China UnionPay has confirmed that it is barring the use of its debit and credit cards issued on the Chinese mainland in the purchases of investment-related insurance products in Hong Kong, with effect from 29 November.
The move aims to curb capital outflows from mainland China as the payment company has observed a significant increase in overseas insurance transactions.
Mainland residents can only use UnionPay cards to buy overseas insurance products related to tourism, including those covering accident and illness, said UnionPay International, a subsidiary of the national bank card association China UnionPay.
Those who pay through UnionPay methods must comply with China's foreign exchange policy that caps each payment in Hong Kong at the equivalent of US$5,000 per transaction.
Banks and UnionPay will monitor non-compliance with the new regulations, according to an internal memo from one insurer seen by Bloomberg.
Regulators have been cracking down on mainlanders' purchases of insurance in Hong Kong as Chinese buyers have been eager to move money abroad amid slower economic growth and a weakening yuan.
Earlier this year, China's State Administration of Foreign Exchange started enforcing the limit of US$5,000 per transaction on purchases of insurance products overseas using UnionPay cards. Regulators also moved to limit electronic transfers for purchases to try and control the surge in insurance purchases in Hong Kong.
However, Chinese buyers had circumvented the payment limit by swiping their cards multiple times.
The statement by UnionPay International said that recent monitoring had found "a surge in multiple transactions on a single card with a single overseas insurance merchant", but did not elaborate.
The most popular insurance policies in the city for Chinese buyers are investment-linked life insurance products. These can be cashed out after a few years and the money can be used for property investment or other purposes.
Sales of Hong Kong insurance products to mainland customers reached HK$30.1 billion (US$3.9 billion) in the first six months of the year, about twice as much as that for the same period last year, according to data from the Office of the Commissioner of Insurance in Hong Kong.