Police have closed 47 underground banks and illegal foreign exchange businesses dealing in more than 100 million yuan.
Officers seized 31 million yuan in cash during the crackdown last year, the China News Service quoted sources from the Ministry of Public Security as saying. More than 2,000 ATM cards, bankbooks and deposits worth 170 million yuan were also confiscated.
The crackdown was mounted because illegal currency exchange activities were expanding and the value of transactions through underground banks was rising.
'This has not only seriously disturbed the order of China's financial market, but has also become a channel for capital to leak out and for pseudo foreign capital to come in. This poses a threat to the country's economic security,' the report said, referring to domestic funds channeled out of the country and then back as foreign capital.
On the mainland, investment in the form of foreign capital often attracts benefits such as tax breaks.
The report said public security agencies had established close co-operation with the People's Bank of China and the foreign exchange authority to step up the crackdown on illegal foreign exchange activities .