Assets within China face severe liquidity constraints.

Chinese residents hold 300 trillion RMB in real estate and nearly 170 trillion RMB in savings, but domestically, there are only 3.4 trillion USD in foreign exchange reserves. These trillions of dollars are our lifeline and will be fiercely guarded. If the exchange rate collapses, the consequences would be immeasurable.

Capital controls are about protecting the exchange rate, protecting domestic asset prices, and maintaining social stability, ultimately for the sake of security.

For ordinary people, capital controls represent a "zero-sum deadlock" or a "vicious money-grabbing game."

Remember the 1998 Russian financial crisis when the ruble plummeted. Many residents couldn't withdraw their US dollars from banks because the banks had no foreign exchange; it had been divided up by the government and powerful interests. In the end, banks settled with the people in rubles at the official exchange rate, and some banks simply went under.

The foreign exchange held by Chinese residents in domestic banks is also not safe; it cannot be used for overseas investment, only for consumption, which is another form of liquidity constraint.