HOT MONEY COMING into China in pursuit of rising property prices and in expectation of further yuan appreciation has long concerned authorities for fear it will help inflate bubbles. Periodic efforts are made to clampdown on those speculators skirting the rules for legitimate foreign exchange transactions. In the latest one, the State Administration of Foreign Exchange (SAFE) says it is looking into trade financing to ensure there is real trade behind the foreign exchange being requested.
In July, it was revealed that some Chinese export companies were in effect disguising hot money as trade payments, writing up fake invoices so they could skirt capital controls and make a fast buck speculating on the yuan’s rise. This was going on on a sufficient scale to be affecting the official trade figures.
SAFE cracked down on those, warning trading houses that were cooking their books to get them in order in short order. But it is clear the chicanery, or something like it, is continuing. SAFE lambasted the commercial banks for not being sufficiently vigilant in rooting out the practice among their customers, saying it would now carry out its own assessments. State media says penalties for abuses will be increased — and imposed on both the companies and their bankers.
China Bystander 
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