Chinese banks quietly lower daily limit on foreign-currency cash withdrawals

Chinese banks have increased their scrutiny of foreign-currency withdrawals and quietly reduced the amount of US dollars people are allowed to withdraw, tightening the country's capital controls as the year-long US-China trade war bites.

The issue was thrust into the spotlight on Friday when a viral video clip showed a bank cashier unable to answer a furious customer demanding to know why she was not allowed to withdraw US$200 from her dollar-denominated account, even though she was within her quota. ---->quota $US 200 tp gak dikasih penuh... nasabah ngomel... teller gak bisa menjawab....


The client was so incensed by the refusal that she filmed the incident on her phone at the unidentified branch of China Merchants Bank (CMB).

She also asked why the bank insisted she could only withdraw her US dollar savings by converting into yuan, the Chinese currency. The cashier seemed caught off-guard, unable to address the woman's questions.

It later emerged the woman had been placed on a "watch list" of customers making frequent withdrawals.

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The clip did not identify the branch, but a senior official from another state bank said lenders were following the latest instructions from the People's Bank of China (PBOC), the country's central bank.

From late last year, the "scrutiny benchmark" for US dollar withdrawals was cut to US$3,000 from US$5,000, according to an official at the Bank of Communications, who requested anonymity. Meanwhile, banks were required to keep a "watch list" monitoring clients who made frequent foreign exchange withdrawals, said the official.

Previously, any withdrawals of US$5,000 or more in a single transaction required proof of need, such as an airline ticket for overseas travel, or a health certificate for overseas medical care.

That limit has been quietly lowered to US$3,000, bankers confirmed, without wishing to be identified.

China's currency is non-convertible on the foreign exchange markets because the country keeps its capital account closed. That allows the central bank's currency regulator to maintain the yuan's exchange rate within a tight range, and to stem capital flight.

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According to the quota set by the regulator, Chinese citizens are allowed to exchange and withdraw up to US$50,000 per year in foreign currency, either in a lump sum, or in instalments.

The written rules issued by the State Administration of Foreign Exchanges stipulate that for a deposit or withdrawal of foreign currency above the equivalent of US$10,000, banks shall ask to see ID, check it and record all the relevant documents.

However, in practise, the procedures are much more complicated.

The CMB had yet to reply to an inquiry from the South China Morning Post by Friday evening. But Chinese news portal Sina quoted CMB as saying the client in the viral clip had withdrawn US$49,800 in the last eight months, through six instalments. That put her under a watch list made by the bank.

The fact she had not exceeded her annual quota may explain why the bank teller was speechless on camera.

"The reason banks are so nervous is that China wants to closely monitor capital outflow against the backdrop of a prolonged trade war," said Iris Pang, ING's Greater China economist.

The outflow from multinational companies may be bigger, but any tightening in that regard is even more sensitive, given the challenges China faces in global trade now, she said.

Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.

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