China said it had cracked down on an underground banking operation that conducted $3.7 billion (3.5 billion euros) in illegal foreign currency transfers. Authorities hailed the bust as a sign of their resolve to stem massive capital flight.

The State Administration of Foreign Exchange (SAFE) said in a statement it had investigated six companies suspected of illegal forex transfers in the southern city of Shenzhen.

An unspecified number of other firms were found to have used false documentation, fabricated trades and other methods to funnel money out of the country, regulators said.

Authorities in particular cracked down on 'ant moving' strategies whereby large sums of money were transferred out of the country in small portions to avoid detection.

'Irrational' spending targeted

"Underground banking has become a major channel used for money laundering and illegal cross-border transfer of funds," The Ministry of Public Security noted.

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"It creates a huge black hole of funds, severely disrupting the normal financial supervision order and endangering the economic safety of the nation," the ministry added.

A huge wave of overseas investment by Chinese companies last year prompted the government to criticize irrational spending.

China's vast foreign exchange reserves fell below $3 trillion in 2016 for the first time in six years as the authorities spend a lot to prop up the value of the yuan and cut down on outflows.

hg/jd (Reuters, AFP)