BANK of China (BOC) has begun to sharply limit corporate customers’ ability to purchase foreign currency in Shanghai, in what sources said Friday was a bid to help stem capital outflows and ease depreciation pressure on the yuan.

    Under the unwritten new policy, described by two sources familiar with the details, bankers at BOC, China’s fourth-biggest lender, began last week to discourage companies wishing to change yuan into U.S. dollars.

    Those firms, which insisted on doing so, were told they would be restricted to exchanging a maximum of US$1 million. Previously, there had been no restrictions on companies’ forex purchases.

    The policy comes as the government adopts increasingly aggressive measures to control movements of yuan out of the country and snuff out expectations that the currency would continue to spiral lower.

    It has already lost nearly 6 percent against the resurgent dollar so far this year, taking it to more than eight-year lows.

    “All preferential policies regarding forex purchases have been canceled,” said one of the sources, who declined to be identified.

    The source said the rules only applied to Bank of China’s Shanghai operations, but that other locations were free to set their own corresponding policies.

    Neither Bank of China nor the State Administration of Foreign Exchange (SAFE), which oversees China’s forex policy, had an immediate comment.

    Bank of China’s Shanghai operations were “starting to strictly control forex purchases... and have imposed restrictions on forex purchases worth US$1 million or more.”

    One source described the policy as “voluntary,” while the other said it had come from the SAFE.

    Either way, the measures appeared to be an escalation of China’s war on outflows after the SAFE earlier last week started vetting transfers abroad worth US$5 million or more and increased scrutiny of major outbound deals. (SD-Agencies)