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China / Across America

ATM limits not seen as hurting tourism

By Paul Welitzkin in New York (China Daily USA) Updated: 2015-10-01 12:32

But China cap of 50,000 yuan overseas could affect real estate buys

The decision to limit the amount of cash Chinese holders of bank and credit cards can withdraw outside of mainland China is unlikely to curb tourism spending in the US, but may affect real estate purchases, observers said.

For the remainder of 2015, withdrawals will be limited to 50,000 yuan ($7,868). Starting in 2016, an annual limit of 100,000 yuan will apply, a UnionPay official said on Tuesday. China already limits the amount of money an individual can take out of the country to 7,868 yuan per year.

The cap by the State Administration of Foreign Exchange will also apply to withdrawals using Mastercard and Visa cards that are issued by Chinese banks, Reuters reported.

Evan Saunders, CEO of Attract China, a US company marketing to Chinese tourists, said Chinese travelers are used to their UnionPay cards not being accepted throughout America "so many of them arrive with large amounts of cash to negate this problem. But as we look at 2015 trends, many Chinese use UnionPay for transactions rather than simply withdrawals, and as more and more business in America accept UnionPay cards, this makes spending money without the need for cash much easier."

Chinese have been major buyers of US real estate in the last several years, and the cap "is likely to have some dampening effect on the purchase of US real estate", Tailan Chi, a professor at the University of Kansas School of Business In Lawrence, Kansas, wrote in an e-mail to China Daily.

China's slowing economic growth and a potential interest-rate increase in the US have led to rising capital outflows from China that intensified after the Peoples Bank of China's (PBOC) surprise devaluation of the yuan in August. Earlier this month, the PBOC said its foreign-exchange reserves fell by nearly $94 billion, the biggest monthly drop ever.

"China has seen a fairly significant drop in its foreign reserves from the peak of around $4 trillion about a year ago. Some Chinese investors may see this as an indication that many of their peers are taking their money overseas and thus want to transfer more of their own funds to other countries. So, I suspect that the new caps are partly intended to stop the momentum and the resultant herd behavior," said Chi.

Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics in Washington, said in an e-mail that Chinese authorities have made "good progress" during the past year in establishing the RMB as an international currency.

"The decision to impose capital controls was clearly inspired by fears that larger outward flows would drive down the RMB and anger China's trading partners, particularly the United States," he said. "Nevertheless, capital controls contradict the more important long-term goal of ensuring that the RMB joins the ranks of international currencies. The controls should be relaxed as soon as possible."

paulwelitzkin@chinadailyusa.com

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