Monday, January 27, 2014

BREAKING: China's Central Bank Suspends Domestic Cash Transfers

This appears very serious:

FXStreet reports: (Bali) - The People’s Bank of China has issued an order to commercial banks to halt cash transfers, which will result on a 3-day suspension of domestic renminbi transfers, while 9 days of suspensions on conversions of renminbi to foreign currency.

Citibank notice to customers

As Forbes reports, this notice, for instance, appears on the online portal for Citibank unit for its China customers:

1. Due to the system maintenance of People’s Bank of China, Domestic RMB Fund Transfer through Citibank (China) Online and Citi Mobile will be delayed during January 30th 2014, 16:00pm to February 2nd 2014, 18:30pm. As to the fund availability at the receiving bank, it depends on the processing requirements and turnaround time of the receiving bank. We apologize for any inconvenience caused.

2. During Spring Festival, Foreign Currency Transfer Transaction through Citibank (China) Online and Citi Mobile will be temporally not available from January 30, 2014 18:00pm to February 7, 2014 09:00am. We apologize for any inconvenience caused.

China's liquidity running dry?

According to Gordon G. Chang, Contributor at Forbes: "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."

Speculation continues to point towards Chinese money market running low of cash ahead of the Luna New Year holiday period. While demand for cash is on the rise around this time, proper planning should definitely prevent such iliquid episodes from occurring unless the problem goes deeper.

As Chang notes: "Today’s “system maintenance” notice is a sign of a fundamental problem. Banks, in short, need cash to rollover ever-increasing amounts of nonperforming loans and wealth management products. This month, cash needs are even higher than normal because of the impending default of the Credit Equals Gold wealth product scheduled for January 31."

Chang draws the following conclusions: "Banks are evidently scrambling for cash. They have, in the past, resorted to desperate maneuvers at the ends of calendar quarters to meet regulatory requirements. The current crunch is even more alarming because it cannot be occurring for quarter-end reasons. Something is very wrong in China at the moment. Banks’ apparent need to conserve cash, coming just weeks after the last incident, looks ominous.

Bottom line: As I have been pointing out in the EPJ Daily Alert, China's central bank has a serious problem. Massive amounts of money will be required to prop up the current central bank manipulated economy. BUT if the PBOC does print the money, price inflation will soar with possible ramifications of social unrest throughout much of the country.


Forbes has removed this story from its web site as a likely hoax. That said, the current situation in China is so precarious that it makes this type of made up story sound very plausible. Be very cautious in trading Chinese stocks,


  1. It appears some Chinese are learning a lesson on why it is important to *hold the private keys* to one's own wealth. We are just seeing another example of what happens when third-parties hold the private keys of wealth.

    For those Chinese who hold the private keys of wealth in something like bitcoins using a tool like Armory ( are completely immunized against and consequently do not have to worry about (1) devaluation through excessive issuance of the currency unit, (2) the counter-party risk or financial stability of the middleman, (3) seizure, (4) 'system maintenance', (5) HSBC-like parenting on cash withdrawals or any other multitude of things that middlemen do to interfere with how someone wants to control their assets. It must feel liberating in times like these.

  2. Maybe the programmers who effed-up Obamacare are now working for the PBOC.

  3. During Chinese New Year, banks give out thousands of bank notes as they are part of the "hong bao" or red envelope tradition. That may be the reason

  4. Bitcoin users in China are unaffected by these measures, and have full access to instant bi-directional international remittances of any size, without restriction.

  5. It appears the news is just a hoax from Forbes.

  6. I'm pretty sure ZH is saying everyone else pulled this story as it's false.

  7. U.S. and China Lock Horns Over Audits; $1.4 Trillion in U.S. Stock Value at Risk

    By Pam Martens: January 27, 2014

    Last week, U.S. investors learned the hard way that when China sneezes, the U.S. may catch pneumonia. Growth in China is slowing and there are growing fears that its massive overinvestment in real estate and manufacturing plants in recent years has led to unsustainable levels of Chinese business and bank debt. Stock markets in countries which have been major beneficiaries of the China growth story plunged at the end of last week, including a two-day drop of almost 500 points in the U.S.

    Questions about Chinese growth and debt levels could not come at a worse time in U.S.-China relations. Despite diplomatic efforts by James Doty, Chairman of the Public Company Accounting Oversight Board (PCAOB) and Treasury Secretary Jack Lew in the spring and summer of last year to forge an agreement, a behind the scenes war is raging over China’s decade of stonewalling U.S. regulators over access to documents prepared by auditors of publicly traded companies that are based in China but listed on U.S. stock exchanges. China takes the position that these audit work papers hold state secrets and it prohibits audit firms from releasing the documents directly to U.S. regulators.

    The growing concern is that the so-called “state secrets” these documents purportedly hold may actually be a paper trail showing accounting or securities fraud that might, indeed, embarrass China but do far more damage to the life savings of American investors and the reputation of U.S. stock exchanges.