SHENZHEN, China (AFP) - - In his grocery store near the Hong Kong border, Mr Zheng sells the usual products: cigarettes and tissues, drinks and snacks. But he also offers a very different kind of service.

Behind his counter is a drawer filled with stacks of banknotes. Zheng is one of a number of traders operating illegal foreign exchange services in this southern Chinese city, and he makes no attempt to hide it.

"A lot of people choose to come to us rather than the bank because we offer much more favourable exchange rates," he said.

Zheng also offers an underground money transfer service in which yuan are exchanged for Hong Kong dollars and deposited in Hong Kong bank accounts.

The cash is then taken out in Hong Kong and used to make investments normally closed to mainland Chinese, in particular the city's stock market, which has boomed in recent months, partly on the back of such illicit activity.

It's no coincidence that Zheng's shop lies on a route used by thousands of Hong Kong and Chinese cross-border travellers every day. He has a steady stream of customers, both individuals and companies, who eschew the bank nearby.

Five other stores approached by AFP, including a pharmacist, offered the same services, indicating strong demand.

Such illicit traders are flourishing as cash-rich Chinese, facing limited investment opportunities, search for ways to make their savings grow -- sparking huge capital flows into Hong Kong.

Authorities launched a crackdown last month, limiting cash withdrawals from Shenzhen banks and ATMs in a bid to stem the flood of illegal money flooding out of the mainland and boosting Hong Kong's bullish stock market.

Chinese police also busted a rogue Shenzhen bank that allegedly handled transactions totalling 4.3 billion yuan (581 million US dollars) in 18 months, serving investors from 31 provinces and cities.

Billy Mak, an associate professor of Hong Kong Baptist University's finance department, said underground banks have existed for many years, particularly in Shenzhen because of its proximity to Hong Kong.

But billions more are believed to have been poured into Hong Kong stocks through underground channels since August, when officials first touted a scheme to allow Chinese to invest directly in Hong Kong stocks for the first time.

The project has apparently since stalled, but not before the Hong Kong bourse soared a staggering 40 percent. Experts estimate five percent of the Kong stock market's daily turnover comes from mainland individuals.

Lu Xiongwen, dean of the school of management at Shanghai's Fudan University, said the expanding Chinese middle-class is no longer happy with regular income from their jobs and the small returns from bank deposits.

So they are striving to boost their savings with new investments, Lu said.

A HSBC survey released last week found 42 percent of the middle classes in major cities Guangzhou, Shanghai and Beijing invested in property, while 34 percent ploughed money into China's unpredictable stock market.

"Some people have money but there are not many ways to invest so they seek opportunities not only in Hong Kong but also overseas to expand their wealth," Lu said.

Demand for investment in Hong Kong is so great that a travel agent recently launched a "fortune-enhancing exploration tour" for Chinese interested in learning about opportunities there.

Hong Kong operator Bonny Ho said the tour was set up after an increasing number of Chinese tourists asked to visit the Hong Kong stock exchange and attend investment seminars.

"Some of these investors were really savvy. They even know about the investment environments in India and Russia, which really surprised me," Ho said.

Raymond Liang, one of some 30 investors joining the tour, said the restrictions of mainland China had forced him to head to Hong Kong.

"You cannot think that the income from your job is good enough. Stocks are going up, China's economy is growing. If you don't renew your thinking, you'll miss the chance to make money," said Liang, who now has an investment account in the city.

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