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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

by 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.

by ddeck 10y ago

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.