TL;DR: Trade wars between governments can often come across as abstract, the battle of high finance as being irrelevant to ordinary people. However, a recent viral video (since taken down) showed a visibly upset woman at a bank in China angered by not being allowed to withdraw US dollars. According to regional press, the country’s central bank, People’s Bank of China (PBOC), instituted stricter capital controls in anticipation of hostilities with the United States, and the impact is beginning to trickle down.
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For the lot of free market economists, trade wars, tariffs, and capital controls are anathemas to healthy financial arrangements. They arbitrarily impact voluntary, organic decisions, and act as perverse incentives. For politicians, they’re ways to rally bases, consolidate voting blocks, and focus domestic populations upon perceived foreign enemies.
The battles at these levels can get rather high falutin’, and appear to have little to do with daily life for the average person. It often isn’t until regular folk are directly impacted that such events and policies become real. And there is nothing quite like the realization what you previously imagined was “your” money turns out not to be the case. Those colored tickets you’ve traded for labor or time actually belong to the governments who issue them, and therefore are subject to complete control.
It’s not so much that fiat users don’t ultimately understand this most basic premise of economics. It’s more about how sometimes it takes a viral video moment to really begin understanding the deep connection between censorship and money, something cryptocurrency enthusiasts are all to familiar. Recently, a woman in China entered a popular merchant bank to withdraw a seemingly modest amount of US dollars from her account. When the teller refused, the woman became “furious,” according to reports, demanding to know why she wasn’t able to make this simple transaction.
“The client was so incensed by the refusal that she filmed the incident on her phone at the unidentified branch of China Merchants Bank (CMB),” South China Morning Post recounted. “She also asked why the bank insisted she could only withdraw her US dollar savings by converting into yuan, the Chinese currency. The cashier seemed caught off guard, unable to address the woman’s questions. It later emerged the woman had been placed on a ‘watch list’ of customers making frequent withdrawals,” they explained.
The word from China’s central bank, according to sources who wished to remain unattributed, is limits on foreign currency withdrawals are being tightened from a previous high of $5,000 to $3,000 — a policy supposedly in place since late last year, but kept quiet. Hitting that new number triggers a so-called scrutiny benchmark, and unless good cause can be shown for absolutely needing more than $3,000 in a single transaction, holders of USD will be denied.
The Trump administration of late has become ever more belligerent in the Chinese government’s eyes, regarding trade and tariffs. Though rhetoric and duties have been pushed back and forth for almost a solid year between the two sides, China believes Trump’s resolve might be less concessionary in tone heading toward the 2020 US presidential election, meaning a protracted and deeping trade war remains a likely possibility.
The yuan is not allowed on foreign exchange markets, which helps the PBOC stem what’s known as the risk of capital flight. The annual foreign currency threshold total appears to be $50,000 in withdrawals for domestic Chinese. For the cryptocurrency community, the entire affair is yet another example of who owns money and the dangers of allowing often capricious and arbitrary rules. International equities markets dipped slightly on the news more monetary controls were being implemented by China. Broader crypto markets have been inching up in recent days. There doesn’t appear to be consensus by analysts as to whether there is any connection.
DISCLOSURE: The author holds cryptocurrency as part of his financial portfolio, including BCH.
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