Yet more evidence no one wants to hold RMB (and the RMB isn’t really undervalued)

China is (once again) tightening up its controls on capital inflows, and loosening its controls on capital outflows.  Forbes: 

“The regulator has for several months been tightening up its supervision of short-term capital inflows and loosening up capital account controls on outflows as it fights off a wave of speculative funds betting on yuan appreciation.”

Clearly, no one wants to (voluntarily) hold RMB in the Chinese banking system.  

Yeah, right. 

That is why China is holding domestic interest rates below US rates.

And desperately trying to discourage folks from moving funds into China …

For whatever reason – expectations of RMB appreciation or confidence that the government of China will stand behind its banks – there is no shortage of demand for RMB right now.   

I have a suspicion – based entirely on the renewed talk of speculative flows and new measures to tighten inflow controls – that China’s August and September reserve growth will be quite impressive.  SAFE certainly seems to think that some exporters are gaming the system in order to get money in more quickly …