China’s new rule on yuan transfers not a capital control measure

03/01/2017 05:26 AST

China’s new rules on cash transactions and overseas transfers of yuan currency are not forms of capital controls, the state news agency Xinhua said, citing a central bank economist. Banks and other financial institutions in China will have to report all domestic and overseas cash transactions larger than 50,000 yuan ($7,201.50), compared with 200,000 yuan previously, the central bank said on Friday.

Ma Jun, chief economist of the People’s Bank of China (PBOC), said the responsibility of reporting such transactions will be assumed by financial institutions, and there will be no extra documentation or official approval procedures required for companies or individuals, according to the Xinhua report issued late on Sunday.

China is maintaining the same quota of $50,000 for each individual’s annual foreign exchange purchase.

The central bank has said the recent move was aimed at better monitoring of money laundering and financing for terrorism rather than targeting normal business activities, Xinhua said.

Beijing has announced a string of rules in recent months to stem capital outflows after its yuan currency skidded to more than eight-year lows.

Meanwhile, China’s manufacturing sector expanded for a fifth month in December, but growth slowed a touch more than expected in a sign that government measures to rein in soaring asset prices are starting to have a knock-on effect on the broader economy. The official Purchasing Managers’ Index (PMI) stood at 51.4 in December compared with 51.7 in November.

A reading above 50 indicates an expansion on a monthly basis while one below 50 suggests a contraction. December’s reading was slightly below the forecast in a Reuters poll for 51.5.

A housing boom in the second half of 2016 and a government spending spree on infrastructure have helped boost prices for commodities from cement to steel, giving the manufacturing sector a much-needed lift. But the government is cracking down on speculative property buying, and signals from policymakers that more will be done to contain asset bubbles and rising debt - even at the expense of slower growth - means extra stimulus measures could be limited.

The Gulf Today