JOYCE Xin, a white-collar worker in Shanghai, is quite enthusiastic about managing her money. With her year-end bonus, she bought US dollars.

“Holding some US dollars seemed like a good choice with everyone saying that currency will remain strong this year,” Xin said. “Besides, interest rates on wealth management products offered by banks have dropped to below 4 percent, and it’s getting riskier to invest in online products.”

By buying dollars at the end of the year, she also keeps intact for 2017 the annual US$50,000 quota of foreign currency that every Chinese citizen is allowed to buy and use on holidays or send overseas.

Xin in betting that her returns on the US dollar will come in somewhere between what are considered “safe” financial products offered by banks and the sometimes dodgier investments offered in online peer-to-peer lending platforms, where promised interest rates can run higher than 10 percent. Irregularities arising in some of those latter products last year are making potential investors more wary.

All of this speculation surrounding personal investments is grounded, in part, in the yuan’s performance in the past two years.

China’s currency depreciated more than 6 percent last year, following a 5.8 percent decline in 2015.

Goldman Sachs recently lowered its forecasts for the yuan, predicting it will end this year at 7.3 against the dollar — down 5 percent from its present value. The investment bank also said it expects the yuan to rise slightly in 2018, ending that year at 7.6 to the dollar.

The greenback has been appreciating on expectations that the US Federal Reserve will continue the cycle of interest rate hikes it began in December. A stronger dollar draws money out of emerging markets — and China as well.

All this puts a drain on China’s foreign-exchange reserves. After peaking at US$3.99 trillion in mid-2014, they had fallen to US$3.05 trillion by the end of November last year.

The State Administration of Foreign Exchange (SAFE) attributed the decline to central bank intervention in the foreign-exchange market, volatile asset prices, devaluation of reserve currencies against the US dollar and the expansion in numbers of Chinese companies expanding their operations abroad.

Money outflow

China International Capital Corp has estimated that the “line in the sand” for sufficient foreign-exchange reserves to meet international payment obligations is US$2.6 trillion.

As China approaches that line, the need to control the outflow of money ratchets up.

Authorities have already begun plugging channels that individuals and companies can use to move money offshore. For one, restrictions have been imposed on mainlanders using domestic bankcards to purchase insurance products in Hong Kong.

For securities investors, no new quotas have been issued under the Qualified Domestic Institutional Investor Program since the middle of 2015. That program allows certain domestic investors to tap foreign securities markets via approved fund managers, insurance companies, securities firms and other assets management institutions.

The absence of new quotas reduces the number of investment products that can be offered.

In the corporate realm, Chinese authorities are expected to impose controls on how much money companies can take offshore for expansion, investment, mergers and acquisitions. The Ministry of Commerce and SAFE have both voiced concern about booming outbound investment, which is expected to show a 10 percent surge in 2016 to US$1.26 trillion.

The controls are likely to target those projects that are unrelated to the core business of a company and transactions in two categories — those valued at more than US$10 billion and those valued at over US$1 billion, the Wall Street Journal reported, citing unidentified sources.

Throughout last year, the SAFE has been cracking down on the underground money market. In Guangdong Province alone, more than 140 operators involved with more than 240 billion yuan in cross-border money transactions were stopped.

For ordinary Chinese citizens, the ban on mainlanders using bankcards to buy insurance in Hong Kong has had the most impact.

That was a surging trend in the past three years as mainlanders sought the more comprehensive coverage of Hong Kong health insurance policies or simply sought to dodge currency controls and obtain “clean” US dollars.

As the yuan weakened, more and more mainland residents sought what they viewed as a safe haven against further depreciation.

Data from the Hong Kong insurance regulator showed mainland clients paid HK$48.9 billion (US$6.3 billion) in Hong Kong insurance premiums in the first nine months of last year, more than double the amount in the same period of 2015.

In fact, mainland contribution accounted for nearly 40 percent of Hong Kong’s total premium income.

Last February, China’s foreign exchange regulator slapped a US$5,000 cap per transaction on UnionPay cardholders buying insurance in Hong Kong. Insurance agents in the city quickly circumvented the ceiling by swiping customers’ cards several or even hundreds of times.

In October, mainland authorities took stronger action. They banned all use of UnionPay bankcards for purchasing insurance and related policies in Hong Kong.

Offshore insurance transactions through UnionPay tumbled in November to 30 million yuan (US$4.3 million) from 8.06 billion yuan in October.

The same payments through MasterCard and Visa were banned in December.

“Currently, insurance is no longer the best way to transfer or manage US dollar assets,” said a Hong Kong insurance agent, who declined to be identified. “Many fund managers and banks can offer better returns from US dollar investments, while the essence of insurance is protection. I don’t advise clients from ordinary families to buy savings-type products to prepare for any depreciation of the yuan. No one can really tell what will happen in the next 20 or 30 years.”

However, the agent noted that there still ways for clients to use bankcards to pay premiums, and the “grey market” remains available for transfers of US$1 million or more back to the mainland for individuals.

“It’s a mouse-and-cat game,” the agent said. “In everything you do, there is risk.”