Friday, Jun 11, 2010
Yuan undervalued by up to 40%
BBC News: China currency stance 'impeding reforms', says Geithner
"US politicians have repeated threats to impose trade sanctions on China if it continues to refuse to revalue its currency, the yuan". Buying yuan at this point must be almost a one-way bet ;) 40% profit anyone?
Posted by doom&gloom @ 02:46 PM (2041 views) Add Comment
27 Comments
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1. mark said...
some huge levels of inflation due soon then, I see foxconn are passing increased wage costs onto the companies who contract it.
re- captcha
brown herpes
2. doom&gloom said...
Looks like going to China in person and opening a bank account is the best way to get involved. Anyone know of any other ways go gain renmimbi exposure?
http://hongkong.angloinfo.com/countries/china/hongkong/banking.asp
3. mark said...
bank of china in the UK, manchester, glasgow, i think london too
4. rumble said...
http://www.bocukltd.co.uk/ ...?
http://etfdb.com/type/currency/rmb-chinese-yuan/ ...?
5. mark said...
you could try www.xe.com you can trade currencies using their system, don't know how good or bad it is
6. Doom&gloom said...
very difficult to open an account in RMB - http://www.bocukltd.co.uk/ looked promising, but only offer HKD (and other world currencies). Used xe.com previously, but they only offered a FX service and their rates were consistently less favourable than HSBC and ABN anyway
7. simon68 said...
As far as I know Europe is now the largest importer of China products, so China can ignore noise from US politicians. I think US is now relying on China more than the other way round. China is 1 of the 5 permanent members UN Security Council, it has the veto right to turn down proposal to impose sanction against North Korea or Iran nuclear project.
8. simon68 said...
The maximum increase of Yuan in 2010 is about 2%, but 3 to 4% in excessive years in future provided it has a good progress in developing its internal (consumption) market. China is undergoing urbanization, converting villages into cities. It needs to step up necessary infrastructure such as road, electricity power plant & clean water supplies etc.
9. mark wadsworth said...
The funny part is
a) On the one hand, the US want China to allow its currency to strengthen, so that the US becomes relatively more competitive.
b) On the other hand, the US is desparate for China to continue buying US government bonds, the effect of which is to depress the Chinese currency and strengthen the USD.
Either way, China gets scammed. Which is intellectually satisfying, but I feel terribly sorry for the half of the Chinese population who are effectively slaves in their own country.
As to speculating, people have been saying for five or ten years that the Chinese currency will strengthen but the loony Chinese mercantilists will make bl**dy sure it doesn't happen any time soon. The only good news is, at least you know their currency probably won't weaken, and I think you can get quite good interest rates. But then again, where's the guarantee that they'll ever repay you?
10. techieman said...
Mark sensible comments... it is where it is for a reason. Remember Jo's wise words: If it’s obvious, it’s obviously wrong.
and my favourite (which i think applies to a few folks on here!) : The whole problem with the world is that fools and fanatics are always so certain of themselves, and wiser people so full of doubts.
- Bertrand Russell - [ i'm not 100% certain he said it!]
Capatcha - "judgement currencies" [4th attempt]
11. str 2007 said...
I love that saying techieman - so true wish I wasn't so unsure - glad someone thinks I'm wise though. LOL
12. simon68 said...
To : mark wadsworth
No worries, it’s not possible for foreigners to open a Yuan account. China is still having a closed market for its currency and banking industry, movement of funds abroad is subject to exchange control.
Even in Hong Kong you need to prove that you stay there legally (e.g. possess a work permit or student visa) before banks will accept your application to open an account, same as other countries. This is to meet the requirement of money laundering/immigration legislations. For Yuan savings or current accounts, you won’t be able to open it without having a Hong Kong ID.
13. doom&gloom said...
It's v difficult to bet on RMB as it is pegged to USD. If it ever floats I think we can expect a big move one way or the other ;) Bank of China etc don't allow non-residents to open accounts (which I'm trying to do) and there are significant controls on RMB.
Great phrase TM. Of course there's no such thing as a 'sure thing'... there's a considerable gap in this world between the people who understand probability and those who do not.
Recaptcha: 'had skoda'. Brilliant.
14. mander said...
I think Geithner is worried more about the Euro than the Yuan. So far all the shockwaves have been sent against the Euro which survived very well and going to parity against the Dollar will take America back to square one. No growth perspective and 600 trillion of derivatives can go boom if there will be no growth. America can forget the Yuan as the Chinese will not listen.
