Beginning this month, mainland authorities will now be requiring documents providing details on the reasons for yuan conversion, and when the money will be used. Improper use of the converted funds (e.g. the purchase of a residential property) will entail stiff penalties such as being banned from exchanging money for a significant duration, The Globe and Mail
The stricter guidelines represent the culmination of Chinese authorities’ months-long effort to moderate the outbound flow of funds, which experts said has massively depleted the government’s foreign reserves over the past few years.
Economist Andy Xie warned that the regulatory revision will lead to a “sharp” decline in housing markets dependent on foreign capital like Canada—a dangerous proposition when one of the nation’s erstwhile hottest cities (Vancouver) has already reached peak sales volume and prices in spring 2016.
However, Real Estate Board of Greater Vancouver president Dan Morrison said that it will still take some time until the effects of this development become apparent.
“There are so many factors in the housing market,” Morrison stated. “Vancouver is not a homogeneous market. Some people want to point to one easy problem or one easy solution, and there is no such thing.”
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The Chinese government’s new, stricter rules on money exchange may have a domino effect on the foreigner-dependent Canadian housing sector.