China launched a three-month campaign to crack down underground banking across the country to prevent money laundering and illegal capital outflows.
The Chinese government made the decision following a stock market rout, which was primarily caused by investors’ concern regarding its deepening economic slowdown. The concerns were ignited by China’s currency devaluation and weak manufacturing data.
Market strategists at JP Morgan Chase & Co estimated that China suffered remarkable capital outflows of around $340 billion as of the end of June. In the second quarter alone, China recorded $140 billion in capital outflows.
In a report released in late July, JP Morgan strategists said, “The magnitude and duration of capital outflows are unseen in China.”
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