Just how big is the underground economy in China?



Chinese police this year shut down seven large underground banks which laundered more than 14 billion yuan ($1.75 billion), the state-run Xinhua News Agency reported, citing the Ministry of Public Security.

Forty-four suspects have been arrested in Guangdong, Shanghai, Beijing, Inner Mongolia, Liaoning and Heilongjiang, and 58 million yuan has been recovered, Xinhua said.

China recorded an 11-fold increase in "suspicious" foreign-exchange fund flows last year, according to the central bank's report in August. The number of suspicious yuan- denominated transactions jumped sevenfold to 283,400 cases.

A combined 61 percent of the suspicious transactions came from eastern China's Zhejiang province and southern China's Guangdong province, where money laundering through the trafficking of goods, underground moneychangers and border trades were frequent, the central bank said.

Is this just the tip of the iceberg? Just how big is the underground economy in China? Any possibilities of terrorism-financing at all?

Let us know what you think.