FXStreet (Delhi) – Michael Every, Research Analyst at Rabobank, notes that there is significant news that China is closing its capital account further by limiting annual cross border payments using Union Pay cards to just CNY50,000 (USD7,854) per person until the end of the year, and a maximum of CNY100,000 for the whole of 2016. That is on top of the daily limit of CNY10,000 already in place.
Key Quotes
“Naturally, this measure is entirely out of keeping with the desire to internationalize the renminbi, or to have it accepted as an IMF reserve currency; neither will it build greater confidence. Indeed, it suggests huge concerns over just how much capital is flowing out of the country.”
“Notably, if the measure fails, it will underline that the authorities have no real control over the capital account, which will accelerate any CNY depreciation. Moreover, if the step succeeds, it will put a huge dampener on the overseas Chinese spending many rely on.”
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