China is looking to enhance the surveillance on foreign currency purchases made by individuals. The country is also expected to further strengthen the punitive measures on illegal currency outflows. However, it is likely to keep the current $50,000 annual individual quota intact.

The State Administration of Foreign Exchange (SAFE) made the announcement during the weekend. It is aimed to assuage the concerns regarding steep fall in yuan. The Chinese currency lost close to 7 percent of its value against the dollar in the last year.

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From Jan. 1 onwards, Chinese individuals will be required to specify the purpose of the foreign currency purchase. They will also be required to provide other-related information. The data will be analyzed by SAFE for proper record.

SAFE said that earlier procedure was too simplistic and was prone to misutilization. The exchange said that the procedure had many loopholes, which led to money-laundering activities. SAFE explained, "Such transactions disrupt normal market order, and erode the interests of those foreign currency buyers who abide by the rules."

China is currently trying to stem the outflow of capital from the country. The fall in yuan further exacerbated the problem of capital outflow. According to Bloomberg Intelligence gauge, China witnessed $689 billion worth of outflow in the initial 10 months of 2016. The country's foreign reserves dipped to $3.05 trillion in November, the lowest levels in the past 5 years.

On Friday, the People's Bank of China announced that financial institutions will be advised to report on international currency transfers involving 200,000 yuan or more. The regulation will be effective from July 1.

TagsThe State Administration of Foreign Exchange, The People's Bank of China, foreign exchange