China has set a new, and drastically lower, limit on the amount of money expats living in China can exchange. The new regulation took effect 1 February 2007.
Now, foreign nationals can exchange only US$50,000 per year. Well, that is, only $50,000 before the bank starts asking questions about how the money is used and asking for receipts and invoices. For many, the sight of such a big number immediately relieves all fears of this limit ever becoming a problem, but as soon as you take a second look at annual rent costs in China's big cities, medical needs, and childrens' education, $50,000 begins to look way too small for comfort.
The law was announced by China's State Administration of Foreign Exchange (SAFE). According to a quote on the Resource Investor investment news site, a SAFE official stated that this new limit "should basically satisfy individuals' normal foreign exchange sale needs, and it is helpful to restrain the entry of unregulated funds through individual channels." Um, did I read that right? This is meant to restrain exchange through individual channels?
Already, many foreigners go around the official exchange channels for no other reason than the tedious and annoying process of dealing with the banks' exchange. And, thus, if they already use "individual channels" just to make life more convenient, this new regulation is all the more reason they have to stay away from the added paperwork they will incur when they do exceed the government's new limit.
I have also met an increasing number of expats who prefer using the ATM. A few years ago, I did the math comparing wire transfer money and ATM exchanges, and unless I was wiring more than $5,000 or so in one shot (dependent on the sending bank's charges), the ATM won. And rarely did I need CNY 40,000 that quickly. Of course, carrying cash is better, but live in China long enough, and cash can be scarce, and wire or ATM are the only options.
So, that brings me to ask the question that will be applicable for many. Will these regulations apply to ATM transactions? It does not look like it. There is a daily amount that can be withdrawn from the ATM, but that is different.
Still, if they wanted to restrain money exchange through individual channels, this is not the way to do it. This will only give a boost to the black market exchange options, sometimes as easy as a group of guys hanging out at the front door of the bank.
There obviously is another purpose behind these regulations. To me, it seems this is to "encourage" expats to make their money in China if they are living in China. The government does not want free agent expats roaming around funding by some unknown outside source: living in China, but paid offshore.
