♠ Posted by Emmanuel in China at 3/29/2016 08:45:00 AM
|If the magnetic strip wears out, get another one.|
Over the past few months [1, 2], I've discussed the extreme lengths people on the Chinese mainland took to get money out of the PRC. Knowing that the yuan was likely to depreciate, Hong Kong with its longstanding currency peg represented a "safe haven" to them. It was not long before PRC authorities got around to banning capital outflows to Hong Kong--especially on such a grand scale. However, that action didn't stop the most determined from simply giving up and accepting depreciation as fate.
With limits for card transactions limited to $5,000 at a time, but with no limits on the number of transactions, many have taken to swiping dozens or even hundreds of times to move money. How does, oh 800 times sound to you?
More than 800. That’s how many times Hong Kong insurance agent Raymond Ng swiped the credit cards of a mainland Chinese client buying HK$28 million ($3.6 million) worth of insurance policies in the city earlier this month.I know what you're thinking: why doesn't China set limits on the number of card transactions that can be made as well? I believe it has to do with the country settling in the yuan as part of the IMF currency basket. Since the IMF generally encourages free capital flows, even more draconian controls would be frowned upon. It wants more and not less use of the SDR, and further limiting yuan movement would likely send the wrong signals internationally.
Dozens, maybe more. That’s how many other agents are using similar tactics as a way around new restrictions on insurance policy purchases by mainlanders that are often used to evade capital controls and get their money out of China, according to interviews with five Hong Kong agents working for Prudential Plc, AIA Group Ltd. and two smaller insurance companies.
“There are always ways around new restrictions,” said Ng, 30, who started selling insurance and investment products to mainland Chinese four years ago, declining to allow his company’s name to be used. "Chinese customers are accelerating the pace of moving assets outside China, especially through insurance products."
Multiple credit-card swiping to buy insurance products, even hundreds of times, isn’t illegal in Hong Kong, but it allows individuals to exceed limits on insurance purchases by mainlanders meant to control capital outflows from China. The widespread practice shows just how eager Chinese remain to move money abroad amid a weakening economy and expectations of further declines in the yuan, potentially putting pressure on authorities to impose stricter curbs.
Still, you do have to wonder what's afoot in the mainland when folks are this eager to move cash.