THE foreign exchange regulator said that, starting yesterday, it will step up scrutiny on individual foreign currency purchases and strengthen punishment for illegal money outflows, but the US$50,000 annual individual quota will remain unchanged.

    The announcement by the State Administration of Foreign Exchange (SAFE) late Saturday comes amid worries that the yuan, which fell nearly 7 percent against the U.S. dollar in 2016, could face renewed pressure in the new year as foreign currency buyers start afresh with a new US$50,000 annual quota.

    Starting yesterday, Chinese individuals who want to buy foreign currencies at banks must first fill out an application form specifying the purpose of the purchase, among other information. The SAFE will examine such information and data more closely and frequently, according to a statement on the SAFE’s website.

    Previously, China’s reporting system for individual forex purchases was too simple, and outdated, leaving loopholes that facilitated illegal money transfers and money-laundering, the SAFE said.

    For example, some individuals exploited the SAFE’s lax management to buy properties and make other investments under capital accounts, using money exchanged under current accounts, according to the SAFE.

    “Such transactions disrupt normal market order, and erode the interests of those foreign currency buyers who abide by the rules,” the SAFE said.

    Individuals caught breaking the rules will be put on a “watch list” and restricted, or banned from buying foreign currencies “for a certain period of time,” and the record will be uploaded into their personal credit-scoring systems, the SAFE said.

    Meanwhile, the SAFE advised people against buying foreign currencies blindly, arguing that investing overseas could be risky.

    “Currently, interest rates in major developed economies are at a low level,” the SAFE said.

    “In addition, the international forex market is volatile, but the yuan’s effective exchange rate is basically stable, and the currency fluctuates sideways against the U.S. dollar. So holding foreign currency assets carries big uncertainty and risks.”

    In 2016, the yuan posted its biggest annual loss against the dollar since 1994, making it the worst performing major Asian currency during the year.

    (SD-Agencies)