Curbs on mainland Chinese insurance purchases overseas, notably Hong Kong, have been extended to cards issued on the mainland by Visa and MasterCard since 10 December, further narrowing channels for Chinese to move money out of the mainland.
These curbs followed a move by UnionPay, China’s largest payment card issuer, to stop the use of its cards for such purchases abroad wef 29 October.
The restrictions closed a loophole used by mainlanders to transfer money abroad as the renminbi continued to depreciate. China’s foreign exchange reserves fell to US$3.05 trillion at the end of November, the lowest level in six years.
Last February, UnionPay enforced an existing (but little observed) limit of US$5,000 per transaction for the purchases of insurance products overseas. But many insurance agents in Hong Kong allowed clients to swipe their cards multiple times to purchase policies costing more than US$5,000.
UnionPay said in a statement in October that it had noticed the surge in multiple payments made using the same UnionPay card with the same merchant, a phenomenon particularly obvious at some overseas insurance companies.
Following UnionPay’s latest action, purchases by mainland Chinese of insurance products in Hong Kong using UnionPay cards dived by 99% to CNY30 million (US$4.4 million) in November from CNY8.06 billion, reported Economic Information Daily, citing authoritative sources.
Mainlanders spent HK$48.9 billion (US$6.3 billion) on Hong Kong insurance products in the first nine months of last year, more than double the figure for the corresponding period in 2015, official data show.
Mainland Chinese can still use bank cards issued on the mainland to buy travel-related, accident and health insurance policies overseas, as these are considered non-capital transactions.