Chinese banks cause alarm as capital flight measures intensify

EXCLUSIVE | Chinese nationals living abroad are growing concerned about long delays to access funds held in Chinese banks.

“Prior to 2020 and the pandemic, it was not a challenge to withdraw money, now we are told to wait for days because of unknown delays and the branches have no staff, so there are long lines from early in the morning,” said one Chinese national living in Australia on the Chinese social media network, WeChat.

Contacted by Asia Markets, the student revealed she had been unable to withdraw or transfer any cash to the local currency so far in 2023, and has been forced to rely on digital payments.

“Officially we have been told of no changes, but everyone is experiencing trouble [with Chinese banks] recently.”

Asia Markets was supplied an image of a long queue of customers at a Bank of China branch on Wednesday March 1 at around 7.30am local time in Melbourne, Australia, supporting the claims.

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An early morning line up at the Bank Of China in Melbourne, Australia (Image: Supplied)

The tightening grip on foreign retail customer withdrawals from Chinese bank accounts comes amid increased pressure by the CCP on financial institutions to limit foreign capital flight.

In the final quarter of 2022, China recorded net capital outflows of US$16.75 billion, according to data from the State Administration of Foreign Exchange.

The Administration’s data shows that almost immediately, as the COVID-19 pandemic caused panic in 2020, the country went from net capital outflows to inflows. The October to December 2022 period was the first quarter of net capital outflows reported in China in two years.

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CCP pressure mounts to restrict capital flight

While there has been no offical recent policy moves to restrict Chinese nationals withdrawing funds in foreign countries from retail accounts, the CCP has publicly announced moves to impede mainland Chinese investors shifting capital into foreign stocks.

New regulation that prevents some brokerage firms from opening new accounts for mainland residents came into affect this week, after first being announced by the China Securities Regulatory Commission in December last year.

Popular brokerage companies such as Tiger Brokers, the Tencent-backed Futu Holdings, and Hong Kong-based Bright Smart Securities have been impacted.

“Without brokers like Futu, I do not have any other way to speculate on US stocks,” a Guangzhou-based civil servant told the Financial Times.

According to the Times, the move would “seal off one of the few remaining loopholes” in China’s strict capital controls.

Bright Smart Securities announced on February 13, it would be suspending the trading accounts of Chinese mainland clients from February 16.

The firm requested clients withdraw all funds by that date.

Institutional investors growing concerned too

As the CCP seemingly extends its power to prevent capital flight, institutional investors are growing concerned.

Veteran Emerging Markets investor Mark Mobius this week revealed he’s been unable to withdraw money he has in an account with an HSBC branch in Shanghai.

His experience, outlined during a Fox Business interview, is strikingly similar to the Chinese nationals who are reporting difficulties withdrawing funds while living abroad.

“I have an account with HSBC in Shanghai, I can’t get my money out. The Government is restricting the flow of money out of the country,” said Mobius.

“I can’t get an explanation of why they’re doing this, it’s just amazing, they’re putting up all kinds of barriers. You know, they don’t say you can’t get your money out, but they say give us all your records from [the past] 20 years of how you made this money, it’s crazy.

“I don’t think it’s a very good picture when you see the Government becoming more and more control orientated.”

Meanwhile, China’s ruling party is intent on attracting inbound foreign capital.

It was announced on Friday that more than 1000 stocks listed on the Hong Kong, Shanghai, and Shenzhen stock exchanges would be added to the Stock Exchange of Hong Kong Stock Connect platform.

Hong Kong Stock Connect allows international investors to invest in Chinese A-Shares, via Hong Kong.

The expansion brings the total number of Chinese companies available on Stock Connect to 3,623.

“This is a year of exciting enhancements for Connect as we continue to work with our stakeholders to deliver a host of other important initiatives that will further enhance the attractiveness of both Hong Kong’s and Mainland China’s capital markets. We look forward to updating the market in the coming months, connecting China and the world,” said Hong Kong Exchange CEO, Nicolas Aguzi.

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