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China announces new limits on UnionPay outside the country

China's State Administration for Foreign Exchange (SAFE) has announced new annual limits on UnionPay cash withdrawals outside of China, an indication that the country is concerned about capital outflow, according to Bernstein Research.

The new annual limit has been set at RMB100,000 ($15,700 ) per card for 2016 (and RMB 50,000 for the remainder of 2015). 

This limit is on top of the existing policy which sets daily withdrawal limits at RMB10,000 per card. 

“SAFE continues to have concerns about capital outflows as is evident by the new UnionPay policy. Earlier this month, SAFE had ordered banks to monitor accounts that register unusually frequent cross-border fund transfers,” Bernstein analyst Vitaly Umansky said in a note.

The new UnionPay policy also requires banks to add accounts which exceed the new annual limit to a watch-list and prevent additional overseas cash withdrawals.

Umansky says the new policy is an incremental headwind for mass gross gaming revenue, in particular premium mass.

“Most Premium Mass customers utilize UnionPay cards (among other means) to access cash for play in Macau casinos. While many customers have multiple UnionPay cards, larger Premium Mass customers may find their access to cash more limited as a result of the new limits.”

At this stage, the new policy does not limit overseas purchase transactions with UnionPay cards. 

“In Macau, pawnshops are often used to bypass UnionPay cash withdrawal limits. The pawnshop transactions are legal in Macau and occur through ~200 shops. However, there is risk that Chinese authorities may pressure Macau into creating tighter regulations around pawnshops.”

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