New | China's SAFE slaps cap on overseas UnionPay cash withdrawal

The gatekeeper of China's foreign exchange has moved to plug a loophole in the capital account by capping the value of overseas withdrawals on bank cards, amid rising concerns over capital outflows and illicit money transfers.

The State Administration of Foreign Exchange has slapped an annual cap on overseas cash withdrawals for UnionPay cardholders at 100,000 yuan or its equivalent per card, effective next year, according to a circular sent to banks and seen by the South China Morning Post.

The new rules are in addition to the 10,000 yuan equivalent daily cap per UnionPay cardholder. Between October 1 and December 31, overseas withdrawals will be limited to 50,000 yuan equivalent.

SAFE requires banks to add accounts that exceed the cap to a watch-list and forbid further cash withdrawals outside of China. SAFE said the measures were designed to rein in potential money-laundering activities.

A source familiar with Chinese banking and capital markets regulation said the move was "aimed at fixing one of the loopholes in the existing regulatory regime".

Earlier this month, SAFE ordered banks to monitor "abnormal" accounts that register frequent cross-border fund transfers. Under current SAFE rules, Chinese nationals can apply to convert up to US$50,000 or equivalent every year, and carry cash up to 20,000 yuan or equivalent at border checkpoints. The absence of a stricter limit on cash withdrawals from overseas had been flagged as a problem.

"Theoretically, you could withdraw 3.65 million yuan a year from outside of China, circumventing the US$50,000 cap," said the source.