Starting from August 1, the People’s Bank of China will implement strict regulations on precious metal trading, requiring individuals or institutions to report to regulatory authorities when cash purchases of gold or other precious assets exceed 100,000 RMB in a single transaction or in cumulative daily transactions. The official explanation for this move is to combat money laundering activities.
Experts believe that the so-called anti-money laundering measures by the Chinese Communist Party are not solely aimed at preventing financial crimes but serve deeper financial stability and strategic considerations. This indicates a shift towards a more stringent control over the circulation of funds to prevent the outbreak of systematic financial risks.
The recent regulations issued by the People’s Bank of China regarding anti-money laundering and counter-terrorism financing management for precious metal and gem institutions require strict customer identification procedures when cash transactions reach or exceed 100,000 RMB. Detailed reports of large transactions must be submitted to the China Anti-Money Laundering Monitoring and Analysis Center within five working days.
Additionally, the regulations establish a long-term tracing mechanism, mandating that all customer information and transaction records be retained for at least 10 years. Any suspicious transaction, regardless of the amount, must be promptly reported to regulatory authorities.
Industry analysts widely believe that this policy will have a profound impact on the jewelry and precious metal industry, as well as on the order of cash circulation and the financial freedom of the public.
In recent years, reports of difficulties in withdrawing large amounts of cash from banks and the requirement for pre-approval or proof of fund usage have emerged in various parts of China. The increasing restrictions on cash transactions are seen as a method to slow down the speed of financial risks.
These measures have raised concerns about the limitations imposed on the free movement of cash and the system’s control over it, which could weaken the public’s trust in the financial system. This signifies a tightening grip on controlling capital outflows, especially through channels like Hong Kong and Macau, where the transfer of physical assets like gold and gems is monitored more closely than electronic transfers.
Considering the rapid increase in China’s M2 money supply since 2024, coupled with concerns about the continuous devaluation of the Renminbi, individuals have shown a tendency to shift their focus from tangible assets to virtual ones. This has prompted the government to implement stricter controls on gold cash transactions and establish a legal framework and data infrastructure for potential future taxation on physical assets.
Moreover, the recent regulations on gold cash transactions align with the preparation for forthcoming large-scale monetary easing policies. The escalating systematized risks associated with the financial system have prompted the government to introduce measures like restricting cash withdrawals and implementing transaction recording systems to mitigate public expectations of a bank run.
Overall, these new regulations underscore the Chinese government’s cautious approach towards managing financial stability and preventing systematic financial risks. By enhancing controls over capital flows and pushing for a more secure financial environment, China aims to fortify its position amid economic uncertainties and market fluctuations. This strategic move emphasizes the interconnectedness of financial policies and their profound impact on the broader economy and society.