The More China Tightens Grip, The More Capital Flows Out

Bloomberg: China Unleashes New Steps to Control Financial Risks, Outflows

Moving to plug one popular way for moving money out of China, the currency regulator is imposing restrictions on buying insurance products overseas, people with knowledge of the matter said Tuesday. Purchases of insurance products overseas using UnionPay debit and credit cards will be capped at $5,000 per transaction effective Feb. 4, according to the people.

Some of the new measures are the exact opposite of what one might expect:

Shang Fulin, chairman of the China Banking Regulatory Commission, told an internal meeting last month that banks would be forced to restructure, inject new capital or change their senior management if key risk indicators fall outside "reasonable ranges," people familiar with the matter said Tuesday. Those indicators include bad-loan coverage and capital adequacy ratios, Shang told the meeting, the people said.

Kiss lending growth, and GDP growth, good-bye if banks follow this order. Or expect massive dilution in the stock market.

When enough exits are closed, money will flow into gold. It is already beginning. China’s Gold Imports From Hong Kong Jump to Highest Since 2013