China Cracks Down On Underground Banking, But "Fake" Goldman Sachs Still Operating

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.

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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.”