Guangdong, whose strong export-driven economy has spawned a thriving illegal financial sector.

More than US$2.7 million worth of Chinese and foreign currency was seized from the illegal banks, the English-language newspaper said. It said handguns and ammunition were also found in the raids, a sign of the possible involvement of organized crime groups who have deep ties to the underground financial industry elsewhere in the region.

Among suspects detained were people from Taiwan, Macau and Hong Kong, the paper said. They ran the operations in partnership with local Chinese, earning huge profits trading in foreign currency and transferring Chinese funds abroad, the paper said.

Such services are in demand because China strictly limits amounts of currency its citizens are allowed to take abroad. The Chinese currency, the yuan, is convertible only under certain restrictions and the government sets exchange rates within a narrow band.

Enterprising Chinese have long found ways to dodge the rules. Illegal money changers offering rates better those in banks are common in major cities. To beat restrictions, Chinese even strap cash to their bodies when leaving the country.