"David Riedel of Riedel Research Group, told CNBC that while investors need to "worry about the health of the banking sector," the Chinese government's 20 percent reserve requirement for the banks and $3 trillion of foreign exchange reserves are " two strong pillars of support ."
But using the foreign exchange reserves to recapitalize the banks could have nasty unintended consequences. Smead said they'd have to convert their U.S. Treasury holdings to yuan and "explosively increase the money supply." "
If China dumps a bunch of US debt back on the market, yields will rise and rates will skyrocket.
Citibank Caught In China Cash Crunch, Not Making Money Transfers
"Both ICBC and Bank of China are known to be cash-tight. On June 20, Bank of China had to issue a statement that it had not defaulted on its interbank obligations, and Caixin, the Beijing-based financial news provider, reported that some of the bank’s branches had stopped lending.
So it appears that the “systems upgrade” stories used by Chinese banks are ruses. Does that mean Citibank, a unit of Citigroup C -0.64% Inc., is also short of cash in China because it has issued notices with the same excuse?"
More of the currency exchange issue. So much for having 65% of your revenues coming from overseas.