The Chinese government has recently made drastic moves to
crack down on capital flight. But the tightening of foreign
exchange conversion rules could have the adverse effect of
speeding up capital outflow.
The People’s Bank of China (PBOC) announced on
December 30 that, starting in July 2017, all financial
institutions would be required to report any domestic and
overseas cash transactions totalling more than RMB50,000
($7,201) to the central bank, compared to the current threshold
of RMB200,000. At the same time, banks will have to report any
overseas transfers by individuals of $10,000 or more. This was
followed by a separate announcement from the State
Administration of Foreign Exchange (Safe) in which the
regulator vowed to step up scrutiny over the use of the $50,000
annual quota by individuals to prevent it from being invested
in restricted areas such as overseas property and securities.
Reuters also reported on January 2...