SHANGHAI, Oct 29 (Reuters) - China’s biggest bank card provider UnionPay said on Saturday it will tighten regulations over how mainland customers can use its debit and credit cards to purchase Hong Kong insurance products, potentially restricting another gateway for capital flight.
Beijing, which has intensified a crackdown on illegal outflows this year, is concerned that buying overseas insurance has become a way for Chinese to skirt restrictions on capital outflows by disguising investment intentions.
UnionPay said in a statement mainland customers were “not allowed to buy any insurance product (that) includes investment- related contents” in Hong Kong, but could still purchase “pure” insurance against accidents, death and illness.
Unionpay, which said it had seen a “significant increase in overseas insurance transactions via cards issued from mainland China”, added that the rules underlined existing regulations.
In February, China placed transaction limits on the use of UnionPay cards to buy Hong Kong insurance products.
China has seen accelerated capital outflows over the past year with a slower economy, concerns over yuan depreciation, and volatile stock markets prodding the government to plug overseas investment channels. Regulators have uncovered illegal capital outflows of $8.43 billion so far this year.
Overseas insurance products can serve as a store of wealth and as offshore collateral for other potential investments like property, analysts and insurance sector insiders say.
UnionPay added mainland China customers could not spend much more than about $5,000 per transaction on overseas insurance products, reiterating a national policy that came into effect in March.
On Friday China’s foreign exchange regulator told banks to strengthen checks on foreign exchange transactions to make sure they were genuine and based on actual needs.
Reporting by Adam Jourdan; Editing by Eric Meijer