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The Chinese market isn't going to be as lucrative in a few months when they get labeled as a currency manipulator. I've heard the free market value of Yuan to U

The Chinese market isn't going to be as lucrative in a few months when they get labeled as a currency manipulator. I've heard the free market value of Yuan to USD is about 24.8:1, while the current official exchange rate is 6.91:1. And of course the Chinese are willing to invest that money at a loss(in Bitcoin, property, etc.) as long as it gets outside of the country before the currency implodes; not even the Chinese want to invest in China. Obviously capturing another billion people is a big deal either way, but I think they're going to be disappointed in their Chinese revenue in a year if they expected it to continue like it is now. I'm sure Zuckerberg has some financial advisors, but I can't see why anyone would want to invest there knowing the currency inflation that's coming over the next 2 years. I guess software isn't that much of a capital investment, comparatively speaking. Depending on how Zuckerberg structures this and how much USD he's putting in and at what rates, it might be worth buying some options against Facebook. Though, if Facebook can get in now, I'm predicting riots in a year or two, and 'accidentally' having some problems with the anti-censorship systems could end up helping the protesters at a particularly important time. Who knows.

ddeck 10y ago
>The Chinese market isn't going to be as lucrative in a few months when they get labeled as a currency manipulator. I've heard the free market value of Yuan to USD is about 24.8:1, while the current official exchange rate is 6.91:1 This seems a bit backwards. The currency manipulation argument is that they are artificially weakening their currency to make manufacturing and exported products more competitive, not strengthening it. And while I would tend to agree that the the reality at this point is in fact the reverse, your argument on the basis of "I've heard that the free market value..." is not particularly robust. The NDF futures market, which is free to trade wherever the free market sees the pair going, is perhaps a better place to look. For reference, the current Dec 2019 future is 7.44:1 [1] [1] http://www.cmegroup.com/trading/fx/emerging-market/chinese-renminbi.html http://www.cmegroup.com/trading/fx/emerging-market/chinese-r...
- MichaelBurge 10y ago
  > your argument on the basis of "I've heard that the free market value..." is not particularly robust. I heard that from some former Chinese daytraders. I agree that it would be a bad idea to trade assuming my ratio without a better source. > which is free to trade wherever the free market sees the pair going, I don't know how to interpret those numbers. I'm not sure exactly how the futures market interacts with currency controls. I've read that Venezuela also has currency controls, and while the official exchange rate of VEF:USD seems to be 10:1 from a quick Google search, I also see a Bloomberg article mentioning that the black market has it at 1000:1. It could be that you get 25 Yuan by illegally shipping USD across the Chinese border to scared Chinese citizens, while the government only approves its citizens to trade at the smaller rate.
  - em500 10y ago
    No sensible person, Chinese citizen or otherwise, is going to offer you 25 CNY per 1 USD, unless it comes attached with a US green card or something. If you can find one, have them contact me, I'm more that happy to trade with them :). Seriously, that's is just some really bad misinformation here.
    - MichaelBurge 10y ago
      I'll ask the daytraders how they would convert $10 million USD into 250 million CNY(either cash, or assets like property) assuming you could either smuggle the USD into China or the Yuan out of China past the currency controls, and let you know.
    - MichaelBurge 10y ago
      1. At least in 1993, the official exchange rate was 6:1 but there were people standing outside the banks that would exchange it at 10:1. They were called the Yellow Cow Government. 2. They haven't been to China in a while, so they can't give an up-to-date black market rate. But a lot of economic indicators(property, bitcoin, etc.) show that people are willing to pay at least 20:1(conservatively). 3. Futures have to be traded in China. Otherwise they would absolutely buy large quantities of futures at the 7.44:1 price quoted here. There's political risk that the government might not enforce a futures contract if the currency gets too bad. 4. George Soros has already tried to pull a Soros on the Yuan, but it's harder when the government actively fights you. 5. At the current exchange rate, China is planning to print enough money to buy the US in a year, and the entire world in 2 years. So that exchange rate can't hold forever. 