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  • China's Banking Problem

    China Halts Bank Cash Transfers - Forbes
    In short, there will be a three-day suspension of domestic renminbi transfers. There will also be a suspension, spanning nine calendar days, of conversions of renminbi to foreign currency.

    The specific reason given—“system maintenance” at the central bank—is preposterous. It is not credible that during the highest usage period in the year—the weeklong Lunar New Year holiday beginning January 31—the central bank would schedule an upgrade and shut down cash transfers.

    A better explanation is that the country’s banking system is running dry. Yes, there is an increased need for money in the run-up to and during the Lunar New Year holiday, but that is only a small factor. After all, central bank officials knew this spike in demand was coming—it occurs every year at this time—and a core function of central banks is to manage seasonal liquidity fluctuations. Moreover, the holiday has not started yet, and the PBOC, as that institution is known, could have added more liquidity to meet cash needs.
    Ho ho ho Santa's got a Bank Run! gift for you Ho ho ho.
    Insolvency, fa la la la la la la.

    So what’s really going on? This crunch follows similar incidents in June and December of last year. In June, for instance, the central bank used the excuse of a “system upgrade” to allow banks to shut down their ATMs and online banking platforms. As a result, they conserved cash and thereby avoided a nationwide meltdown.
    good story very heartwarming if you like complete financial Armageddon warmth.
    Originally from Sochi, Russia.

  • #2
    Note: Something that the Forbes article touches on but I don't think is emphasized enough.

    China's "economic growth" (read: GDP growth) is heavily reliant on domestic investment. Investment in what? SOEs, of course. Unfortunately, this investment-led growth is fueled almost entirely by non-commercial lending from Chinese banks like PBOC. These banks don't have a choice in who they get to lend to because the state is essentially ordering them to loan to SOEs to keep them afloat. So even if you have SOEs reporting gains, this is due to what are essentially subsidies (non-commercial loans with incredibly low rates) making them "competitive".

    So how do you keep growth going? Keep up the vicious cycle of loaning to SOEs. But where does this money come from, you might ask??? Simple- the Chinese population. Because the your everyday Chinese citizen is getting screwed on consumer prices already (a function of SOEs as well), they might as well save their income. Where do they save this money? Due to a close capital account, they have no other option but to deposit their savings in state banks. These banks have outrageously low rates, so what you have is a hidden taxation system that fuels state-led investments.

    But when people start pulling money out of the system, how do you keep up investments??? You can't. And thus your growth crashes. How do you stop this from happening? Stop the banking system from running dry. Will the Chinese be able to stem off a crisis in this case? Most likely. Is the systemic issue with their banking and economic system being revealed by this event? You bet.

    Comment


    • #3
      No, There Is No Stoppage Of Cash Transfers In China | Zero Hedge

      The story was removed from Forbes.

      Leaving aside the fact that one should typically rely on official PBOC advisories, posted quite clearly on its website (where one finds no mention of this notice), one could simply keep track of interbank liquidity indicators such as repo and SHIBOR, both of which dropped, indicating that liquidity actually improved.

      Anyway, here is what really happened, as reported by China Compass. "Forbes columnist Gordon Chang claimed in a much-quoted item today that the Peoples Bank of China had instructed commercial banks to halt cash transfers. Chang's column, entitled “China Halts Bank Transfers,” specifically refers to Citibank's Chinese branches. The report is entirely misleading." Our advice - focus on the real "weakest links" in China's banking system, of which there are many and are backed by facts, not the least of which is the potential upcoming shadow banking default. Ignore groundless rumors and speculation.
      guess not yet not yet
      Originally from Sochi, Russia.

      Comment


      • #4
        Let me ask you this...

        If renminbi is undervalued (the other hype) and China needs cash, why not just print heck load of renminbis?

        Liquidity... solved. Next ;)
        No such thing as a good tax - Churchill

        To make mistakes is human. To blame someone else for your mistake, is strategic.

        Comment


        • #5
          Originally posted by cyppok View Post
          No, There Is No Stoppage Of Cash Transfers In China | Zero Hedge

          The story was removed from Forbes.



          guess not yet not yet
          Gordon Chang's diatribe should be banned from WAB. He's got no sources, no connections, no guanxi in China.

          I am surprised anyone would still take this guy seriously in 2014 (8 years after the collapse of China).

          Comment


          • #6
            Originally posted by cdude View Post
            Gordon Chang's diatribe should be banned from WAB. He's got no sources, no connections, no guanxi in China.

            I am surprised anyone would still take this guy seriously in 2014 (8 years after the collapse of China).
            Someone that writes on economics and business stuff but lacks connections, sources and guanxi in China is indicative of one of two things:

            1) He has no idea what he's talking about
            2) He knows what he's talk about far too well for his own good and lost all his connections

            Comment


            • #7
              Originally posted by ace16807 View Post
              Someone that writes on economics and business stuff but lacks connections, sources and guanxi in China is indicative of one of two things:

              1) He has no idea what he's talking about
              2) He knows what he's talk about far too well for his own good and lost all his connections
              3) He's a fiction writer.

              Comment


              • #8
                Originally posted by cyppok View Post
                No, There Is No Stoppage Of Cash Transfers In China | Zero Hedge

                The story was removed from Forbes.



                guess not yet not yet
                So is Gordon Chang plagarizing from you or the other way around?

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