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[HONG KONG] China is cracking down on a popular method of moving money out of the country, putting a limit on purchases of insurance products in Hong Kong using the country's ubiquitous UnionPay credit and debit cards, two sources told Reuters.
The limit for each transaction made in Hong Kong by using UnionPay cards issued in the mainland to pay premiums will be curbed at US$5,000 from Feb 4, due to policy changes at UnionPay card, said the sources, who had direct knowledge of the situation but asked not to be identified due to the sensitivity of the issue.
UnionPay International said in a statement that insurance has always been under its overseas restrictive category, which has a limit of US$5,000 for each transaction conducted via bank cards issued in China.
A slowing economy and a slide in the yuan fuelled record capital outflows of US$676 billion from China in 2015, creating a boom in demand for outbound investment products and leading to a crackdown on loopholes by regulators.
Agents have been aggressively marketing life insurance products that can be paid for in yuan and used as collateral for offshore foreign currency loans, private bankers and insurance agents say.
No daily limit was set for the number of total transactions, according to the sources.
"The new policy said the limit is set for each transaction, but you can still pay many times a day to complete your payment for premiums of big amounts," said one of the sources.
The sources said other payment methods such as online payments are not affected but several market participants said tighter restrictions might yet follow if the UnionPay caps are not effective in slowing the outflow of funds.
Beijing has been fighting hard against fund outflows in the past few months by intensively introducing a series of measures to restrict cross-border flows, including suspending new applications for the Renminbi Qualified Domestic Institutional Investor (RQDII) investment scheme as well as yuan account financing.
China's State Administration of Foreign Exchange did not immediately respond to requests for comment.