6. They reiterated that being labeled as a currency manipulator would be very bad for China, and there would be a huge surge in demand for the black market. 7. If you're caught smuggling USD into China, it's a pretty serious crime and they'll confiscate all of your USD. So the higher exchange rate has risk built into it. 8. You've been able to exchange $50k/person/year for a while, but they're starting to crack down on it. You need forms and approval for even $1000. 9. Since they're no longer in China, they wouldn't exchange at the 20:1 rate any more. But they'd happily bet against RNMB if you're selling futures at anywhere near 7.44:1 for December 2019. I'm planning to call a broker to ask about it, since I can't reconcile their pessimism with the fact that Yuan futures do seem at a glance to be traded on the Chicago Mercantile Exchange, which is a non-Chinese entity. Depending on what they say, you could probably earn a decent commission if you could refer a non-Chinese bank or something willing to deal with these guys.
simonh 10y ago
I don't think anyone in the financial or international communities is going to take any notice of Trump labeling anyone anything. The 'currency manipulator' theory is that China is keeping the value of the Yuan low to fuel exports. In reality it's the US growing debt and low interests rates that are far more of a factor in the imbalance. This is easy to see if you compare the Yuan against other currencies apart from the dollar - do that and the 'currency manipulator' theory falls apart. It's not the Yuan that's being kept weak against the dollar, but rather the dollar strengthening against everybody.
- MichaelBurge 10y ago
  You probably know this already, but "label as a currency manipulator" doesn't mean calling the Chinese names, but refers to some provisions in the IMF and WTO. https://www.fas.org/sgp/crs/misc/RS22658.pdf https://www.fas.org/sgp/crs/misc/RS22658.pdf You could of course claim that a formal dispute under the WTO would go nowhere, but you haven't yet done that.
  - simonh 10y ago
    Unless the IMF and WTO agree, name calling is all it is. The burden of proof will be on Trump, I don't have to claim anything.
    - MichaelBurge 10y ago
      I'm referring specifically to this paragraph: Unique among the major international trade and finance organizations, the WTO has a mechanism for enforcing its rules. If a country believes another country has violated WTO rules, to its detriment, it may request the appointment of a dispute settlement panel to hear its complaint. The other country cannot veto the establishment of a panel or adoption of a WTO decision by WTO members. The panel reviews the arguments in the case and renders judgment based on the facts and WTO rules. If the losing party does not comply with the ruling within a reasonable period of time, the WTO may, if requested by the complaining party, authorize it to impose retaliatory measures (usually increased customs duties) against the offending country or to take other appropriate retaliatory measures against that country’s trade. I admit I haven't read the actual trade agreements, but it appears that the WTO has no choice but to summon a panel to review Trump's claim. I'll write it out: Claim(from you): Nobody in the financial or international communities is going to take any notice of Trump labeling anyone anything. Assumption 1: Trump will file a dispute with the WTO. Assumption 2: If a dispute is filed with the WTO, a panel will be convened to review it. Assumption 3: If a panel reviews something, it has taken notice of it. Conclusion: At least one person on the panel is in the international or finance community and will take notice of Trump's dispute. Since we have a contradiction of the form P & ~P, either the original claim P must be rejected, or one of the assumptions behind the argument for ~P must be rejected. I wonder: If someone is trespassing on my property and I call the police, am I merely a name caller until the court convicts them? It seems like initiating a formal process should be more than name calling.
auganov 10y ago
I don't see how they'd invest so much money as to have a significant impact on their bottom line. I'm guessing that even at 0 revenue Zuck would still want to be in China. It's a long-term strategic play for him.
jza00425 10y ago
"I heard", now who is the fake new maker we were talking about?
eva1984 10y ago
> I've heard the free market value of Yuan to USD is about 24.8:1 Please do tell me where I can get this deal :)

