Posted on 09/09/2009 12:41:14 AM PDT by bruinbirdman
China will issue sovereign bonds denominated in its own currency to offshore investors for the first time this month – a crucial step towards making the renminbi a global currency.
The country’s finance ministry said it would issue Rmb6bn ($879m) of bonds in Hong Kong on September 28, in a move to “improve the international status” of the currency and to help mainland companies raise funds in the offshore bond market.
“While the amount is not large, this is a significant development for the internationalisation of the renminbi and for the development of the Hong Kong bond market,” said Wensheng Peng, an economist at Barclays Capital.
Beijing has taken a number of steps in the past year to encourage greater use of the renminbi in international transactions, beginning a process to decrease its dependence on the US dollar. Senior government officials, including Premier Wen Jiabao, have expressed concern that the value of the dollar will decline, which would erode China’s $2,100bn in foreign exchange reserves, mostly held in US government bonds.
Beijing has signed deals since December with Malaysia, South Korea, Belarus, Indonesia and Argentina that allow it to receive renminbi instead of dollars for its exports to those countries.
In July, China began a pilot programme that expanded renminbi settlement agreements between Hong Kong and five major trading cities on the mainland, including Guangzhou and Shanghai.
But developing an offshore bond market will be crucial if the renminbi is to become a truly global currency, as it would provide foreign institutions with an attractive means with which to hold the renminbi.
The process would take time, said Frederic Neumann, regional economist at HSBC in Hong Kong, but issuing government bonds was an important step. He said the market in government bonds would help set the benchmark “risk-free” interest rate for renminbi debt, paving the way for further issuance by mainland companies.
Five state-owned Chinese banks, including Bank of China and China Construction Bank, have issued renminbi bonds in Hong Kong since 2007, when the government started to allow the deals. Earlier this year, HSBC became the first foreign bank to issue renminbi bonds in the territory.
The ChiComs might try making the Renminbi a convertible currency first. And let some ChiComs take yuans out of the country. In fact, they might just try using a single currency. Or a single stock market.
They might try not pegging the communist RMB to the almighty Greenback.
yitbos
Not sure what you mean... I take RMB out from China regularly, spend it in Japan, Thailand, Singapore, South Korea, even Taiwan.
My HSBC account has RMB, USD, GBP, EUR, and JPY denominations with seamless transfer of funds between currencies (deposit RMB, pull out EUR in Germany, or GBP in London).
It’s already a portable currency, and there is only a single currency - the Renminbi, commonly called the Yuan or the Kuai, just like the US Dollar is call the buck or the greenback.
There's talk already in China of another "correction" of the exchange rate, down to 6.2 RMB = 1 USD or so. It's allowed to float over a very small range (much like the HKD), but there's growing pressure from banks and investment firms inside China to adjust the RMB exchange rate again.
Of course, manufacturers and exporters want to keep it where it's at, fearing a drop in revenue if the RMB gains against the USD.
As long as the U.S. allows China to parlay the existing situation into a PR coup, the Chinese can do and say pretty well anything they want to continue influencing the markets. The extremely subservient nature of the public American approach to this issue spanning now two administrations is utterly mystifying.
Note that I said, "And let some ChiComs take yuans out of the country."
ChiCom slaves are paid in yuan. The Reds have a special stock market only for domestic "yuan".
Remninbi is their international "currency" backed by the full faith and credit of about $2.1 trillion greenbacks.
The ChiCom international trade is virtually monetized in greenbacks. The renminbi is pegged to the buck.
yitbos
Yuan and RMB are the same thing. It’s the difference between a buck and a dollar. One is just a common used phrasing and one is the official name of the currency. They are not two different currencies.
That's one of the reasons the ChiCom currency is not convertible.
In Red China, on the black market, how many yuans for a buck?
yitbos
Just because something is price controlled by the government and fetches a different price in the black market doesn’t mean the thing itself is different.
It’s the same piece of paper currency. They aren’t printing two different types of money.
That's what the Commies would like you to think. That's a reason they are cutting deals (actually barter) with some countries for straight currency exchanges in renminbi. But the RNB has no relationship to the yuans the slaves are being paid.
So, you think that every yuan a ChiCom peasant has should be able to be converted into for the RNB exchange rate?
The West Germans did that with the East German Mark and they're still paying for that mistake.
yitbos
“So, you think that every yuan a ChiCom peasant has should be able to be converted into for the RNB exchange rate?”
I don’t know about “should”, it really would depend on whether there are enough takers out there. I’ll let the market decide what the proper exchange rate should be. I take it you think it is too high?
But isn’t the common charge that the CCP are keeping the RMB value low to sell us more of their goods. Are you implying that the goods we buy from them should be even cheaper?
The Chinese are using the greenback as a shield against normal market forces in virtually every respect. Chinese policies have fostered and kept alive the imbalances that have placed us in such debt to them, and which have conversely placed their lifelife in our hands. For whatever reason, the United States has not adjusted to the Chinese game, and has permitted Chinese rhetoric to drive the markets; it is America’s meekness on the issue that has allowed China yet another method through which to manipulate public opinion and, ultimately, markets.
