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January 4, 2017

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Home » Business » Economy

Yuan falls again while new rules taken calmly

Source: Agencies | January 4, 2017, Wednesday | Print Edition

THE yuan weakened again yesterday against the US dollar while the market responded calmly to new rules on tighter inspection of Chinese residents’ purchase and transfer of foreign exchange.

The yuan closed at 6.9557 against the greenback in the onshore market in Shanghai on the first trading day of the new year, down 0.13 percent from last Friday’s.

The weakening followed the lower guidance rate the People’s Bank of China set at 6.9498 per US dollar yesterday, down from 6.9370 it set last Friday.

It extended yuan’s weak performance last year when the currency devalued 6.6 percent against the greenback, its poorest showing since 1994.

But the continued weakening of the yuan has not sparked a buying spree for the US dollar when the annual US$50,000 quota every individual is entitled to buy and send overseas was renewed at the beginning of the new year.

Authorities have tightened monitoring of foreign exchange transactions out of concern over capital outflows.

Last Saturday the foreign exchange regulator released new rules whereby individuals have to report more details on their use of the foreign currencies when they buy through banks.

Individuals have to fill in an additional application form to explain the use of the purchase bought through banks’ counter or online banking.

The foreign exchange can’t be used to buy houses abroad, for securities investment and capital accounts that haven’t been opened in the mainland market such as investment-type insurance policies, according to the application form seen by Shanghai Daily.

Those who breach the rules will be put on a watch list and won’t be able to buy any quota of foreign currencies for the year and two years after that, according to rules on the application form.

Despite the tighter rules on managing and supervising foreign currency purchase, there were no reports of long queues at banks in Shanghai.

Only a trickle of people at banks were seen selling yuan for dollars on the first business day of the new year, when buyers in theory could have made use of their quotas.

At major bank branches in two of China’s biggest cities, there were no queues yesterday, and the few individuals who changed money reported doing so with relative ease.

“The whole process of changing money was pretty smooth and quick,” said an office worker surnamed Xu, who withdrew US$500 from an ICBC branch in Beijing yesterday for a coming vacation in the United States.

Several other customers at banks in the two cities reported similar ease when changing amounts of money well below the quota.

Aside from the rising forex deposits, there has been little indication of growing unease among ordinary Chinese.

Yang Zhao, chief China economist at Nomura in Hong Kong, said there wasn’t any widespread panic about the falling yuan, so he had not expected a surge in demand.

The new rules were part of the authorities’ measures to control the outflow of money amid yuan depreciation pressure.

Last Friday, the PBOC ordered financial institutions to report if an individual client makes cross-border yuan transactions of above 200,000 yuan (US$28,810) daily.

Economy


 

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