Liu Minxia

SHENZHEN Customs confirmed yesterday it has stepped up inspections at the city's checkpoints as more people are bringing large amounts of yuan across the border to profit from the rising yuan and higher interest rates.

On Tuesday, instead of doing spot checks as usual, customs officers required all inbound travelers at the Luohu and Futian checkpoints to have their luggage to be scanned in order to prevent them from importing more than 20,000 yuan (US$2,864) in cash. According to mainland regulations, incoming travelers are allowed to bring a maximum of 20,000 yuan in cash at a time.

A custom officer at Luohu Checkpoint said Tuesday that more people had breached the regulations in the past few months.

Shenzhen customs previously said it had uncovered about 1,000 cases of people trying to bring excessively large amounts of money into Shenzhen in the first quarter of this year, but declined yesterday to reveal the total sum of the money involved in the cases. Last year, there were only about 2,000 such cases in the whole year.

Violators are liable to a fine of 10 to 30 percent of the sum they are bringing in, and if a particularly large amount is involved, the authorities may even confiscate the money.

The number of Hong Kong residents bringing cash across the border to open yuan bank accounts started to rise rapidly after Hong Kong cut the savings deposit rate to almost zero early last month, creating a wide gap between interest rates on the mainland and in the SAR.

For instance, the rate of return on a six-month fixed deposit at HSBC in Hong Kong is 0.7 percent per annum, compared to 3.78 percent at mainland banks.

Many Hong Kong residents are trying to cash in on the appreciation of the yuan, as the currency has risen 18 percent against the Hong Kong dollar since 2005.

The Hong Kong Monetary Authority said Tuesday a total of 1.2 billion yuan had been remitted from Hong Kong to the mainland in February, representing 0.13 percent of the 958.3 billion in new yuan savings deposits that month.

The Shenzhen office of the People's Bank of China, the central bank, said yesterday it had noticed the growth and was carrying out research on it, but it didn't say whether it would issue new regulations. It said yuan saving deposits increased by 16 billion yuan, or 21.62 percent, in the first three months this year.

But experts say it has always been difficult to control cash flows and the money brought in by individuals would only be a small part of the total cash inflows.

"Both institutions and individuals have been keen on joining the yuan ride, which poses a tough question for regulators. They should think how to manage the inflows, but we have to admit it's very difficult to manage," Li Chunyu, secretary general of Shenzhen Finance Consultants Association, said Wednesday. "For now, I think the regulators should keep on being tough on it."

The State Administration of Foreign Exchange (SAFE), the country's foreign exchange regulator, said yesterday that it would increase oversight over cash inflows by employing an electronic system for monitoring foreign direct investment (FDI).

SAFE did not refer specifically to speculative money, but it has vowed in the past to step up control over illicit cash flows.