March 24, 2017 / 2:46 PM / 9 months ago

Crackdown on UnionPay cards for Hong Kong property purchases

HONG KONG, March 24 (Reuters) - A leading Hong Kong real estate agent said on Friday that some banks it works with would no longer accept payments for property transactions in the city through China’s state-backed UnionPay, the mainland’s biggest bank card provider.

The move is the latest by Chinese authorities to curb waves of capital outflows that have put pressure on the yuan and eroded the country’s foreign exchange reserves.

“We received notice from the two Hong Kong banks we work with ... that they will no longer accept payment by UnionPay cards issued in the mainland,” said Sammy Po, chief executive of the residential department of leading Hong Kong real estate agent Midland Realty International.

Mainland clients, who account for 5-10 percent of Midland’s new home clients, could still pay with other credit cards or cash, Po said, adding that he expected the impact to be limited.

Many mainland Chinese use credit cards to pay for a portion of property transactions in Hong Kong and UnionPay acknowledged it was scrutinising some purchases.

“Recently, we have carried out investigations on large-sum, suspicious, cross-border UnionPay card transactions and reiterated to cooperating institutions the requirement to strengthen merchant supervision,” a spokeswoman for UnionPay International in Hong Kong told Reuters.

“According to the UnionPay regulations ... it is strictly prohibited to use a UnionPay card issued in mainland China for cross-border acquisitions of property.”

Capital outflows from China surged last year to a record $725 billion, the Institute of International Finance said in February, partly on expectations that the yuan would weaken against the dollar.

The outflows, which caused a $320 billion decline last year in Chinese foreign exchange reserves, have prompted authorities to strengthen capital curbs. The yuan fell 6.5 percent against the dollar last year, the biggest ever yearly fall.

In October, UnionPay said it would tighten regulations over how mainland customers could use its debit and credit cards to purchase Hong Kong insurance products, potentially restricting yet 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. (Additional reporting by Julie Zhu and Sumeet Chatterjee in HONG KONG, Writing by Anne Marie Roantree, Editing by Mark Potter)

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