"China Banks Seem To Be Doing Whatever They Can To Avoid Paying Anyone In Dollars"
By Dan Harris of China Law Blog
Getting Money Out of China: What The Heck is Happening?
Regular readers of our blog probably know that our basic mantra about getting money out of China is that if you have consistently follow all of China’s laws, it ought to be no problem. Not true lately.
In the last week or so, our China lawyers have probably received more “money problem” calls than in the year before that. And unlike most of these sorts of calls, the problems are brand new to us. It has reached the point that yesterday I told an American company (waiting for a large sum in investment funds to arrive from China) that two weeks ago I would have quickly told him that the Chinese company’s excuse for being unable to send the money was a ruse, but with all that has been going on lately, I have no idea whether that is the case or not.
So what has been going on lately?
Well if there is a common theme, it is that China banks seem to be doing whatever they can to avoid paying anyone in dollars. We are hearing the following:
1. Chinese investors that have secured all necessary approvals to invest in American companies are not being allowed to actually make that investment. I mentioned this to a China attorney friend who says he has been hearing the same thing. Never heard this one until this month.
2. Chinese citizens who are supposed to be allowed to send up to $50,000 a year out of China, pretty much no questions asked, are not getting that money sent. I feel like every realtor in the United States has called us on this one. The Wall Street Journal wrote on this yesterday. Never heard this one until this month.
3. Money will not be sent to certain countries deemed at high risk for fake transactions unless there is conclusive proof that the transaction is real — in other words a lot more proof than required months ago. We heard this one last week regarding transactions with Indonesia, from a client with a subsidiary there. Never heard this one until this month.
4. Money will not be sent for certain types of transactions, especially services, which are often used to disguise moving money out of China illegally. This is not exactly new, but it appears China is cracking down on this. For what is ordinarily necessary to get money out of China for a services transaction, check out Want to Get Paid by a Chinese Company? Do These Three Things.
5. Get this one: Money will not be sent to any company on a services transaction unless that company can show that it does not have any Chinese owners. The alleged purpose behind this “rule” is again to prevent the sort of transactions ordinarily used to illegally move money out of China. Never heard this one until this month.
What are you seeing out there? No really, what are you seeing out there?
(18 votes)
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Maybe that's it, somebody taught the Chinese how to read Serial Numbers
Hmm perhaps indeed. We solved a problem that all those smart people were unable to solve. Maybe we will win the Nobel Price in Economics this year.
The dollar is fake anyway. Printed out of thin air. The whole financial world is fake. People will find out when everything would collapse and when then the most priced asset would be a loaf of bread and the most sought after skill will be how to make your own food. Bye bye all these useless PR people, leisure time consultants, interior decorators, marketeers, etc.
Q: People will find out when everything would collapse and when then the most priced asset would be a loaf of bread and the most sought after skill will be how to make your own food
A: We live in a world of overproduction. Automated production is everywhere, for 99% of popluation the only deficit is money
omg! i can't stop laughing. do you mean all those hundreds of billions of dollars sequestered in china to avoid the taxman in the usa is now stranded. roflmao!!!!
Could be, a coordinated, negative interest rate policy implementation?
Love it!
Oh and fuck APPL.
why isnt BTC going up?
try this www.nytimes.com/2016/01/17/business/dealbook/the-bitcoin-believer-who-ga...
Mike Hearn sold his soul recently to the bankers. Now working for R3, he will say anything for $$.
maybe China secretly arrested fonestar too
THAT would be a public service!
Aye mateys....I got a good one for ya today...:-)
Well, your friends with their fancy persuasion
Don't admit that it's part of a scheme
But I can't help but have my suspicions
'Cause I ain't quite as dumb as I seem
And you said you was never intendin'
To break up our scene this way
But there ain't any use in pretendin'
It could happen to us any day
How long has this been goin' on
How long has this been goin' on
friggin hah :-) https://www.youtube.com/watch?v=sCoAvUMFKv0
love you all :-)
You can only send a 375k cashiers check to your Chinese college student in Santa Monica for transportation allowance. ( Ferrari , Lamborghini, Porsche etc)
I don't find this surprising. If you are going to devalue your currency, you are not going to allow exchanges into the currency you are going to devalue against. The US dollar.
