China maintains firm control on foreign exchange. Companies, banks, and individuals can only move money in or out of the country following strict rules and limits. (1)
According to the quota set by the regulator, Chinese citizens are allowed to exchange and withdraw up to US$50,000 per year in foreign currency, either in a lump sum or in instalments. (2)
“The reason banks are so nervous is that China wants to closely monitor capital outflow against the backdrop of a prolonged trade war,” reported Iris Pang, ING’s Greater China economist. The written rules issued by the State Administration of Foreign Exchanges stipulate that for a deposit or withdrawal of foreign currency above the equivalent of US$10,000, banks shall ask to see ID, check it and record all the relevant documents. (2) Individuals who exceed this amount are more likely to be added to a bank’s watchlist.
According to The State Administration of Foreign Exchange (SAFE), regulations are meant to guard against risks associated with cross-border money laundering. In an interview with media, one official said, “ large-sum transactions tend to be associated with illegalities such as frauds, gambles, money laundering and terrorist financing”. (3) Another reason for foreign exchange control is to restore the balance of payments equilibrium. Given the challenges China now faces in global trade, it’s not difficult to understand the motivation behind the increased sensitivity and tightening policy.
China Country Commercial Guide https://www.export.gov/article?id=China-Foreign-Exchange-Controls
South China Morning Post https://www.scmp.com/business/banking-finance/article/3008795/chinese-banks-quietly-lower-daily-limit-foreign-currency
Official of the State Administration of Foreign Exchange Answers Media Questions https://www.safe.gov.cn/en/2017/1230/1391.html