Chinese Herd Crashes Online Banking System in Hunt for Dollars

About 6 months after the offshore renminbi experienced a surprised depreciation in 2011, there were articles about hoarding U.S. dollars. There have been articles as far back as a year ago, here's a January 2015 post: Do You Plan to Hoard Dollars?, but no herd.

Not anymore. The system for buying U.S. dollars at Chinese banks was paralyzed by surging demand this week: 汇率贬值下的理财众生相：抢外汇致网银系统瘫痪

RMB rapid devaluation caused uproar in the investment market, the Shanghai and Shenzhen Bank , Port currency exchange shops also emerged a boom in foreign exchange buying. Shangzheng Bao reporter recently in Shanghai, Shenzhen, visited a number of banks found that banks purchase foreign exchange surge in demand, and because of the sudden emergence of personal focus on the use of online banking to purchase foreign exchange, some banks even admitted online banking system failure, slow operation and other issues.

In a further devaluation of the RMB concerns, although some people rush to convert yuan into US dollars , Hong Kong dollars and other currencies, but reporters found that most people just after the exchange of foreign currency funds deposited in foreign exchange accounts of mainland banks, but there are some who will funds turn to China's Hong Kong, purchase of insurance and financial products, and some go abroad seeking funds to purchase real estate .

This isn't even the full force of the herd.

Buying foreign currency

In Shenzhen, the Bank of China, China Merchants Bank, Industrial and Commercial Bank of China, Ping An Bank and other banks Sales Account Managers have told reporters that the recent customer can clearly feel the strong demand for the swap. "In our customer VIP room, foreign exchange for U.S. dollars accounted for a large part, in addition I also received a lot of advice to purchase foreign exchange business calls a day. "Merchants Bank account manager surnamed Li.

ABC , a lobby manager of a sales department in Shenzhen, said the purchase of foreign exchange has always been busy at the beginning of the season, because of the new year, the purchase of foreign exchange quota empty out, but this year, "the busy season" was somewhat scary. "More than half of the customers I received this morning purchased foreign exchange." Bank lobby manager, told reporters, "to purchase foreign exchange business customers included all ages, to purchase foreign exchange counter is mainly used to pay overseas tuition, Some are used to pay for the import and export of goods and services, there are some people because there is no open online banking. "

Since the purchase of foreign exchange is too hot, some banks take a number of restrictive measures, ICBC Shenzhen business department sources said the recent emergence of some customers to purchase foreign exchange counter also more frequent phenomenon, for too frequent swap behavior, banks will in order to counter the grounds of insufficient inventory, inadmissible. In addition, for the purchase of foreign exchange demand "overseas investment" category, the banks will be to refuse to handle.

A joint-stock bank in Shanghai, the reporter found that, for the purchase of foreign exchange operations, the following can be directly converted $ 5,000, more than 5000 US dollars will need to make a reservation in advance. And a maximum of $ 10,000 to purchase foreign exchange, in one week can only purchase foreign exchange three times.

In addition, the reporter found a number of banks, the purchase of foreign exchange demand for small denominations, bank to purchase foreign exchange for clients use the review is not strict, customers only need to provide identity cards, no bank card to purchase foreign exchange in cash, a bank Shanghai The purchase of foreign exchange confirmation purposes actually is automatically generated as "non-official travel . "

It is worth noting that a number of bank staff to reflect, go to the counter to purchase foreign exchange business are mostly large enterprises and purchase of foreign exchange, the individual purchase of foreign exchange is also very popular recently, but the individual purchase of foreign exchange, mainly through online banking to complete. In fact, recently a number of banks online banking system is "trashed" appears slow functioning, communication failures and other problems.

The article goes on to discuss expectations for RMB devaluation, futures hedging, etc.

FT: China steps up capital controls to stem outflows

China is ratcheting up ad hoc capital controls to stem accelerating capital outflows, with banks restricting dollar purchases amid fierce demand from households and companies.

The foreign exchange regulator has provided verbal guidance to banks in Shenzhen instructing them to limit dollar buying by individual and corporate clients, according to a person with knowledge of the situation.

The FT report says demand spiked in Shanghai and Shenzhen, so this is the vanguard of the herd, not the herd itself.

If the Chinese continue to restrict dollar buying, some money will leak into Bitcoin, but I suspect the place where most will flow into is gold. A gold spike amid a roaring U.S. dollar bull market/global deflation/yuan devaluation was always contingent on Chinese choosing the precious over the greenback. Watch the yuan price of gold, if it stays in an uptrend, herd buying could follow. Although I believe a drop below $1000 is quite possible in USD, heavy Chinese buying will put a floor on the price. The government may eventually see the wisdom of steering Chinese into gold as an alternative as well...