Hold your Renminbi! – the WTO column

(tomorrow in Chinabiz)

The rumor the Chinese currency is going to revalue, upwards, is heading for a listing in the Guiness World Records. Last year illegal funds worth around 50 billion US dollar flood back into China based on the expectation the value would go up.
It did not happen.
Foreign investment bankers kept on insisting it would happen fast; it did not.

But in this feverish economy, with an American election coming up, the pressure is higher than ever. Last week Guo Shuqing, director of the State Administration of Foreign Exchange (SAFE) and vice-governor of the People’s Bank of China went to great length to explain over and over again to the media and the NPC-delegates nothing was going to happen to the Renminbi. Media qualified his efforts as ‘a campaign’.
For the first time I was not so certain anymore. A revaluation should come as a surprise, so Guo has to lie, that is his task as a central banker otherwise speculators can grab their chances and earn wide margins on the capital they hold. A stable currency is not very good for the livelihood of speculators.

Guo Shuqing did a bit too much his best, he actually said that the chances of the value of the Renminbi would go down in stead of up. Also premier Wen Jiabao reassured us in his annual speech to the NPC that the Renminbi would stay stable.
It is just too much.

This week new regulations came in place to stop non-residents from changing too much US dollars into Renminbi, the limit of 20,000 US dollar came down to 10,000 US dollar per day and 50,000 US dollar per month. Still not my daily average but then I’m in the sinking business of journalism, not in the money market.
But business people told me that getting any money changed was almost impossible these days. The Chinese banks they visited or online transactions were blocked for all kind of different reasons. Because there was a pattern in this otherwise normal behavior of banks, suspicion came up.
Proof is flimsy, but since the PBOC is not going to tell me in advance that is all I can to the feverish climate here in Shanghai. The economy is getting crazy, so ending now an almost ten year peg makes sense.

I would hold my Renminbi’s, at least for a couple of weeks.