China has found nearly $10 billion worth of falsified trade transactions more than a year after the fake trades were first uncovered, the currency regulator said on Thursday, adding that a crackdown had now stamped out the practice. To evade China's capital controls and sneak money in or out of the world's second-biggest economy, some companies create artificial trade invoices that are not backed by an actual exchange of goods or services.
Authorities have found nearly $10 billion worth of such deals so far and 15 cases may be linked to criminal fraud, said the State Administration of Foreign Exchange, China's currency regulator which also manages the country's $3.99 trillion foreign exchange reserves. Global commodity markets were rattled in June when an investigation into a trade fraud in China showed companies had used fake receipts at a port in Qingdao in east China to obtain multiple loans secured against a single cargo of metal.
The incident prompted global banks and trading houses to fire off a series of lawsuits over their estimated $900 million exposure to other related cases. "Fake trades not only increase the pressure of hot money inflows, but also provide illegal channels for cross-border capital flows," Wu Ruilin, vice-head of the management and inspection department at the regulator told a press briefing. Some banks were found to have neglected their duties in checking the authenticity of deals, which increased fraudulent behaviours, Wu said.