Credit Suisse: Impact of annual cap on UnionPay cards to be limited

The impact of the annual cap of RMB100,000 per card on UnionPay withdrawals overseas – confirmed yesterday by the Chinese State Foreign Exchange Administration (SAFE) – is expected to have limited impact on Macau’s gaming industry, according to the research note from Credit Suisse signed by analysts Kenneth Fong and Isis Wong. “We see limited impact on daily operations as ATM withdrawals are not the major funding channel for players. Besides, players can easily get around the rule by using multiple cards to cash the desirable amount”, the analysts explained. As from today, UnionPay cards are subject to a cash withdrawal overseas cap of RMB10,000 per day but there isn’t any annual limit. However, SAFE decided to apply an annual cap of RMB100,000 per card, starting next year. This was confirmed yesterday in a press release, which clarified that the cap will also be applied to cards issued in Mainland China for foreign companies Visa and MasterCard. However, the restrictions on overseas withdrawals came into effect earlier, and from today and until the end of the year, there is already a temporary cap of RMB50,000 per card. “If the cumulative overseas cash withdrawal exceeds the [RMB100,000] cap, the transaction will automatically be rejected”, Lawrence Lau, of the General Management Department of UnionPay International Hong Kong Branch told Business Daily. Mr. Lau also explained that the cap is applied to cards, which means that a holder of two different UnionPay cards can withdraw as much as RMB200,000 per year in overseas territories. “Cumulative overseas cash withdrawal on an annual basis for each Mainland China-issued UnionPay RMB card shall not exceed the equivalent of RMB100,000 per card per year”, he clarified. Controls already in practice While the Credit Suisse report mentions that the purchase and resell of goods using UnionPay cards is “a more common way to withdraw bigger sums in the territory for premium mass market players”, it also stresses that a mechanism is already in place tracking large overseas transactions. The Credit Suisse research team for the local gaming sector believes that the control on UnionPay overseas transactions concerning Macau will not be increased in the near future because “it’s hard to distinguish real purchases versus cash out transactions”. The report also explains that “operationally, the two separate transactions – for example, purchase of items from a jewellery shop with Union Pay debit card and reselling the item to a different pawn shop for cash – are both legitimate”. For its part, SAFE expects this policy to avoid “money-laundering risks” related to large sum overseas transactions. “Recent monitoring found that some UnionPay card holders have made frequent withdrawals of large amounts overseas under unusual circumstances. The foreign financial regulators have been alerted to this”, SAFE said.