CHINA'S currency regulator will boost scrutiny of cross-border capital flows by importers and exporters to stop speculative funds from entering the country disguised as trade payments.

The State Administration of Foreign Exchange will send out warning notices to companies whose goods and capital flows do not match, as well as those who are bringing large amounts of cash into China, it said in a statement yesterday.

China is investigating possible fraud behind first-quarter export growth figures questioned by economists from Goldman Sachs Group Inc to Nomura Holdings Inc. The practice of false trade declarations "does exist, but is definitely not mainstream," Zheng Yuesheng, a customs administration spokesman, said last month after analysts highlighted discrepancies between Chinese mainland and Hong Kong trade data.

"It seems the notice is somewhat related to inflated trade data," said Liu Dongliang, a senior analyst in Shenzhen at China Merchants Bank. "But the measures may be ineffective as the root cause remains unchanged - the market is still betting on a stronger yuan."

Recipients of SAFE's warnings have 10 days to explain the need for their transactions and those who fail to comply or are unable to provide satisfactory proof will then be placed on the agency's so-called B list, which means their activities will be closely monitored for at least three months.

SAFE said it will "conduct on-site verifications and checks for clues of abnormal capital inflows" and will "severely punish those who use fake documents." SAFE also told banks to "enhance checks to uncover behaviors such as forging fake trade deals" among clients.

Yuan positions at Chinese financial institutions stemming from foreign-exchange transactions, a gauge of money flows, rose by 1.22 trillion yuan (US$197 billion) in the first quarter of 2013, more than four times as much as a year earlier.