China is bleeding their reserves just proping up their stock market.
I believe the yuan is tied to the dollar. Wouldn't stemming the outflow of dollars hold up the exchange value of the yuan?
In a REAL world, you might be right... :-)
Currency Wars -> Trade Wars -> World Wars.
Dollar bulls you can give up. It is going to get smashed because of all the stuff you are saying. FOREX is not a market.
My company does a lot of trade with Chinese companies - both private and SOE.
Almost complete radio silence since the new year. I'm pretty sure something went out under the radar that dollars will not be provided for anything unless mission critical for PRC industry - tech or parts and the like.
I think dollar liquidity is much more pressing than realized.
A material segment of these "new" polices is from the Chinese stock markets collapsing last months and a handful of insiders moving their ill gotten gains to Las Vegas.
This is the old trench coat CCP Investigative Division closing ranks to stop some daughter of some millionaire from closing escrow on a Spanish Trails mansion.
Close everything down.
Require a thorough investigation Spring Time at Disneyland.
Seize a few Lexus.
Chabuduo.
It will shake out, but there is a meme out there to undercut the dollar as a verboten bankrupt currency.
Nobody is going to complain when oil is sub $45.
Thanks. I always appreciate your tremendous insight for China
Also the Chinses Peoples Army wants some tech and materials that will come from people who won't take Chinese Fiat they'll take US Fiat or gold.
I can't believe how screwy things have been over the decades.
When I was in China in 1994 as a tourist, the guide offered to have custom made "chops" or stamps with our name on each one. She insisted on being paid in dollars, not yuan.
Then for the following 20 years, I heard all these people (Jim Rogers) saying the dollar is going to die and that the yuan was going to appreciate in dollars and should be switching over to yuan.
Now all those gazillions in US treasuries backed by US fiat dollars are worth more than the yuan and the dollar is the sought after currency?
My head is absolutely spinning.
Until very recently I thought the Chicoms were playing a very deep monetary 3 diminsional chess game so sophisticated the Occidental mind could not grasp it.
Now I'm leaning towards they got their dicks slammed in the door than stepped into a bear trap, fell down the stairs and than a piano crashed down on their heads.
That's a riot.
And when they tried to get back up, they put their hand into a pile of dog poo.
i hate it when that happens
This illustration is not complete until an ACME anvil falls on the poor coyote's head!
Turns out, the Chinese are about as competent as Icelandic Banksters.
Wonder if they will start Silver Plating Gold Chain to get it out of the Country as a Export.
reverse counterfeiting anyone..
There must have been a lot of hanky panky going on if people who want to buy a house outside China must prove to the bank that the house and contract actually exists.
All drastic measures have more than one reason. Meanwhile the little South Australian town of Adelaide is getting a new Chinese consulate with 25 staff. I don't mind. In 20 years time we'll know all about it.
I once transferred US$300k for a medical equipment from Indonesia to Russia. My transfer was held up at New York Bank, which was a correspondence bank in the transaction, and delayed transfer for 3 weeks until I proved all transactions are real.
So what China doing is no big deal.
After all they are doing within their own country, unlike US Fed which butts into all international transactions.
There is actually 2 China. The communist China owns 3 trillion in us currency based assets.
The capitalist China owes somewhere around 5 trillion in us based debts.
They do not like each other. But both knows who is the boss.
If people's economy is affected, the capitalist will have no place to hide.
Communist China allowed the capitalist Chinese to do business in China as it was getting rich itself and common people also wanted it.
It is more like the Ukraine situation where President Yanukovich saw European capitalism as dangerous to Ukraine while common people wanted to try it.
China warned its people against capitalism but gave the freedom to try it.
All those who now suffer bankruptcy and non payment of salaries cannot blame the Chinese government.
There have been thousands of cases of riots and even beating up and kidnapping of capitalist bosses.
China Communist are in full control and enjoying the show of slow collapse of Capitalist system.
Those who invested in Chinese Capitalist companies better watch out,
That's an interesting theory(?). Seems like it might make sense.
For sure, the US's position, and the working of the Fed is forcing others' hands. Whether this will hold up until the end of the game is to be seen...
