China Targets Forex Transactions

Best Binary Options Brokers 2020:
  • BINARIUM
    BINARIUM

    Best Binary Broker 2020!
    Perfect for Beginners!
    Free Trading Education! Free Demo Acc!
    Get Your Sign-up Bonus Now:

  • BINOMO
    BINOMO

    Trustful broker.

China Targets Forex Transactions

China hones in on Forex transactions to prevent money exiting abroad

Long at risk of capital flight, China has begun the new year by making a stand. In a bid to prevent money exiting abroad, the country has now imposed extra requirements on citizens converting yuan into other currencies.

According to the currency regulator, the State Administration of Foreign Exchange, China is focusing on closing loopholes that have long been exploited for the purposes of money laundering and channelling funds into overseas properties.

Leaving their quota of $50,000 of foreign currency per person per year untouched, they have nonetheless implemented additional disclosure requirements which came into effect on 1st January.

This annual limit is automatically reset at the beginning of each year. It is widely believed to increase outflow pressures, an especial problem after the currency experienced its most dramatic annual slump in over 20 years in 2020.

New Forex Rules

According to figures from a Bloomberg Intelligence gauge, approximately $762 billion flowed out of the country between January and November of last year. This money is believed to have shored up residential property markets from Vancouver to Sydney, with some also making its way across the border into the Hong Kong insurance sector.

There are a number of key elements to the requirements introduced to remedy this issue, such as a pledge by customers not to use funds for the purposes of overseas property purchases, life or investment insurance, or securities. In addition to this, detailed plans concerning the intended use of capital converted must be supplied.

Guidelines Include:

  • Pledge on purpose of spending
  • Details of intended use
  • Specific measures on anyone ignoring the guide

Those who are found to violate the rules will be included on a currency regulator watch list, which has the power to not only deny their foreign exchange quota for up to three years, but also to perform anti-money laundering investigations.

Dollar purchases

According to Zhao Yang, a Chinese economist, this will have the effect of dulling the allure of dollar purchases and should thus reduce the pressure on capital outflows.

The measure may be a timely one, for the yuan is now approaching an eight-and-a-half-year low. For Chinese markets, the road ahead could indeed be rocky, and those with interests should re-assess their investment strategy with this in mind.

State intervention in terms of currency value is nothing new, particularly in this region. The China-US relationship may also come under increased scrutiny in light of some of Donald Trumps’ statements, so Forex volatility with the Yuan looks almost assured during 2020.

Best Binary Options Brokers 2020:
  • BINARIUM
    BINARIUM

    Best Binary Broker 2020!
    Perfect for Beginners!
    Free Trading Education! Free Demo Acc!
    Get Your Sign-up Bonus Now:

  • BINOMO
    BINOMO

    Trustful broker.

China Targets Offshore Cryptocurrency Trading Platforms With New Ban

China is working extra hard to stamp out cryptocurrencies completely in the country by banning access to all cryptocurrency-related websites, both onshore and offshore.

China started its crackdown on Bitcoin in the first week of September 2020 and also issued a ban on initial coin offerings (ICOs) which were becoming very popular. By the middle of September, China asserted its stance and ordered the halt of all Bitcoin exchanges in Beijing and Shanghai. All cryptocurrency exchanges in the capital were ordered to submit plans of winding down and no new users were allowed to register on their platforms.

But despite the domestic crackdown on Bitcoin, Chinese traders were still able to find ways to trade in cryptocurrency. After the closure of many domestic virtual currency exchanges, Chinese traders turned to overseas platforms to continue trading. According to Financial News, a newspaper affiliated with the People’s Bank of China (PBOC) overseas transactions and regulatory evasion continued to proliferate, fueled by illegal issuance, fraudulent claims and even pyramid selling.

It seemed that the traders only went on to several other illegal routes to continue trading the currency, which China started banning in the country because of the extreme risks that came with it. But as these illegal offshore activities have now come to light, it will be harder for traders to continue accessing foreign platforms since China will be officially blocking these off as well.

Donald Zhao is a crypto trader who moved to Tokyo after the crypto ban was invoked in Beijing last year. In a statement, Zhao said

It is common for people to use virtual private networks to trade cryptocurrencies, as many exchange platforms relocated to Japan or Singapore. I think the new move literally means it would be even harder to circumvent the ban in China as people promoting related business programmes may be arrested

Bitcoin is trading at its lowest since November 2020 and at the time of this writing is valued at $6,605. But despite its falling price, many traders are still interested in the crypto market and have moved their businesses and transactions to Hong Kong or Japan, while maintaining investment support from mainland investors.

