China’s new forex control threatens further blow to Hong Kong’s insurance sector
As of January 1, individuals are required to explain the purpose of their foreign currency purchases at Chinese banks, under new regulations
Hong Kong’s insurance sector is likely to come under increased pressure after Beijing tightened its scrutiny of individual foreign currency purchases at the start of the new year in a bid to further restrict capital outflows, analysts say.
The city’s insurance companies were already feeling the pinch from a raft of earlier measures designed to make it harder for mainlanders to purchase insurance products as a way of hedging against the declining yuan.
As of January 1, 2017, individuals are required to explain the purpose of their foreign currency purchases at Chinese banks and provide additional information, according to a recent announcement by the State Administration of Foreign Exchange (SAFE), the country’s top currency regulator.
We expect more material impact on the business Chinese tourists bring to Hong Kong insurers
Specifically, individuals are restricted from using foreign currencies in overseas investments, including property, securities, life insurance products and investment-related insurance purchases.
Analysts expect Hong Kong’s insurance industry to feel the effects of the latest measures.
“We expect more material impact on the business Chinese tourists bring to Hong Kong insurers, given the fresh restrictions on outbound personal investments,” said Jenny Jiang, an equity analyst for Morgan Stanley.
“The new rules for 2017 not only make US dollars less accessible to individuals but also effectively prevent customers from using the onshore banking system to pay for cross-border insurance premiums.”
According to the rules, the annual cap of US$50,000 for each person seeking to sell yuan remains unchanged.
