Read the Beforeitsnews.com story here. Advertise at Before It's News here.
Profile image
By silveristhenew (Reporter)
Contributor profile | More stories
Story Views
Now:
Last hour:
Last 24 hours:
Total:

A Desperate China Caps Card Withdrawals In Frantic Attempt To Stem Outflows

% of readers think this story is Fact. Add your two cents.


Earlier this month we documented Beijing’s mad dash to tighten up capital controls in China in order to stem outflows in the wake of the PBoC’s move to transition towards a new FX regime. 

Put simply, expectations that a (much) deeper devaluation is on the horizon coupled with China’s efforts to manage the fallout from those expectations by liquidating hundreds of billions in FX reserves to support the onshore and offshore spots have understandably put authorities on edge, leading directly to efforts to stop the bleeding.

As we put it a few weeks ago, “while China may succeed in maintaining an orderly pace of FX depreciation, if the local population is concerned it will lose substantial purchasing power in the coming months and years, it will accelerate the capital flight from the country, forcing even greater reserve liquidation as the government finds itself defending not only the capital but also the current account, not to mention the sheer capital flight panic resulting from the crashing stock market.”

Of course one of the more straightforward ways of circumventing China’s official capital controls has been by “abusing” UnionPay cards. Roughly speaking, the process works like this (via Reuters):

Growing numbers of Chinese are using the country’s state-backed bankcards to illegally spirit billions of dollars abroad, a Reuters examination has found.

This underground money is flowing across the border into the gambling hub of Macau, a former Portuguese colony that like Hong Kong is an autonomous region of China. And the conduit for the cash is the Chinese government-supported payment card network, China UnionPay.

In a warren of gritty streets around Macau’s ritzy casino resorts, hundreds of neon-lit jewellery, watch and pawn shops are doing a brisk business giving mainland Chinese customers cash by allowing them to use UnionPay cards to make fake purchases – a way of evading China’s strict currency-export controls.

On a recent day at the Choi Seng Jewellery and Watches company, a middle-aged woman strode to the counter past dusty shelves of watches. She handed the clerk her UnionPay card and received HK$300,000 ($50,000) in cash. She signed a credit card receipt describing the transaction as a “general sale”, stuffed the cash into her handbag and strolled over to the Ponte 16 casino next door.

The withdrawal far exceeded the daily limit of 20,000 yuan, or $3,200, in cash that individual Chinese can legally move out of the mainland. “Don’t worry,” said a store clerk when asked about the legality of the transaction. “Everyone does this.”

Yes, “everyone does this,” but not for long because now that the yuan deval debacle has served to accelerate the capital outflows, Beijing is set to double down on efforts to curb the degree to which capital controls are openly subverted and as WSJ reports, China is has now “put a new annual cap on overseas cash withdrawals using UnionPay.” Here’s more:

China has capped the amount of money Chinese holders of bank and credit cards can withdraw outside the country, in its latest effort to discourage people from moving badly needed capital offshore.

China’s foreign-exchange regulator put a new annual cap on overseas cash withdrawals using China UnionPay Co. bank cards, a UnionPay official said on Tuesday. Under the new rules, UnionPay cardholders can withdraw up to 50,000 yuan ($7,854) overseas during the last three months of this year, and the amount will be capped at 100,000 yuan for all of next year, the official said.

State-run UnionPay has a virtual monopoly on processing card transactions in China, meaning the limits extend to nearly all Chinese bank- and credit-card holders. It wasn’t clear when the new cap was issued.

The new cap is in addition to an existing 10,000 yuan daily withdrawal limit, part of China’s curbs on how much money can flow across its borders.

The move by China’s State Administration of Foreign Exchange is the latest by Beijing to scrutinize capital outflows.

The People’s Bank of China, the country’s central bank, said earlier this month that its foreign-exchange reserves fell by $93.9 billion, the biggest monthly drop ever, after it surprised the market on Aug. 11 with its decision to devalue the yuan by around 2%.

Will this help to reverse the momentum? No, probably not. 

The problem here – and this is something that quite a few people are still struggling to understand – is that Beijing has telegraphed a much larger devaluation, which means the pressure on the yuan will likely continue.

So yes, as difficult as this is to come to terms with, this is a scenario where China played the deval card and is looking to ever-so-gradually move from a 3% deval to an export-boosting double-digit deval, but in the meantime, Beijing must manage the pace, which means supporting the yuan via direct interventions. The trick, however, is going to be pulling this off without triggering a disastrous outflow of capital, and we’ll leave it to readers to determine if the measures outlined above are likely to do anything meaningful to stem the flow. 



Source: http://silveristhenew.com/2015/09/30/a-desperate-china-caps-card-withdrawals-in-frantic-attempt-to-stem-outflows/


Before It’s News® is a community of individuals who report on what’s going on around them, from all around the world.

Anyone can join.
Anyone can contribute.
Anyone can become informed about their world.

"United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.

Before It’s News® is a community of individuals who report on what’s going on around them, from all around the world. Anyone can join. Anyone can contribute. Anyone can become informed about their world. "United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.


LION'S MANE PRODUCT


Try Our Lion’s Mane WHOLE MIND Nootropic Blend 60 Capsules


Mushrooms are having a moment. One fabulous fungus in particular, lion’s mane, may help improve memory, depression and anxiety symptoms. They are also an excellent source of nutrients that show promise as a therapy for dementia, and other neurodegenerative diseases. If you’re living with anxiety or depression, you may be curious about all the therapy options out there — including the natural ones.Our Lion’s Mane WHOLE MIND Nootropic Blend has been formulated to utilize the potency of Lion’s mane but also include the benefits of four other Highly Beneficial Mushrooms. Synergistically, they work together to Build your health through improving cognitive function and immunity regardless of your age. Our Nootropic not only improves your Cognitive Function and Activates your Immune System, but it benefits growth of Essential Gut Flora, further enhancing your Vitality.



Our Formula includes: Lion’s Mane Mushrooms which Increase Brain Power through nerve growth, lessen anxiety, reduce depression, and improve concentration. Its an excellent adaptogen, promotes sleep and improves immunity. Shiitake Mushrooms which Fight cancer cells and infectious disease, boost the immune system, promotes brain function, and serves as a source of B vitamins. Maitake Mushrooms which regulate blood sugar levels of diabetics, reduce hypertension and boosts the immune system. Reishi Mushrooms which Fight inflammation, liver disease, fatigue, tumor growth and cancer. They Improve skin disorders and soothes digestive problems, stomach ulcers and leaky gut syndrome. Chaga Mushrooms which have anti-aging effects, boost immune function, improve stamina and athletic performance, even act as a natural aphrodisiac, fighting diabetes and improving liver function. Try Our Lion’s Mane WHOLE MIND Nootropic Blend 60 Capsules Today. Be 100% Satisfied or Receive a Full Money Back Guarantee. Order Yours Today by Following This Link.


Report abuse

    Comments

    Your Comments
    Question   Razz  Sad   Evil  Exclaim  Smile  Redface  Biggrin  Surprised  Eek   Confused   Cool  LOL   Mad   Twisted  Rolleyes   Wink  Idea  Arrow  Neutral  Cry   Mr. Green

    MOST RECENT
    Load more ...

    SignUp

    Login

    Newsletter

    Email this story
    Email this story

    If you really want to ban this commenter, please write down the reason:

    If you really want to disable all recommended stories, click on OK button. After that, you will be redirect to your options page.