China has defended its decision to bar the children of a fugitive businessman and their mother, all three of them US citizens, from leaving the country, saying the trio are suspected of having committed “economic crimes”.

These exit bans are usually used against overseas citizens of Chinese heritage.

Victor and Cynthia Liu, children of Liu Changming, a former bank executive who is wanted in connection with a €1.24 billion fraud case, and their mother, Sandra Han, have been detained since June and the US state department is in contact with the children.

They were picked up while visiting their grandfather on the tropical island of Hainan. According to the New York Times, the children have severed their relationship with their father since 2012.

It’s the latest flare-up in increasingly tense relations between China and the US, sparked by US president Donald Trump’s decision to impose billions of dollars in tariffs on a wide range of Chinese goods.

“As we understand it from the relevant authorities, these people you have mentioned all have legal and valid identity documents as Chinese citizens,” Chinese foreign ministry spokesman Geng Shuang told reporters at a regular news briefing. “They are suspected of having committed economic crimes and have been restricted from leaving China by Chinese police.”

Cynthia Liu (27) was due to start work at the consultancy McKinsey & Company in New York, while Victor Liu (19) was due to resume his studies at Georgetown University in Washington DC.

Under Xi Jinping, China has cracked down on corruption, and part of that has involved trying to repatriate economic fugitives overseas with a police operation known as “Operation Foxhunt”. However, the US does not have an extradition treaty with China and rarely co-operates with Chinese law enforcement officials trying to repatriate Chinese citizens considered economic fugitives by Beijing.

In a recent case, a Singaporean working for the Swiss bank UBS was prevented from leaving China and UBS issued a travel warning to its employees.

The law in China states that its citizens automatically lose their citizenship when they gain citizenship in another country. Anyone born with citizenship from another nation, such as Mr Liu, who was born in the US, loses their citizenship regardless of where their parents are from.

Among the high-profile cases were the Hong Kong booksellers detained by Chinese authorities in Hong Kong for publishing books critical of the Chinese government. One of them, Lee Bo, held a British passport but was described as “first and foremost a Chinese citizen”, while his Chinese-born Swedish colleague Gui Minhai had a Swedish passport.

The US state department has issued a travel warning over the practice of exit bans, saying they posed a risk to foreigners in China.