China limits overseas cash withdrawals for its citizens

Goldman Sachs: Reaction to China's slowdown is overdone

Have a lot of yuan in China? Beijing would like to keep it that way.

The Chinese government is clamping down on the amount of cash its citizens can withdraw from ATMs overseas, its latest attempt to stop money flooding out of the country.

The restrictions apply to holders of UnionPay bank cards issued in mainland China. For the remainder of 2015, withdrawals will be limited to 50,000 yuan ($7,868). Starting in 2016, an annual limit of 100,000 yuan ($15,737) will apply.

UnionPay customers are also bound by an existing daily withdrawal limit of 10,000 yuan per card.

The new rules will apply to the vast majority of Chinese citizens because UnionPay has a near monopoly on cards, and card payments, in China.

China already limits the amount of money an individual can move out of the country to $50,000 per year.

Even with those restrictions, capital outflows totaled $219 billion in the first half of 2015, according to UBS.

Money is flowing out despite government efforts to reassure investors who are worried about the country's economic slowdown, wild swings in the stock market and a sudden devaluation of the yuan in August.

China's foreign-exchange reserves plunged by a record $94 billion last month, according to the country's central bank, leaving it with a war chest of $3.6 trillion.

Tao Wang, an economist at UBS, said that foreign exchange reserves are likely to fall further as Beijing defends the value of the yuan.

"But we believe widespread worries about the adequacy and liquidity of reserves are more a reflection of current extreme market pessimism on China rather than facts and reality," she said.

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