Foreign exchange scrutiny to prevent speculative outflows

Since the beginning of 2017, the State Administration of Foreign Exchange has strengthened the regulations on individuals' purchase of foreign currency. According to the regulations, Chinese individuals that intend to purchase foreign currency have to provide detailed information of how they intend to use the foreign currency when applying; purchasing foreign currency to buy property overseas and invest in foreign countries are prohibited.

These regulations have been called new, but in fact they are not. The authority is only strengthening the implementation of existing regulations and making people aware it will punish violations. Individuals can still enjoy their $50,000 annual exchange quota for the normal forex purchase purposes such as overseas study or travel.

Under the circumstances that China's capital account is not completely open yet, it is necessary to enhance foreign exchange scrutiny through improving the management of foreign exchange purchases to cope with any speculative capital outflow.