Beijing Slows Capital Flows, Gold and Bitcoin Jump

SCMP: China may tighten capital controls as yuan outflow continues
Money is leaving China’s shores at a faster clip, as more citizens and companies rush to get their currency out of the country before the yuan’s value deteriorates faster.

The average daily turnover of China’s foreign exchange market reached US$34.2 billion as of December 19, 12 per cent more than the US$30.5 billion daily average in November, according to research by investment bank China International Capital Corp (CICC).

...The Chinese government is likely to “throw sand in the gears” and create friction in capital remittances such as scrapping or adjusting the annual US$50,000 individual foreign exchange swap quota, CICC analysts said, instead of imposing hardline capital controls.
CICC analysts see a line in the sand for Chiense reserves:
China’s foreign exchange reserves are adequate and won’t be a threat to external payments as long as they remain above US$2.6 trillion, CICC said.
These road blocks are having an effect because Chinese are already finding ways around them. Bitcoin is rallying:
Gold on the Shanghai Gold Exchange trades at a premium, 2.7 percent as of today, or $30 an ounce. It's down from a peak above $40 an ounce.

Reuters: Shanghai Gold Exchange cuts transaction size to limit price moves
Shanghai Gold Exchange, the world's biggest physical bullion exchange, said on Wednesday it will curb the amount of gold investors can trade at one time, a move analysts said would limit institutional investors' influence on prices.

The exchange said in a statement it will halve its limit on transactions to 500 kg on some spot gold contracts starting Jan. 1. It did not give a reason for the move and the exchange did not answer calls seeking comment.

The new limit, which would be worth more than $20 million based on current prices, suggests the move is targeted at institutional investors, such as banks and hedge funds.

The move does not affect the amount traders can sell or buy in any one day, but it would likely force traders to carry out big transactions in multiple moves, reducing the potential for "fat finger" erroneous trades or preventing big investors from carrying out rapid-fire buying or selling to influence prices.

It may also drive up the transactions costs.

Turnover in the exchange has soared as Chinese retail investors' appetite for gold as a safe-haven investment has increased. In November, volume hit 3.4 million kg, the highest monthly total so far this year.

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