The new ban on all domestic and foreign websites related to cryptocurrencies and ICOs follows an official order from the PBOC last month stating that all Chinese financial institutions will not grant any kind of funding to activities related to cryptocurrencies.

In addition to the bans, China’s major search engine Baidu and social media platform Weibo already followed Facebook’s recent move to remove all cryptocurrency and ICO-related ads on their websites.

China Targets at Unemployment, Financial Risks, Trade in 2nd Half of 2020

China Top Goals and Measures- Talking Points:

  • China unexpectedly set unemployment rate as the first top target, hinting domestic difficulties.
  • China’s monetary policy will be used primarily to deal with financial risks and will remain neutral.
  • Top policymakers concerned on external uncertainties, mostly driven by US-China trade war.

China’s Strategy for the Second-Half of 2020

China’s Politburo released top six targets in the second-half of 2020: “To stabilize unemployment rate, financial markets, international trade, foreign investment, domestic investment and expectations.” Two primary measures are proactive fiscal policy and prudent monetary policy.

An Unemployment Rate Target – Why does it Matter?

The targets revealed the challenges that China is facing and its priorities.

The u nemployment rate was not mentioned often before this top meeting. It is neither a key gauge that impacts China Central Bank’s monetary policy, unlike in the U.S. However, Chinese top policymakers have set it as the first goal for the economy in the second half of 2020. This indicates an urgent need to solve this issue.

The headline unemployment rates in China are Surveyed Unemployment Rate in Urban Areas and Registered Unemployment Rate in Urban Areas. Both are reported on a quarterly basis by China’s National Statistics Bureau. In recent years, the surveyed unemployment rate has shown to be more accurate than the registered rate, due to an increasing amount of unemployed people who do not register for their status.

In the second quarter of 2020, the survey rate was 4.80% and the registered rate was 3.83%. Both are lower than the annual targets set at the NPC meetin g in March : 5.5% and 4.5% respectively. Yet, as mentioned earlier, top policymakers have seen a need to curb the unemployment rate over the following six months, a signal that the economy may have or will bear greater pressure than it does now. This reinforces Yuan’s bearish outlook.

Financial Risks Remain Elevated – They Impact Monetary Policy

The second goal in the second half of 2020 is to continue to curb financial risks, including further cutting leverage. This task will fall on to China’s Central Bank (PBOC) and other financial regulators, such as SAFE (FX regulator), China Securities Regulatory Commission (securities regulator).

This also means that Chinese monetary policy will be primarily used to deal with financial risks, rather than stimulating the economy. The latter will have to reply more on fiscal policy. The PBOC has called for a more proactive fiscal policy by the Finance Ministry recently and the Politburo meeting agreed on such a measure.

In the first half of 2020, the PBOC cut the reserve requirement ratio twice, in the effort to increase liquidity to target sectors. It may cut more in the second half, but it will unlikely to change the overall tone on the monetary policy: prudent and neutral. As a result, the Chinese currency will likely avoid suffering from massive easing measures.

US-China Trade War – The External Uncertainty

“External Environment has significantly changed”, stated in the Politburo meeting report. This mostly refers to the escalated US-China trade disputes and shows the top policymakers’ concerns on this matter. China’s third and fourth targets for the next six months is to support trade and foreign investment.

While the U.S. released $12 billion bailout plan for farmers, China may introduce similar subsides to exporters who suffer in the trade battles. In addition, China will likely continue to seek to strengthen relations with other trade partners. However, these measures will not be able to cover all the losses caused by the trade war and they could only be temporary fixes; the economy may have to suffer from the trade fight for months, if not years.

The Yuan began to lose against most major currencies including the U.S. Dollar in late April, when US-China trade battles heated up. The bearish trend remains amid both the internal and external challenges.

Yuan’s loss against the U.S. Dollar started in late April.

Yuan’s loss against the Japanese Yen started in early May.

Yuan’s loss against the Australian Dollar started in late April.

Yuan’s loss against the Euro started in late May.

Download a free trading guide to improve your knowledge of trading the news.

— Written by Renee Mu, Currency Analyst with DailyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

Best Binary Options Brokers 2020:
  • BINARIUM
    BINARIUM

    Best Binary Broker 2020!
    Perfect for Beginners!
    Free Trading Education! Free Demo Acc!
    Get Your Sign-up Bonus Now:

  • BINOMO
    BINOMO

    Trustful broker.

Binary Options Trading School
Leave a Reply

;-) :| :x :twisted: :smile: :shock: :sad: :roll: :razz: :oops: :o :mrgreen: :lol: :idea: :grin: :evil: :cry: :cool: :arrow: :???: :?: :!: