Effective January 1st 2017, China’s foreign exchange regulator stepped up its scrutiny on individual foreign exchange purchases, a move that is aimed to fight the historic decline of the yuan against the dollar, which has declined more than 15 percent over last two year and more than 8 percent since the beginning of last financial year in April. Incidentally, the yuan has also registered its first yearly loss against the dollar in 2016, since the exchange rate was liberalized back in 2005. According to a statement in foreign exchange regulator SAFE’s website, starting January 1, Chinese individuals who want to buy foreign currencies at banks must first fill out an application form specifying the purpose of the purchase, and other relevant information and SAFE will examine such information and data more closely and frequently.

Another important point to note is that SAFE has kept the annual eligibility quota of purchasing foreign exchange at $50,000, which means SAFE is looking to control the outflow of money by indirect heavy paperwork means, rather than direct intervention using the quota, which would have undermined the confidence more. This quota gets reset every year in January. So investors in China looking to move their money out will be enjoying fresh oxygen from today.

In the coming weeks and months, one should keep a watch whether the increased paperwork succeeds or fails to reign on quotas.