UnionPay announced that its mainland customers may not be able to use their UnionPay credit card for purchasing insurance products from abroad.

It is likely that the step has been taken to curb capital flow from the country. However, the mainland residents can still use the card for buying overseas insurance policies offering tourism-related services.

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UnionPay is the largest bank card provider in the country and it is anticipated to restrict the debit and credit card usage by mainland customers.

Its latest statement said the mainland residents are not allowed to purchase insurance products with investment feature in Hong Kong. The purchase of pure insurance products, providing protection against illness, accident and death are still allowed, though.

UnionPay said there had been considerable spike in the use of cards for purchasing overseas insurance products. It also added that the new rules are based on existing regulations.

Earlier this year, the country had placed transaction limits on buying Hong Kong insurance products using UnionPay cards.

China is currently looking to curb capital outflows, which have increased in the recent past. The outflow has been triggered by various factors, including currency depreciation and sluggish economic growth rate.

In many cases, foreign insurance products may be used as investment vehicle for storing wealth and diversifying risk.

In the first half of 2016, mainland visitors bought HK$30.1 billion worth of insurance products in Hong Kong, up by 116 percent on year-on-year basis. China has asked the banks to closely monitor foreign exchange transactions.  

Tags UnionPay, china, Hong Kong