ddeck 10y ago

>The Chinese market isn't going to be as lucrative in a few months when they get labeled as a currency manipulator. I've heard the free market value of Yuan to USD is about 24.8:1, while the current official exchange rate is 6.91:1 This seems a bit backwards. The currency manipulation argument is that they are artificially weakening their currency to make manufacturing and exported products more competitive, not strengthening it. And while I would tend to agree that the the reality at this point is in fact the reverse, your argument on the basis of "I've heard that the free market value..." is not particularly robust. The NDF futures market, which is free to trade wherever the free market sees the pair going, is perhaps a better place to look. For reference, the current Dec 2019 future is 7.44:1 [1] [1] http://www.cmegroup.com/trading/fx/emerging-market/chinese-renminbi.html http://www.cmegroup.com/trading/fx/emerging-market/chinese-r...

MichaelBurge 10y ago
> your argument on the basis of "I've heard that the free market value..." is not particularly robust. I heard that from some former Chinese daytraders. I agree that it would be a bad idea to trade assuming my ratio without a better source. > which is free to trade wherever the free market sees the pair going, I don't know how to interpret those numbers. I'm not sure exactly how the futures market interacts with currency controls. I've read that Venezuela also has currency controls, and while the official exchange rate of VEF:USD seems to be 10:1 from a quick Google search, I also see a Bloomberg article mentioning that the black market has it at 1000:1. It could be that you get 25 Yuan by illegally shipping USD across the Chinese border to scared Chinese citizens, while the government only approves its citizens to trade at the smaller rate.
- em500 10y ago
  No sensible person, Chinese citizen or otherwise, is going to offer you 25 CNY per 1 USD, unless it comes attached with a US green card or something. If you can find one, have them contact me, I'm more that happy to trade with them :). Seriously, that's is just some really bad misinformation here.
  - MichaelBurge 10y ago
    I'll ask the daytraders how they would convert $10 million USD into 250 million CNY(either cash, or assets like property) assuming you could either smuggle the USD into China or the Yuan out of China past the currency controls, and let you know.
  - MichaelBurge 10y ago
    1. At least in 1993, the official exchange rate was 6:1 but there were people standing outside the banks that would exchange it at 10:1. They were called the Yellow Cow Government. 2. They haven't been to China in a while, so they can't give an up-to-date black market rate. But a lot of economic indicators(property, bitcoin, etc.) show that people are willing to pay at least 20:1(conservatively). 3. Futures have to be traded in China. Otherwise they would absolutely buy large quantities of futures at the 7.44:1 price quoted here. There's political risk that the government might not enforce a futures contract if the currency gets too bad. 4. George Soros has already tried to pull a Soros on the Yuan, but it's harder when the government actively fights you. 5. At the current exchange rate, China is planning to print enough money to buy the US in a year, and the entire world in 2 years. So that exchange rate can't hold forever. 6. They reiterated that being labeled as a currency manipulator would be very bad for China, and there would be a huge surge in demand for the black market. 7. If you're caught smuggling USD into China, it's a pretty serious crime and they'll confiscate all of your USD. So the higher exchange rate has risk built into it. 8. You've been able to exchange $50k/person/year for a while, but they're starting to crack down on it. You need forms and approval for even $1000. 9. Since they're no longer in China, they wouldn't exchange at the 20:1 rate any more. But they'd happily bet against RNMB if you're selling futures at anywhere near 7.44:1 for December 2019. I'm planning to call a broker to ask about it, since I can't reconcile their pessimism with the fact that Yuan futures do seem at a glance to be traded on the Chicago Mercantile Exchange, which is a non-Chinese entity. Depending on what they say, you could probably earn a decent commission if you could refer a non-Chinese bank or something willing to deal with these guys.

simonh 10y ago

I don't think anyone in the financial or international communities is going to take any notice of Trump labeling anyone anything. The 'currency manipulator' theory is that China is keeping the value of the Yuan low to fuel exports. In reality it's the US growing debt and low interests rates that are far more of a factor in the imbalance. This is easy to see if you compare the Yuan against other currencies apart from the dollar - do that and the 'currency manipulator' theory falls apart. It's not the Yuan that's being kept weak against the dollar, but rather the dollar strengthening against everybody.

MichaelBurge 10y ago
You probably know this already, but "label as a currency manipulator" doesn't mean calling the Chinese names, but refers to some provisions in the IMF and WTO. https://www.fas.org/sgp/crs/misc/RS22658.pdf https://www.fas.org/sgp/crs/misc/RS22658.pdf You could of course claim that a formal dispute under the WTO would go nowhere, but you haven't yet done that.
- simonh 10y ago
  Unless the IMF and WTO agree, name calling is all it is. The burden of proof will be on Trump, I don't have to claim anything.
  - MichaelBurge 10y ago
    I'm referring specifically to this paragraph: Unique among the major international trade and finance organizations, the WTO has a mechanism for enforcing its rules. If a country believes another country has violated WTO rules, to its detriment, it may request the appointment of a dispute settlement panel to hear its complaint. The other country cannot veto the establishment of a panel or adoption of a WTO decision by WTO members. The panel reviews the arguments in the case and renders judgment based on the facts and WTO rules. If the losing party does not comply with the ruling within a reasonable period of time, the WTO may, if requested by the complaining party, authorize it to impose retaliatory measures (usually increased customs duties) against the offending country or to take other appropriate retaliatory measures against that country’s trade. I admit I haven't read the actual trade agreements, but it appears that the WTO has no choice but to summon a panel to review Trump's claim. I'll write it out: Claim(from you): Nobody in the financial or international communities is going to take any notice of Trump labeling anyone anything. Assumption 1: Trump will file a dispute with the WTO. Assumption 2: If a dispute is filed with the WTO, a panel will be convened to review it. Assumption 3: If a panel reviews something, it has taken notice of it. Conclusion: At least one person on the panel is in the international or finance community and will take notice of Trump's dispute. Since we have a contradiction of the form P & ~P, either the original claim P must be rejected, or one of the assumptions behind the argument for ~P must be rejected. I wonder: If someone is trespassing on my property and I call the police, am I merely a name caller until the court convicts them? It seems like initiating a formal process should be more than name calling.

auganov 10y ago

I don't see how they'd invest so much money as to have a significant impact on their bottom line. I'm guessing that even at 0 revenue Zuck would still want to be in China. It's a long-term strategic play for him.

jza00425 10y ago

"I heard", now who is the fake new maker we were talking about?

eva1984 10y ago

> I've heard the free market value of Yuan to USD is about 24.8:1 Please do tell me where I can get this deal :)