All Personal Forex Purchases to Face Increased Chinese Scrutiny In 2017

In its bid to reduce illegal money outflows and arrest the fall of the Chinese yuan against the US dollar, China’s State Administration of Foreign Exchange (SAFE) has announced that starting from today, January 1, 2017, all personal forex purchases will be subjected to increased scrutiny, Reuters reports.

This new foreign currency purchases by individual firms does not affect the subsisting yearly individual quota which was pegged at $50,000. Chinese finance experts are afraid unless strict measures are put in place so prevent abuse of the annual $50,000 forex quota for individuals, the yuan could fall lower than the 7% experienced in 2016.

Personal Forex Purchases

SAFE was also forced to take this new action against individual forex purchases since frauds continue to exploit the weak financial system in the country to launder money and move massive amount of money out of the country. According to SAFE, “such transactions disrupt normal market order, and erode the interests of those foreign currency buyers who abide by the rules.”

Starting from today, Chinese authorities will be on the lookout for individual frauds who try to beat the system and then restrict or ban their capacity to buy forex in the country for an unknown period of time, while the information of their misdeed will be uploaded for all to see in their personal credit-scoring systems, reveals.

Since SAFE is trying to plug loopholes in the foreign exchange purchase market in China, organizations buying larger amounts of forex will have to report the same to the authorities for approval or monitoring, the Financial Times said.

To this extent, Chinese banks are now tasked with reporting large or questionable transactions to the government while also verifying the identities of individual customers seeking to buy forex in the country.

SAFE admits that “there have been leaks in China’s system of personal foreign exchange purchases,” and is bent on blocking the loopholes by improving professional standards for buying forex in the country.

Apart from the fact that frauds exploit the forex system to commit fraud and ultimately weaken the yuan against the US dollar, fraudsters also damage by moving huge money out of the country via phony overseas investments and corporate acquisitions that beat capital government controls.

In order to salvage the economic harm already done, the central bank of China sold dollar reserves to save the yuan’s fall against the US dominant currency. This was because China’s foreign reserves dropped by as much as $200 billion in 2016 alone.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.