Tue, Jan 03, 2017 - Page 10 News List

China’s new bank rules are not capital controls: economist

MITIGATING RISKS:The PBOC on Friday said that it would tighten rules for Chinese banks to report cross-border customer transactions from July 1

Bloomberg

China’s new regulations on cash transactions and overseas transfers are not capital controls, according to a central bank researcher cited by Xinhua news agency.

New requirements published by the People’s Bank of China (PBOC) on Friday stoked concern that the government is imposing capital controls in a disguised form, Xinhua reported late on Sunday.

“It is not capital control at all,” Ma Jun (馬駿), chief economist of the central bank’s research bureau, told the state-run news service.

The US$50,000 annual foreign exchange purchase quota for individuals is unchanged, and the rules would not affect normal activities such as business investment and operations abroad or overseas travel and study, Ma said.

Ma’s comments follow the annual Jan. 1 reset of the US$50,000 limit for individuals, which might potentially aggravate capital outflow pressures that have been intensifying after the yuan suffered its steepest annual slump in more than two decades.

The People’s Bank of China on Friday said it would tighten rules for banks to report cross-border customer transactions starting July 1 as part of stepped-up efforts to curb money laundering and prevent terrorism financing.

Financial institutions would assume responsibility for reporting and there would be neither extra documentation nor official approval procedures for businesses and individuals, Ma said.

The PBOC on Friday said it is to require financial institutions to report any cross-border transfers of 200,000 yuan (US$28,779). Officials say they want more timely data on individuals to track risks arising from increasing cross-border transfers, according to a statement.

Middle-class and wealthy Chinese have been converting money into other currencies to protect against devaluation, putting downward pressure on the yuan.

The currency started last year by roiling global markets, with a weaker-than-expected fixings in January creating panic about currency policy and spurring outflows, and finished the year near an eight-year low.

China’s foreign reserves, the world’s largest stockpile, fell to a five-year low of US$3.05 trillion as of November last year. The US$99 billion drop in January, the largest last year, followed the last reset of the quotas.

Data scheduled for release on Saturday would show the hoard fell to US$3.01 trillion, according to the median estimate of economists surveyed by Bloomberg.

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