Okay, I'm sure I've got this completely wrong but it's not easy to get embarassed at ZH. So don't let that stop you.
It seems that most of the slowdown is in the banks converting yuan to dollars and then either wire transferring or issuing Letters of Credit in US dollars to foreign entities.
The writer does not tell us if the same slowdown exists with pounds or euros. The implication is that it is only in dollars.
We know that the yuan has been losing value for some time. The last I saw it was 6.58. At the end of January 2014 it was 6.06.
Dollar investment in China at the beginning of 2014 only bought 6.06 yuan. And if the investors want to repatriate dollars today, they will have to pay 6.58 yuan for a dollar. That is if their bank can find dollars to buy. And if they don't find dollars to buy, when they do find dollars to buy they could cost even more. 6.70 6.75.
The Chinese know EXACTLY what they are doing and no one on the planet does what they do better.
The Chinese got extremely pissed off at foreign investors (GS JPM) when they used their crude and obvious schemes to create a bubble on The Shanghai exchange
The Shanghai composite was 2026 on June 20, 2014. About the same time foreign investors were permitted to trade "A" shares.
It was 5166 on June 12, 2015, more than double a year later after Goldman Sachs, with the help of some Chinese firms, manipulated the market up so they could short it at the top.
Just like they did in Tokyo in 1989.
Except the Chinese were waiting for them.
They hadn't read the rules about listed companies being able to suspend trading in their shares.
They hadn't thought that in this global slowdown that Beijing would drop the bottom out of the yuan to capture the export business.
Meanwhile the stocks are still suspended and the yuan is still dropping. When they do get sell out of their shares, it will cost them more yuan to buy a dollar.
I don't know if China is threatening the world with recession because of the filth that runs and has run Goldman Sachs, but it wouldn't surprise me if they were.
Lol the Chinese govt still thinks their US trade suplus is still in China, it leaves there faster than it leaves the US
Would China, or anyone, rather have physical gold or other hard assets (African, Australian or South American) rather than fiat US paper ?
China has been spreading currency around the world for the past five are so years as a alternitive to doing trade in dollars.
Nobody in chinese government was paying much attention to that because they thought it was all free money. Then suddenly they found out it wasn't free money at all because all those foriegners they had dumped chinese currency on wanted to change it into dollars.
Now they have to deal with both the large drain on dollars caused by conversions and the fact they have 10s of billion of dollars in current trade linked to these deals that will increase need for conversion into dollars going forward.
When China did all its trade in dollars it kept a INHERNETLY CORUPT Chinese system somewhat honest. Once they tried to end run dollar trade things quickly spun out of control.
China's economy is slowing down and stock market is collapsing. It will not be surprising to see some Chinese as seeing holding their money in US$ as a better bet than holding it in CNY. China has a per person limit of US$ 50,000/per year to convert their CNY into foreign currencies. It takes no more than 60 million panicked Chinese to wipe out China's entire forex reserves. The recent manipulation of the offshore Yuan down by currency speculators was intended to create that panic. China has successfully stopped the panic into spreading by shoring up the offsore Yuan by using the forex reserves, but cannot defend if a similar panic is created in the onshore Yuan. Reducing the per capita limit will aid and not arrest the panic. So China has to ensure their forex reserves depletion is not the result of any panic.
Of course, China will forever be subject to this kind manipulation unless it can kill the US$ off, which is on the cards anyway, with a gold-backed electronic international currency to be issued by the New Development Bank to replace the US$ for international payment settlements. After that happens no one will be able to manipulate other fiat currencies, by manipulating one's own. At that point, China may actually lift all capital controls and allow Chinese to convert their Yuan into any foreign currency they please, since there will be no attractive fiat currencies any more and all capital outflows will be investment related.
So why can't China just use its foreign reserves to recapitalize its banking system? I suppose the yuan would collapse, making capital flight worse, so you wind up with a downward spiral. Central bankers seem to be very good at creating black holes. Maybe they should go into particle physics.
capital controls is what any suvereign country has to implement
it is like customs controls on the borders
That's the problem with musical chairs, it's all fun and games until you get down to the last few chairs. You don't want to be the last one standing holding the bag.