Large Capital Outflow in August; Initial FX Buying Wave Was Tourists and Students, Not Investors

Reuters: China banks' Aug net FX sales jump to $127 bln, show outflows rising
China's banks sold a net 807 billion yuan ($126.8 billion) of foreign exchange on behalf of clients in August, up sharply from July's 174 billion yuan, reinforcing signs of increased capital outflows in the wake of a surprising currency devaluation.

Commercial banks sold a net $43.5 billion in foreign exchange settlements last month, taking into account their own foreign currency purchases, data from the State Administration of Foreign Exchange (SAFE), the country's foreign exchange regulator, showed on Thursday.

Earlier data showed China's central bank and commercial banks sold a record 723.8 billion yuan ($113.69 billion) of foreign exchange in August on a net basis, highlighting how capital outflows intensified.

The central bank said it sold a net 318.4 billion yuan worth of foreign exchange in August.
ZeroHedge adds some color with China Outflows Said To Surpass A Staggering $300 Billion In Under Three Months. From a GS report:
We think this suggests that banks used their own FX position (i.e., without resorting to PBOC's FX reserves) to absorb part of the outflow pressure.
There were a lot of stories in Chinese financial media about hoarding dollars back in 2012. Those stories came several months after the offshore yuan depreciated in late 2011. Depreciation pressure on the yuan is far greater today and the "street" still hasn't shifted its expectations, in fact the media is pushing the other way by highlighting interest rate disparities.

Because at the same time taking into account the exchange rate factor, we should not forget that the interest rate factors, the current bank rate of return financial products is not high dollar. Therefore, we recommend investors try to choose a relatively high returns of fixed income products, without aggressive asset allocation. Reporters visited the commercial banks understand that the six-month US dollar deposit interest rates of only 0.5 percent, one-year non-guaranteed US financial products average expected return rate is only about 2%. The first half of the average earnings of all the bank's financial products rate of 4% to 6%. There are financial planners believe that the renminbi wealth management products higher than the foreign currency investment income, enough to absorb the risk of devaluation of the RMB minor.
You'll only get 0.5% to 2% in US dollar products, but 4% to 6% in RMB products. Except the yuan depreciated 4% in August, so the dollar is already as good a buy as the RMB.

Another article sees demand heating up. One factor driving the buying is people making advance purchases. Overseas students and tourists, for example, are buying much more foreign currency than usual in case there is further depreciation. If depreciation does end, this is a one-time hit, but if depreciation expectations firm, we haven't yet seen the type of buying that will come from ordinary Chinese investors.

Sohu: 人民币忽升忽跌 还要“囤外币”吗?
In fact, the recent volatility of the yuan, has been on many people's lives impact. In particular, the continued depreciation of the RMB, so many people have decided to advance the needs of "hoarding foreign currency", so the banks have recently ushered in a wave of "buying forex."

"Devaluation, which means the same foreign currency exchange, it may take more the yuan. In US dollars, for example, now for $ 10,000, may be necessary than before August, spend a few thousand dollars, so recent Many people fear further depreciation of the yuan to purchase foreign exchange. Last month, the bank's purchase of foreign exchange we have a large amount of rise. "downtown a state-owned bank foreign exchange management staff of the Ministry told reporters.
With the continued devaluation of the RMB and foreign currency wealth management once disappeared, she began to heat up.

"These foreign currency financial products, before basically nobody cares, who will now be consulting more gradually." In the City Bank of a network, a financial planner told reporters.

Reporters learned that the foreign currency deposit rates are generally very low, foreign currency financial products, too, are generally annual yield of around 3%; while the lowest renminbi financial products revenue also more than 3.5%. So, people prefer to choose renminbi financial products. With the recent devaluation of the yuan, many people began to sights on the foreign currency financial products. The reason is simple, in the current context, can be obtained in addition to their own foreign currency financial gains, but also possible to obtain an additional "exchange rate changes" proceeds. For example, within the investment period, the currency of one percent appreciation of the renminbi, it would mean an additional 1% of earnings, overall earnings or can exceed RMB financial products.
It also explains how new regulations can crimp outbound investment by ordinary Chinese:
At present, China's annual per citizen swap requirements are no more than 50,000 US dollars. To buy a house in a foreign country, then $ 50,000 is clearly not enough. Previously, there was general practice is to find some relatives and friends, "the trouble." For example, I need $ 500,000 to buy a house, a person can only purchase foreign exchange for $ 50,000, looking for 10 relatives and friends to help, will be able to purchase foreign exchange to a total of $ 500,000; are stored in my account, a US housing money will He lobbied, which is also called "ant" type of purchase of foreign exchange. But the implementation of new regulations, which probably would not work.

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