Twitter
Advertisement

China restricts withdrawals from Shenzhen banks

Central bank authorities in China have placed limits on cash withdrawals from Shenzhen banks after an avalanche of illegal funds were withdrawn.

Latest News
article-main
FacebookTwitterWhatsappLinkedin

Movement of illegal funds from southern city to Hong Kong stock market the reason

HONG KONG: Central bank authorities in China have placed limits on cash withdrawals from Shenzhen banks after an avalanche of illegal funds from the southern city found its way to the stock market in neighbouring Hong Kong.

From Thursday, the daily over-the-counter withdrawal limit at Shenzhen banks was capped at 30,000 yuan (about $4,000) for a personal account and 100,000 yuan (about $13,000) for a corporate account. 

Similar limits have been set on weekly and monthly withdrawals from both personal and corporate accounts. 

Depositors’ access to ATM machines have also been tightened.

The official China Securities Journal, from the China Securities Regulatory Commission, and the Securities Times, from the Shenzhen stock exchange, said the new limits were aimed at “illegal activities”.

An estimated 50% of cash withdrawals in the mainland in the first nine months were made from Shenzhen bank branches, according to the office of the People’s Bank of China. 

The move is a response to a feared flight of capital, which could potentially destabilise China’s financial system and the booming economy, following suspicion that billions of yuan have flowed illegally into Hong Kong in recent weeks and months.

An official proposal to permit mainland Chinese investors to invest directly in Hong Kong stocks was recently suspended (pending risk-management exercises) following similar fears that it could lead to a flight of capital.

In anticipation of fresh infusion of bags of money under that proposal - colloquially called the “through train” scheme - Hong Kong’s Hang Seng Index had moved up nearly 40% since August, when the scheme was announced.

Average daily stock market turnover in Hong Kong has surged from HK$60 billion last year to HK$160 billion.

Visitors to Hong Kong from mainland China can legally bring 20,000 yuan per person each time, but there are reports that underground financial entities have been funnelling cash vastly in excess of that limit. The money is carted across the border through hawala operators. 

Hong Kong Monetary Authority chief executive Joseph Yam said in Beijing that although the possibility of illegal fund flows into Hong Kong could not be ruled out in its entirety, he was confident that the banking system was capable of such money laundering.

“Our banks have a good fund management system that can monitor illegal fund activities,” he said.

Find your daily dose of news & explainers in your WhatsApp. Stay updated, Stay informed-  Follow DNA on WhatsApp.
Advertisement

Live tv

Advertisement
Advertisement