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From January 10th onwards, holders of the Yin Lian RMB bankcard will be able to make ATM and/or POS (point-of-sales) transactions in South Korea, Thailand, and Singapore. The People's Bank of China made this move to improve the security, efficiency, and convenience of overseas transactions since it would reduce the necessity of cash usage. Among other effects, this would encourage trade and the financial institutions' cooperation between China and the affected countries. The cards will be eligible for use on current account transactions and cash withdrawals in small amounts. The payments/withdrawals are denominated in the foreign currency and ChinaUnionPay then settles the transaction with the issuing bank and a comparable amount is deducted from the cardholder's account. This can be seen as a part of a recent wave of changes made to loosen capital controls on Chinese currency. About a year ago, these bankcards began to be accepted in Hong Kong and in September 2004, acceptance was granted in Macao. At the end of November, the PBC also announced that they would be raising the maximum amount of domestic currency allowed to be transported overseas from 6000 to 20000 RMB. Their rationalization was the increase of per capita consumption by over 3 times since 1993, the year of the last limit adjustment. Although moves are being made to liberate capital flows, it seems, at least overtly, that the immediate purpose is to increase efficiency for consumers and businesses, but not necessarily to compliment a relaxation of the current |
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exchange rate regime. In a corresponding press release, a PBC official stated that "banknote issuance and withdrawal and the liquidity arrangement of forex reserves will have to be adjusted in correspondence with the fact that Renminbi has been increasingly accepted in neighboring countries and regions." The anticipated changes in forex controls will be made to "prevent and mitigate the potential financial risks." |
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