China Warns on Illegal Capital Flow – Jamil Anderlini and Tom Mitchell

From The Financial Times:

Illegal capital flows in and out China threaten to destabilise the country’s financial system as well as Hong Kong’s, warned Wen Jiabao , Chinese premier, on Monday.

“There are a lot of abnormal factors, including underground banking, illegal fund inflows and outflows,” Mr Wen said. His remarks, made in Singapore, followed a report in the Economic Observer , a Chinese-language mainland newspaper, claiming that Sinopec and CNPC , China’s two largest petrochemicals companies, had used the services of an illegal banking operation to settle bills with Hong Kong-based companies. The operation allegedly specialised in cross-border fund flows between Hong Kong and the southern Chinese city of Shenzhen. CNPC and Sinopec declined to comment. [Full Text]