Only seven SIV applications have been submitted since the new rules were introduced on July 1, which require investors to put their money into riskier assets such as venture capital and emerging companies.

China has previously tolerated significant capital outflows via so called "grey channels", but has tightened up enforcement in recent weeks as the economy slows and fears over capital flight put downward pressure on the currency.

The crackdown from Beijing has seen Chinese banks setting up watch lists for unusual transactions, according to one bank manager, who asked not to be named as he was not authorised to speak about the policy.

He said the operation was aimed at cracking down on a practice whereby family and friends of those wanting to purchase a property overseas all transfer US$50,000 into an overseas account. That's the limit each Chinese individual is allowed to move out of the country each year.

The purchaser then pays back his friends and family in China and uses the money from the overseas account to put down a deposit on the property.

However, banks are now tracking the source of funds for overseas bank accounts that have received more than US$200,000 within 90 days, according to the bank manager, who works in Shanghai for one of the major state-owned banks.

"We have always had this policy but now it has been restated and is being enforced more strictly," he said.

"In the past we could find a way around these rules but now all those ways have been blocked."


"I'm sure this would be having an impact on overseas property purchases," he said.

The crackdown is also said to be affecting trading companies, which have been asked to submit more supporting documents to verify transactions, according to a report in China Business News on Monday.

China's move to tighten its capital controls comes after the country's banks reported net capital outflows of $US109 billion in the first quarter of 2015, according to the Bank for International Settlements.

The People's Bank of China has also been spending record amounts of its foreign reserves to keep the yuan stable after it devalued the currency on August 11.

The devaluation, which came as a surprise, caused havoc on global markets as investors feared it signalled the economy was experiencing a sharper downturn than previously thought.

The tighter rules in China come as Sydney recorded its lowest auction clearance rate for the year this past weekend, while Melbourne has now recorded two weekends below the same time last year, according to Corelogic RP Data.

Credit Suisse estimates Chinese buyers account for around 15 per cent of all new home purchased in Australia and this proportion will rise to 20 per cent by 2020.

