As Bloomberg reports, China’s foreign-exchange regulator told banks to improve checks of customer documents related to special trade zones amid speculation that the areas have been exploited to disguise capital inflows as exports.
Banks shouldn’t provide cross-border payment services to companies in the so-called bonded zones that aren’t pre-registered with the foreign-exchange authority, according to a notice issued yesterday by the State Administration of Foreign Exchange (SAFE) that takes effect June 1. As SAFE said, If an exporter decides to deposit its revenue overseas, banks must know the size, duration and remittance arrangements.
According to Bank of America Corp. and Royal Bank of Scotland Group Plc. bonded zones, which lie within the nation’s borders and handle inbound and outbound shipments as international trade, may help account for inflated data on export growth this year. SAFE’s notice follows a May 5 statement that it will increase scrutiny of cross-border capital flows.
Zheng Yuesheng, a spokesman for the General Administration of Customs, said last month that China is investigating possible fraud behind first-quarter export growth.
According to Bank of America, China’s trade surplus is one-tenth the official $61 billion reported in the first four months of the year after accounting for fake transactions used to disguise hot-money inflows.
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