PBOC’s Ma Says New Cash Transaction Rules Are Not Capital Controls

Updated on
  • Xinhua cites central bank research bureau top economist Ma Jun
  • Banks to face tougher controls on cross-border transactions

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

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

“It is not capital control at all,” Ma Jun, chief economist of the central bank’s research bureau, told the state-run news service. The $50,000 annual foreign exchange purchase quota for individuals is unchanged, and the rules won’t 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 $50,000 limit for individuals, which may potentially aggravate capital outflow pressures that have been intensifying after the yuan suffered its steepest annual slump in more than two decades. The PBOC said Friday it will 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.

Assume Responsibility

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

The PBOC said Friday it will require financial institutions to report any cross-border transfers of 200,000 yuan ($28,800). 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 2016 near an eight-year low.

China’s foreign reserves, the world’s largest stockpile, fell to a five-year low of $3.05 trillion as of November. The $99 billion drop last January, the largest in 2016, followed the last reset of the quotas. Data scheduled for release on Jan. 7 will show the hoard fell to $3.01 trillion, according to the median estimate of economists surveyed by Bloomberg.