In November 2019 the Chinese People’s Bank already announced the “Pilot Implementation of Large Amounts of Cash Management in Hebei Province, Zhejiang Province and Shenzhen” for public comments. Its aim is to manage the amount of large cash flows.
According to the draft, the pilot will last for two years and will be implemented in different regions step by step.
The first step is to fully regulate large amounts of cash managed by commercial banks in Hebei.
After the pilot has been successfully implemented in Hebei Province the second step aims to fully regulate large cash positions managed for business by commercial banks in Zhejiang and Shenzhen. Furthermore, the measures try to get a handle on large cash withdrawals and the cash management of enterprises in wholesale and retail business, real estate sales, the construction industry, and car vendors in Zhejiang. In addition, the pilot aims to strengthen the management of large amounts of cash held in private accounts and undertakes to monitor large amounts of cash entering and exiting China respectively RMB cash operations in Hong Kong and Shenzhen. Last but not least the central bank uses the pilot to explore measures to promote the reporting of personal income in appropriate regions.
What’s the purpose of cash management?
Although non-cash payments have been developing rapidly in recent years in China, the volume of large amounts of cash transactions continues to grow, according to central bank officials. Large amounts of cash withdrawals have become an important channel for the cash in circulation. Internationally, major developed countries generally treat the management and supervision of large amounts of cash as an important part of social governance and international cooperation, hence strict control measures are adopted. It is an important policy goal for China to strengthen the management of large amounts of cash in circulation, in an effort to curb its use for illicit activities.
Why pilots in Hebei, Zhejiang and Shenzhen?
The basis for large amounts of cash managed by financial institutions is rather well developed already in Hebei. Furthermore, Zhejiang and Shenzhen are the key areas of cash input nationally. In Zhejiang, the use of large amounts of cash in certain industries are rather prominent and large amounts of cash held in personal accounts are outstanding. Apart from that RMB cross-border flows between Shenzhen and Hong Kong are also very common.
After the pilot, the central bank will evaluate the results in order to improve its cash management. At the same time, the results of the cash management study shall be implemented, to gradually promote relevant cash management measures nationwide.
Identification of large amounts of cash.
According to the pilot, the starting point for “large amounts of cash” held in public accounts in China is 500,000 yuan. However the starting point for private accounts may vary from city to city. For example, it might be 100,000 yuan in Hebei Province, 300,000 yuan in Zhejiang Province and 200,000 yuan in Shenzhen. For the vast majority of ordinary people, their daily cash usage will be lower than the prescribed starting points above. Hence, the central bank’s pilot will not affect them in any way.
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