How Chinese Used Insurance to Dodge Currency Controls
- Hong Kong's haven turns polices into actual insurance for cash
- Chinese have bought record amounts of insurance in Hong Kong
The China UnionPay Data Co. logo is displayed on an automatic teller machine (ATM) in Beijing, China, on Thursday, Sept. 16, 2010. The U.S. filed two complaints against China at the World Trade Organization, concerned that curbs on payment-processing companies put payment-processing companies such as MasterCard Inc. and Visa Inc. at a disadvantage because China favors a monopoly provider, China UnionPay Data Co. The second complaint is over dumping duties on more than $200 milion of U.S.-made steel products.
Photographer: Nelson Ching/BloombergBefore the Chinese regulator stepped in this week with measures against the insurance industry aimed at curbing the country’s $1 trillion worth of capital outflows in 2015, hundreds of thousands of mainland Chinese had been flocking to Hong Kong to buy policies using their China-issued UnionPay credit or debit cards.
Using the cards enabled them to get around China’s controls that officially limit citizens from converting no more than $50,000 per year and sending it abroad. By swiping the cards at insurers such as AIA Group Ltd., Prudential Plc, and Manulife Financial Corp. in Hong Kong, mainland residents bought policies denominated in Hong Kong dollars and U.S. dollars -- averaging $50,000 but reaching as much as $1 million or more -- with the equivalent amount of yuan deducted from their bank accounts back home.