41–50 of 118 posts
"But will we start banking in a Chinese bank? It's not as crazy as it sounds." Hasn't HSBC had a fairly significant US/Canada presence for a while?
It's not a floating currency, it's directly controlled by politicians. Holding yaun is taking a speculative currency bet on the competency of the Chinese Communist Party to successfully manage the Chinese economy.
Trust them to do everything they can to keep it growing. People are in China are only generally content with their government because every year everyone gets richer and richer, except the family five blocks down the road that had their house confiscated and compensated only 25% market price because the local council is planning to build a `public facility` on the land.
It's not a floating currency, it's directly controlled by politicians. Holding yaun is taking a speculative currency bet on the competency of the Chinese Communist Party to successfully manage the Chinese economy.
If it had to, couldn’t the party trash the currency (from an international investor’s point of view) without trashing the economy?
The current president 'Hu Jintau' controls the exchange rate through China's currency policy which dictates how many USD an owner of Yuan can get in exchange.
So buying yuan is a bet that the peg will be removed and the USD will be printed so much that nobody will exchange human labor for it.
It could work, but I'd buy physical gold before the yuan.
I know this won't be popular, but the whole idea of "diversification" has always struck me as a lame attempt by rich people (Stock brokers) to get more money from poor people. So I roll my eyes whenever a guy with a Rolex and a Porsche is telling me I need to "diversify"
Imagine average Joe investing in a very non-diversified portfolio of one stock which he has decided he likes, perhaps due to personal knowledge of the firm.
Over time, odds are this stock will do poorly compared to if he'd had a more diversified portfolio.
It's the same general law of markets that is why it's generally better to invest in index funds... they benefit from overall increases in productivity and economic growth, without being subjected to all the risks that less diversified portfolios suffer from.
Of course, it's always possible to formulate a 20/20 hindsight critique of diversification b/c there is always an investment or two that retrospectively looks like it would have been an obvious sure thing to a layperson.
Earlier quoted context omitted.
Trust them to do everything they can to keep it growing. People are in China are only generally content with their government because every year everyone gets richer and richer, except the family five blocks down the road that had their house confiscated and compensated only 25% market price because the local council is planning to build a `public facility` on the land.
Similar to the United States, except here your house gets seized to build a factory for Pfizer. http://en.wikipedia.org/wiki/Kelo_v._City_of_New_London
"Prior to Kelo only eight states specifically prohibited the use of eminent domain for economic development except to eliminate blight: Arkansas, Florida, Illinois, Kentucky, Maine, Montana, South Carolina and Washington.[30] By July 2007, 42 states had enacted some type of reform legislation in response to the Kelo decision. Of those 42 states, 21 enacted laws that severely inhibited the takings allowed by the Kelo decision, while the rest enacted laws that place some limits on the power of municipalities to invoke eminent domain for economic development. The remaining eight states have not passed laws to limit the power of eminent domain for economic development." (from the same link)
I don't think you'll see that in China.
OK, that’s the upside from the depositor’s point of view. What is the upside from the Bank of China’s point of view? Given the massive dollar reserves that the Chinese government has accumulated from its trade surplus, why should they sell off renminbi in exchange for even more dollars? If the RMB/USD exchange rate is almost certain to increase, why would the bank want to give up an appreciating asset in exchange for…
Their deep reason for that is turning Shanghai in the world's leading financial center.
The Yuan is pegged to the US Dollar at around 1 yuan = 0.15 USD cents. A graph of exchange rate for Yuan/USD over time produces a horizontal line. The current president 'Hu Jintau' controls the exchange rate through China's currency policy which dictates how many USD an owner of Yuan can get in exchange. So buying yuan is a bet that the peg will be removed and the USD will be printed so much that nobody will exchange…