15. simon68 said...
The sad thing is world becomes smaller and flat. Is China more dependent on US or Europe more dependent on China? Who knows?
Is Chinese population being salved by their country or UK population being slaved by their elected leaders to go on their consumption habits based on ever rising house price to purchase product abroad from abroad in Asia, who knows?
16. simon68 said...
To: mander
You are right. The strongest team is having a weak currency.
17. simon68 said...
To : mark wadsworth
One last remark, China can seize personal properties of its citizens and even freeze their bank accounts for political reason but it would not do that for foreigners, never.
18. simon68 said...
There is a common belief in western world that corruption in developing countries is a bad thing and democracy in western countries is good thing. Is it really the case?
Corruption in China is like lubricant oil which helps to get around bureaucracy, say for example if you wish to establish a company in China through proper procedures it may take 8 months or even over 1 year to obtain all the necessary licenses or approvals. But you could speed by the process and iron out obstacles by giving bribe to relevant officials
In western countries like UK, Cameron knows it is for the benefit of the nation to maintain an efficient government structure/cut unproductive expenses and allocate resources for future generation. However, any proposal for significant budget cut and lay-off civil servants is equivalent to political suicide, which deters the right actions to be implemented.
19. simon68 said...
Ty_Andros said:-
The destruction of the productive to feed the unproductive is cannibalism of the worst sort. In the name of social justice, public servants in something-for-nothing societies REFUSE to reform the welfare states of the west and implement polices of growth. Such REFORMS spell DOOM for their futures, economies and their constituents. IMPLEMENTING more wealth redistribution and taxes WILL FAIL to revive anything and sets the next deepening of the unfolding crisis and depression.
Over forty years of borrowing and spending to substitute for the policies of growth are now FAILING and the bills are now coming due. Only there is NO MONEY, and unfortunately, economic growth and wealth creation is something the Western world’s fathers and grandfathers knew about, but for current leaders they are but a footnote in the history books. Let me repeat: The IDIOTS at the wheel of economic and political power are implementing policies which have NO CHANCE of fostering economic and income growth.
20. simon68 said...
Ty_Andros said:-
Wealth creation (producing more than you consume and fostering rising incomes) is the only solution to preserving wealth in societies which practice credit-based FIAT currencies. FIAT currency based financial systems ALWAYS fall into insolvency, bond market collapses, serial quantitative easing and then hyperinflation, without exception throughout history. THIS TIME WILL BE NO DIFFERENT. I DEFY any analyst to show me one exception….
21. cyril said...
Re: early posts @4, 5 - you might be able to place a spread bet on the Yuan? (e.g with IG Index).
hunks possible
22. simon68 said...
To: Cyril
Then, good luck with your Yuan betting.
I would rather hang on to my stocks position in China state enterprises. Many Hong Kong people including me who bought China Shares in 2008 at market bottom made significant profits to present (more than you can possibly earn throughout working life).
23. simon68 said...
What I can foresee is China is repeating the Japan’s history in 80’s but 10 times larger in size. The largest properties and stocks market bubble is going to emerge in China. If you get on at the right time and leave before the crash then you will be rewarded with great fortune.
24. icarus said...
Most of the increase in "China's" exports to the US over the last several years has been from US multinationals manufacturing in China. They have a loud voice in setting US policy and the undervalued RMB has helped them. This sabre-rattling by the US could be because said multinationals have been squealing about the Chinese government's new policy of procurement, in which indigenous Chinese innovation has priority.
25. simon68 said...
If you follow Warren Buffett to buy BYD Company shares in 2008 then you should now realised more than 5 folds profits to your original investment.
Automotive
In October 2008, Buffett invested in new energy automobile business by paying $230 million for 10% of BYD Company(SEHK: 1211), which runs a subsidiary of electric automobile manufacturer BYD Auto. In less than one year, the investment has reaped him over 500% return of profit.
http://img809.imageshack.us/img809/2365/bydcompany.gif
26. simon68 said...
State Enterprises in China enjoy monopoly position because of the state policies inclined to assist them.
Warren Buffett made 10 folds profits on China Petroleum Chemical shares.
27. @nabcomuk said...
June 13 2010 17:57
ETF Securities is to expand its currency trading platform substantially with the launch today of a total of 22 new exchange traded products that will allow investors to bet on the direction of sterling, the Chinese renminbi and the Indian rupee.
http://www.ft.com/cms/s/0/6552ef58-770c-11df-ba79-00144feabdc0.html