...there will be a three-day suspension of domestic renminbi transfers. There will also be a suspension, spanning nine calendar days, of conversions of renminbi to foreign currency.
Currency controls = instability
...It is not credible that during the highest usage period in the year—the weeklong Lunar New Year holiday beginning January 31—the central bank would schedule an upgrade and shut down cash transfers.
Surprising that Forbes would allow something like this to be said.
A better explanation is that the country’s banking system is running dry.
...This crunch follows similar incidents in June and December of last year. In June, for instance, the central bank used the excuse of a “system upgrade” to allow banks to shut down their ATMs and online banking platforms. As a result, they conserved cash and thereby avoided a nationwide meltdown.
So today’s “system maintenance” notice is a sign of a fundamental problem.
Banks, in short, need cash to rollover ever-increasing amounts of nonperforming loans and wealth management products. This month, cash needs are even higher than normal because of the impending default of the Credit Equals Gold wealth product scheduled for January 31. Analysts are worried that the failure, if it occurs, will cause a China-wide panic.
...The suspension of FX transactions means that speculators will not be able to dump renminbi and buy dollars.
= value of US dollars go up?
...China does not have a foreign currency crisis. It has a domestic currency one where dollars, euros, pounds, and yen are not much use.
Banks are evidently scrambling for cash.
They have, in the past, resorted to desperate maneuvers at the ends of calendar quarters to meet regulatory requirements...
Like Lehman's Repo 105's?
Something is very wrong in China at the moment.
Banks’ apparent need to conserve cash, coming just weeks after the last incident, looks ominous."