Chinese goods should be more expensive. China should buy less debt. Chinese growth should be lower. Unfortunately, there is nothing they can do now aside from a very slow diversification away from the dollar and a simultaneous significant growth of domestic assumption in order to extract themselves from the trap they are in. Why we do not attempt to leverage this situation as they have done for their own interests is beyond me. I suspect it is less some conspiracy by which we have sold out to the Chinese, and more that the American political system is simply living in a time warp and has not adjusted to _any_ the new geopolitical realities that have developed in the last decade.
My point is "those who control language contro minds".
We should know that the yuan is inside the borders ChiCom money. There is no exchange rate for it. It is not convertible and has no reelationship to any other foreign currency.
So the ChiComs were forced to declare the "renminbi" a convertible trade mechanism, equivalent to $. It is virtually all electronic.
There are some concessions the Communist Chinese have made to average citizens to take Communist money out of the country. I don't know how that works. It is probably and agreement to exchange the yuans at renminbi rates. But the amount is very small. The ChiComs can't have yuans floating around the world in any quantity because they are worthless in quantity.
Recently the amount was increased because so many ChiComs want to gamble in Macao.
If someone reads ChiCom, they can google renminbi image and read what's on the picture.
yitbos
Ummm, OK. You’re completely wrong about this. There is one currency, it’s called the Renminbi, and it’s slang term is Yuan or Kuai (sometimes Mao, but that’s really in the Western provinces).
The general manager of my company (I own the company, she works for me) is 26th generation Shanghaiese, and has no problem taking RMB out of the country when we travel to Japan, Singapore, or even the US for trade shows and business. None at all.
There is no alternate currency. How do I know? I live and work here half my life, and have done so for the last 4 years. Factory workers at every factory I’ve seen or heard about - Chinese owned, Chinese run factories - are paid in RMB. Everything is in RMB.
About 30 years ago there was a separate “foreigner” currency that was given to foreigners at customs, to spend inside the country. This was accepted at only “State Sanctioned” businesses as a way to keep lao wai (foreigners) from mixing with the locals.
But now? There is one currency, it’s the RMB (Renminbi), and it’s transportable and can be exchanged freely.
BTW, there is no “special stock market” in a different currency. You can invest in the Shanghai, Shenzhen or the Hang Seng (Hong Kong) exchanges; all it takes is an account at a Chinese bank and an account at a Chinese broker. I know, I’ve invested off-and-on in the SSE (Shanghai Stock Exchange).
Seriously, you need to update your knowledge of China. It’s not even communist, but a fascist oligarchy. There is no communism here; no one is guaranteed a job, there isn’t free medical, you have no assigned housing or food. Your pay is not set by the State (other than a minimum wage law, like in the US), and your output can go 100% to a foreign owned company rather than the State. If you don’t work, you starve to death or die from exposure. The communist economic system doesn’t exist in China.
Russia was communist with the Government dictating where you live, what your job was, and how much food you get to eat. In China, the Government doesn’t give a rat’s a**, as long as you make money, pay some taxes, keep your nose clean, and let the powers-that-be continue controlling what they want.
China is a fascist oligarchy, with State control of some industries and companies, and the Government is essentially run by a small number (well, small by Chinese standards) of influential and powerful families. But communist? Not by a long shot.
BTW, I am posting this from the Lushan Hotel in Xiamen, China (here for work).
First of all, there is only one picture, the paper currency RMB.
Now if you want to argue that the electronic currency is somehow maintained internationally at a different rate than the really work of the paper currency inside the country, by forbidding people inside the country from trading their RMB internationally, I concede that it happens to a degree, but as you admit people are able to exchange their money internationally up to a point, so to argue that the international denomination and the domestic one are completely insulated from each other is simply not accurate.
You are correct. The still call themselves “CCP”, but in reality they are really running a very traditional Confucian imperial system that has been the standard in China for two thousand years.
Communism as an ideology has been almost completely abandoned.
Even that's not an issue; I've seen people walk in to a Chinese bank (say, ICBC or what I use, China Merchant's Bank and HSBC) and buy $10,000 in US dollars. Or ¥1,000,000 before going to Japan. I've seen people deposit €25,000 from their sales, right into their account.
I get paid in Euros, USD, AUD, and RMB. I withdraw my funds in RMB in China, USD in the US, SGD in Singapore, and so on.
Banks here will gladly pay you out in whatever currency you want, as long as they have it. The same with Citibank and Bank of America, in the US. If they have the currency denomination and amount you want, you can withdraw foreign currencies without a hitch.
Yep. I wish Rush and others would quit using the term “ChiComs”; it cheapens what Communism really is (China’s no US or even EU, but it’s a heck of a lot better than the old USSR). China’s learned that Communism doesn’t work, and has returned to its roots of a capitalistic, free market economy. If anything, it should be an example of just how bad Communism is for economies!
ChiFOs would be more accurate: Chinese Fascist Oligarchy.
BTW, I was at the waterfront last night, drinking cheap Tsing Taos at Me&You2 (a funky little pizza place run by an expat Swede) and watching the fireworks for the Xiamen festival. Struck up a conversation with a Shang Wei (captain) in the PLA, he was in town for a conference, still in uniform. Turns our that crap in the military IS truly universal! We swapped a few stories from the past about how readily military structures - and Governments - tend to promote incompetent people to get them out of the way. The Peter Principle lives!
He could hold his liquor, too; I guess that’s a universal constant for grunts as well...
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.