China to probe use of forex in trade finance

Dec 07, 2013, 5:19 PM EST
This picture taken on September 24, 2013 shows US dollar notes being counted next to stacks of 100 yuan.
AFP/Getty Images/STR

BEIJING, Dec 7 (Reuters) - Chinese regulators will clamp down on banks' and companies' use of foreign currency for trade finance by ensuring that trade deals are authentic and by monitoring for unusual cross-border cash flows, state media reported.

The report did not specify the illegal activities targeted by the State Administration of Foreign Exchange (SAFE) in the clampdown. China is in the midst of an effort to quell currency speculation, however.

Banks have not fulfilled a duty to carry out their own investigations into the use of foreign currency, prompting SAFE to carry out its assessments and punish institutions accordingly, Xinhua reported on Saturday.

According to SAFE, the authenticity and compliance of long-term trade financing will be a particular focus of the crackdown, the report said.

Penalties for any illegal activity will be increased, Xinhua said.

The foreign exchange reserves of China's central bank recently reached their highest level since January 2008 as a result of the rising value of the renminbi, Chinese policy reforms and market expectations that the U.S. Federal Reserve will soon start curbing monetary stimulus, Xinhua said.

(Reporting by Paul Carsten; editing by Jane Baird)