This article singles out Chinese underground banking systems, which primarily deal with foreign exchange and remittance transfers. Drawing on qualitative data and by analysing the links of Chinese underground banks to migrant smuggling and money laundering, the article examines the extent to which the Chinese banking systems are involved in crime.
The article specifically explores Chinese informal fund transfer systems. The author explains that these systems, widely known as underground banks, are one of the two prototypes of unregulated practices of funds transfer that can either use or bypass conventional banking institutions. The article contends that the confidentiality and anonymity of these fund transfer systems breed a high possibility for abuse and involvement in crime.
Data was collected for the study in both mainland China and the United States. With the aim of gaining an understanding of the underground banks operating in the United States, 30 research subjects were selected from the Fujianese community in the United States for interview. Potential respondents were restricted to adults who were smuggled to the United States since the mid-1980s and who had been clients of underground banks in New York City’s Chinatown. The majority of the research participants were married males, who left families behind in China. They came from rural areas, with low education levels and experience of working at low-skilled jobs, and their ages ranged from 24 to 52 at the time of the interviews. The in-depth interviews of Fujianese immigrants in the country illegally were preceded by a structured survey that consisted of 40 closed-ended questions with categorical response items. The questions focused on the research participants’ general background information and then asked about smuggling loans, location and method of smuggling fee payments as well as questions concerning their smuggling experiences and their experiences with underground banks.
The article discusses how, in the period of the late 1980s to the mid-1990s, at the peak of the irregular immigration stream from the coastal areas of Fujian Province, a major proportion of Fujianese migrant workers illegally in the country gained access to underground banks operated by co-ethnics for transferring their earnings from illegal employment in the United States to their home communities in China. Chinese underground banks in the United States were concentrated in the Fuzhou Town—the area around East Broadway in New York City’s Chinatown. These Fujianese-run underground banks collaborated with their counterparts in the sending communities of Fujian by arranging for safe delivery of overseas remittances to individual emigrant households without any additional charge.
Analysis of the interview responses revealed that Fujianese immigrants chose underground banks as a preferred mechanism to transfer earnings home for both illegitimate and legitimate purposes. Remittances were used to repay smuggling debts and to improve families’ economic well-being. They were also used to assist other family members to migrate to the United States legally or irregularly. The article concludes that because a trend has been noted of migrant smuggling expanding into other regions of China from Fujian Province, the specialized use of underground banks will probably continue well into the twenty-first century to serve as a reliable conduit for concealing the source of illegitimate income and for channelling earnings to home communities in China.
The article represents a unique attempt to illuminate the financial element of the migrant smuggling process. Through the collection and analysis of empirical material, the article provides insights into the role that Chinese underground banks have in facilitating irregular migration to the United States.
