There are plenty of oddities hidden in Cantonese wet markets, but a massive shadow banking operation that funnels millions of US dollars out of the country every month? Not as common.
That’s exactly what Chinese authorities found earlier this week, however, when they busted an underground bank operating out of a food market in Panyu District, Guangzhou. The organization is suspected of illegally transferring USD70 million out of the country in the past month alone, according to China Daily.
Shadow banking, which refers to financial activities conducted by unregulated institutions (i.e. the guys who trade currency for you on the street at better exchange rates than banks), remains a serious problem in China.
Experts say it can undermine the country’s financial stability, and others fear China’s shadow banking sector could trigger a financial crisis in developing countries.
This year alone, three large underground banks have been discovered in Guangdong province, involving cross-border transactions worth RMB3 billion and resulting in the detention of 30 suspects, according to China Daily.
Nationwide, more than 380 underground banks were busted last year in China, for conducting illegal financial transactions equivalent to RMB900 billion.
According to World Finance, difficulties in applying for a new loan or achieving credit at official banks may push some Chinese borrowers to look towards unregulated sources for support.
READ MORE: Man Tries to Deposit ¥1,000 in Fake Bills at Guangzhou Bank
[Image via World Finance]
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