Remarks September 25 from Wu Ruilin, deputy director of the supervision and inspection department of China’s State Administration of Foreign Exchange, indicate that a recent probe into fraudulent trade financing agreements turned up nearly $10 billion in fictitious deals.
The probe stemmed from a scandal involving metal supplies in the port cities of Qingdao and Penglai, but quickly as spiraled into an international investigation.
Foreign Banks and commodities firms face losses there of close to $1 billion, while Chinese banks stretches into the billions of dollars in exposure, according to court filings, public statements by the banks and analysts’ estimates, reports The Wall Street Journal.
More than 15 cases over to police, Mr. Wu said.
“Trade-financing fraud is very harmful not only to trade but also to the overall economy,” he said. “It increases the pressure of hot money inflows and has even become the channel through which funds of some criminal activities flow in and out of China. Hot money is speculative funds that can quickly pour into an economy and depart as rapidly.”