China Foreign Exchange Watchdog Finds $10 Billion in Fake Trade

China uncovered almost $10 billion in fraudulent trade nationwide as part of an investigation begun in April last year, including many irregularities in the port of Qingdao, a foreign exchange official said.

Companies “faked, forged and illegally re-used” documents for exports and imports, including in Qingdao, Wu Ruilin, a deputy head of the State Administration of Foreign Exchange’s inspection department, said at a briefing in Beijing. The agency identified the fake invoicing as part of a crackdown on the practice in 24 cities and provinces, Wu said.

The fraudulent trades have “increased pressure from hot money inflows and provided an illegal channel for criminals to move funds,” Wu said. The foreign-exchange regulator will severely punish those involved in such fraud, Wu said.

Chinese banks have about 20 billion yuan ($3.3 billion) of exposure to companies caught up in a loan fraud probe in Qingdao, two government officials told Bloomberg in July. Qingdao authorities are investigating if metals stored in bonded facilities there were pledged as collateral more than once.