China to Cap Overseas Withdrawals

China's foreign exchange regulator will cap overseas withdrawals using domestic Chinese bank cards at 100,000 yuan ($15,370) per year in an effort to target money laundering, terrorist financing and tax evasion, it said on Saturday.

Individuals who exceed the annual quota will be suspended from overseas transactions for the remainder of the year and an additional year, the State Administration of Foreign Exchange said in a notice posted on its website, Reuters reported.

Under the new rules SAFE will submit a daily list of individuals banned from making overseas bank card withdrawals, and banks must suspend the users by no later than 5 pm the same day, the notice said.

Domestic card users will also be barred from withdrawing more than 10,000 yuan a day overseas, it said.

The new rules come into effect on Jan. 1, and reporting adjustments must be adopted by banks by April 1, 2018, it said.

China has strengthened regulatory oversight of overseas card transactions in the past year, targeting illegal cross-border transfers and money laundering.

In September SAFE brought in regulations requiring Chinese banks to report daily their bank card holders' overseas withdrawals as well as every transaction exceeding 1,000 yuan.

China's foreign exchange reserves rose for the 10th straight month in November due to tighter regulation and a stronger yuan, which continue to discourage capital outflows.

Meanwhile, with the new global circumstances, especially the challenges from US tax reform, China is facing a very complicated situation and a lot of pressure.

In the next three to five years, allowing debt to increase by 30 trillion yuan ($4.6 trillion), while not optimal, may be the most practical way for China to deal with this predicament, Sputnik reported.

Steady growth and the country's various development goals cannot be taken for granted, especially amid the uncertainties of the current global economic environment. To tackle the problems China is facing, it is necessary to sustain the impetus of the economy, and this will require more debt. There are various reasons for this.

The US tax reform is set to start a round of tax cutting competition worldwide, which will put China's financial capabilities to the test. China and the US are the world's two largest economies.

The former is more focused on production and the latter on consumption. As an alternative to cutting taxes, China will have to expand debt to maintain financial stability.