US dollar transfers cut back by Chinese bank as Beijing steps up scrutiny of capital outflows

China Merchants Bank suspends programme that allowed customers to set up automatic transfers to overseas accounts in US dollars

Beijing has tightened rules on overseas transfers by individuals in recent years to ensure control of capital outflows

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China Merchants notified customers last week that new US dollar transfers would be suspended. Photo: Bloomberg

Published: 8:00pm, 4 Dec 2019Updated: 8:00pm, 4 Dec 2019

China Merchants Bank has suspended some of its US dollar remittance services as Beijing steps up its efforts to scrutinise funds flowing out of the country amid the trade war with the United States.

China Merchants notified customers on Thursday last week that new transfers under the bank’s “Overseas Remittance Programme” would no longer be accepted from December 2, and the entire programme would be shut down on December 30. On Friday, in response to a large market and customer reaction, it announced it would resume the services on January 2.

The programme allowed customers to make foreign exchange remittances to overseas accounts at a specified date or through automatic, periodic transfers based on online instructions. Withdrawals of foreign currency were limited to US$30,000 for any single transaction.

China Merchants Bank said in a statement on its official Weibo account, a Twitter-like microblogging site popular in China, that the decision to suspend the services was due to “system upgrades and improvements” and it would resume on January 2 next year. The Shenzhen-based lender’s ordinary cross-border payment services are unaffected.

China has implemented draconian capital controls in recent years designed to prevent its citizens taking cash out of the country, especially due to trade war tensions between China and the US, and domestic headwinds that have seen growth fall to near a 30-year low.

Credit Suisse has forecast China’s economic growth to slow to 5.9 per cent in 2020, below Beijing’s target of between 6 per cent to 6.5 per cent for this year, amid ongoing trade volatility.

Every Chinese citizen is allowed to buy foreign exchange worth up to US$50,000 a year, although they still face major administrative hurdles within that quota, such as close examination of their applications and declarations that indicate how and when the foreign exchange purchases are to be spent.