I’ve got a large CD coming due in the U.S. in May that I’m considering converting to RMB. I don’t have a good handle on all the currency and legal issues but what I’m considering doing is going to Hong Kong and swapping with a Taiwanese businessman I know who’s interested in converting from RMB. I’d open an RMB-denominated savings account in a Hong Kong bank.
Does anyone have any advice on the mechanics, legalities and timing of such a plan?
Thanks
not sure about this, but take care that you manage the way back. selling the rmb might be the challange. i heard you can only swap rmb 100.000 at the time (non-convertible currency) and they will ask questions… especially if you cannot show the receipt of the original purchase. even if you have a receipt there is also a time-limit of max. one year. i guess you speculate for the rmb to float against the us dollar, so cross your fingers that the event takes place within one year. there is no free-lunch.
treat this info with skepticism, as it is also second hand to me.
As the current RMB rate is fixed and pegged to the US$ with almost no movement, then this does not seem to make any investment sense, there seems little chance of any profit, with potential problems getting out of the holding.
Only way this could work is by buying at less than the accepted exchange rate so that conversion back would provide the profit, but why isnt the TW businessman not doing this, unless the money is shall we say a little dirty.
Traveller,
I think his/her idea is in anticipation of a revaluation of the RMB.
CK
CK, then in that case he wont be making much if anything, Exchange is fixed centrally by Chinese Governemnt and pegged to the greenback. Only a change in policy currently not likely, despite pressure from the States will change it, and then the wrong way if holding RMB.
wrong traveller! if the RMB will float against the USD, then the rambos will certainly gain value (talk in the street is about a 15 % immediate gain). so in that way it makes sense to hold RMB, but as I mentioned in the above post it’s not without risk as the downside is possible trouble at the time spook wants to unwind the deal…
Easy now. Before taking any sure-fire bets, then remember that the smart investment people in Asia thought that the RMB would go down if the peg got losened, and that the Chinese were on the verge of devaluating.
Talk on the street is very often wrong, and given that it’s relatively hard to get out of the investment in case it does not perform as expected, I would be very careful.
Actually, the US dollar is at a low point and will continue so for the next couple of months. If you keep your greenbacks for a few more months as the recovery in the US gains steam, the US$ will rise, and you will stand to gain relatively to most other currencies - NT$ included. If it rises a lot, and currencies, stockes etc otfen overshoot and/or undershoot, then there will most certainly be talk of a RMB devaluation 
.
Huh? Pretty much everybody I know in banking or investment agrees that the RMB is currently undervalued; most of them believe by about 15%. This is not just street talk. Why do you think so many politicians in the States are blaming the US trade deficit with China on the cheapness of the RMB? Of course, whether or not the low value of the RMB has anything to do with the trade deficit is an argument for another thread.
Most people I talk to believe that there is no chance at all of the RMB floating in the next decade. However, there is a very good chance that Beijing will bow to pressure in the next couple of years and re-peg it at a higher rate; a new peg might include a slightly larger range for fluctuation. That’s of course assuming that it is still undervalued; a lot could change in the Chinese and world economies in the next year or two.
OVER THE NEXT COUPLE OF YEARS!
That’s a hell of along time to wait for a say 10% return before transaction costs. If it happens in 2008, the return will be minuscule on an annual basis, and buying a US index would offer greater upside potential while putting your money on one of the most stable and secure econimies in the world.
Pretty much everybody in “the know” believed firmly that China would devaluate. I saw that sentiment aired as late as 2001.
The crowd is often wrong, remember what the smart savvy investment people say about SE Asian economies until early July 1997.
Wouldn’t you agree there’s sustained upside pressure on the RMB though? And I’d keep the money (US10K) in a Hong Kong bank interest-bearing long term account probably yielding interest equal to or greater than that available in the U.S.
Conversely, the long-term support for the dollar appears to me to be weak. If the BOJ were no longer able to sustain its current level of buying of US Treasuries wouldn’t that alone put downward pressure on the dollar?
If I can find a HK bank paying reasonable interest on an RMB-denominated long-term deposit account I don’t see any clear downside as I’m trading for a pegged currency that’s tracked the dollar’s downward slide.
If you can indeed open an account in RMB in HK with minimal transaction costs, earling a bit of interest, then OK. At least you can get the monies out, when the gurus in the know start talking about RMB devaluation again.
But that’s the thing – the talk is just politics as usual. Even if the cost of Chinese goods shot up, they would still be so much cheaper than American-made goods that there would still be a trade deficit. In fact, it would probably be even larger because the USD wouldn’t go as far when buying Tickle-Me-Elmos and microwave ovens.
But that’s the thing – the talk is just politics as usual. Even if the cost of Chinese goods shot up, they would still be so much cheaper than American-made goods that there would still be a trade deficit. In fact, it would probably be even larger because the USD wouldn’t go as far when buying Tickle-Me-Elmos and microwave ovens.[/quote]
I wasn’t making the argument that the low exchange rate for the RMB is the cause of the trade deficit. You should read the last sentence of my post.
Considering that very few inputs are actually paid for in RMB, it makes no difference at all for the US trade deficit if the RMB is valued at 8:1 or 5:1. Our factory makes speakers, microphones and headsets. 80 to 85% of the selling price is usually materials costs; almost all of the materials are imported and paid for with US$. The material cost/value-added of most factories over here is about like this. The only thing paid in RMB is labour costs, light, gas and water and bribes (and some of these greedy bastards over here in Dongguan actually insist that their hongbaos be in US$!). Even if the RMB floats or the peg is adjusted, Chinese labour is going to be dirt cheap.
Nevertheless, the RMB by most measures is currently undervalued. Politicians latch onto this as if it really matters and try to use it as ammunition.