31 Dec 2015
New Financial Rules Take Effect on 1 January 2016
Several financial rules are due to take effect on 1 January 2016. In addition to restrictions on the number of debit cards issued by commercial banks, the new rules will also spell changes to mortgage repayment and insurance purchase.
Limits on Debit Card Issue
There will be a limit on the number of debit cards a person may apply for. The Industrial and Commercial Bank of China (ICBC) recently issued a circular, stating that with effect from 1 January 2016, one customer may not open more than four debit card accounts in the same bank across the country. This represents an action taken by a commercial bank to implement a relevant circular of the China Banking Regulatory Commission. Other commercial banks are expected to follow suit.
ICBC said it would not open or activate any new debit cards for customers who already had more than four debit cards (excluding social security card, medical insurance card, military security card and cancelled debit card) of the same bank across the country. In principle, one agent may not open more than three cards on behalf of others in the same bank.
Easing of Mortgage Pressure
The effects of repeated interest rate cuts by the central bank since the beginning of 2015 should be clearly manifested after 1 January 2016. The central bank cut interest rates five times this year, but since the adjusted interest rates for existing mortgages will not become effective until the beginning of the following year, people will not be actually enjoying the benefits of these interest rate cuts and pay less in monthly mortgage repayment until 1 January 2016.
Individual Income Tax Cut for Purchase of Life and Health Insurance
Chongqing and a number of other cities will pilot the individual income tax policy for commercial health insurance from 1 January 2016. For any individual who buys qualifying types of commercial health insurance, an annual cap of Rmb2,400 will be set as the allowable pre-tax deduction in respect of the relevant premiums paid.
Temporary Suspension of Share Trading in Response to Huge Rises and Drops
The regulations of the Shanghai Stock Exchange, Shenzhen Stock Exchange and China Financial Futures Exchange on the index circuit breaker system will come into force on 1 January 2016. Under the circuit breaker system, trading will suspend temporarily in the event of a major price swing. Alternatively, trading may continue within the limit bounds.