From: zeng@Apple.COM (Tie Zeng)
Newsgroups: misc.invest
Subject: Re: Chinese Currency (Was: Re: Long-term direction of the dollar)
Date: 4 Sep 92 08:21:43 GMT
Organization: Apple Computer Inc., Cupertino, CA

In article <23086@sybase.sybase.com> coop@sybase.com (John Cooper) writes:
>In article <1992Aug29.121249.12917@athena.mit.edu> joe@athena.mit.edu (Joseph C Wang) writes:
>>
>>First of all, there doesn't seem to be a major lack of confidence in
>>the Renminbi.  The exchange rate on the black market is only slightly
>>higher than the official exchange rate.  (Black market rate is
>>6-7RMB=$1 and official rate is about 5.5RMB=$1).  Also the exchange
>>rate for RMB in commerical transactions is set by "swap center"
>>exchanges instead of by the government, and these "gray market"
>>exchange rates match the "black market" exchange rates closely.
>
>
In Guangzhou, Black market rate is as high as 9RMB=$1. I don't
think it has anything to do with confidence though. The economy
is growing rapidly and people has lots of RMB. And  people
want to have foreign currency to buy things that could not
be bought with RMB .   Also, some of the bussiness man from
places like HongKong make lots of maney in doing bussiness
in China. But only part of their profit can be exchanged
to Foreign currency to mail out of China. Sometime these people
just  exchange the profit from RMB to forein currency at black market.

>While the Chinese economy is probably not in trouble, I don't know that the
>above figures prove confidence in it.  First of all, the fact that a black
>market exists at all seems to me to be a poor sign of confidence.  It doesn't
>simply mean that the economy is weaker than someone else, otherwise we'd see
>a black market between, say, Spanish pesetas and French francs.  It's a sign
>of general feeling that the money is worth so little that extra premiums have
>to be paid just to get people to buy it.
>
>But more than that, speaking from personal experience, I don't think the above
>black market rates are that low.  In 1986 I was in the former Yugoslavia, and
>a couple of times I traded my money on the black market there (one of them at
>an official state bank!).  The premium offered to me was about 10-15% over the
>official exchange rate if I remember correctly -- at any rate, it wasn't so
>much that I was reaping in the profits.  This really wasn't any better than
>what's posted above for China.  While Yugoslavia was at the time doing better
>than any of the Warsaw Pact nations, it was hardly an economic powerhouse;
>I doubt that people would have had even as much confidence in it as in China,
>let alone more.  Now, maybe I was ripped off.  Afterall, I was just a naive
>Western tourist.  But if the need for dollars was really that strong, I would
>expect to have had competing offers constantly approach me.  That was not the
>case.
>
>
>--
>John Cooper                               | My opinions, may not be employer's.
>Sybase, Inc.                              |
>                                          | "If you don't like the news go out
>sybase!coop@sun.com                       | and make some of your own."

--------T. Zeng

Newsgroups: misc.invest