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they were able to grow their exports exponentially. There were two key factors in controlling the cost of their exports: fi rstly was the availability of cheap labour and the second was by controlling their exchange rates. Exchange control was very important as they wanted to build up their foreign currency reserves. Today, I think the Chinese are the largest holder of US dollars and a very signifi cant holder of Euros. But clearly the rest of the world wasn’t happy that the Chinese were decimating other countries’ industry by supplying cheap products. The only country that seems to have been able to counter this has been the Germans and their ability to produce high value products effi ciently and competitively. However, the Chinese have had


to allow some depreciation of their currency, but have done so in a very controlled manner, allowing a small change over the course of each year. As you can see from the graphs, the trend against the US dollar, the Euro and Sterling over the last 10 years are all very similar, with the fi rst two losing just over 20% against the Renminbi and Sterling closer to 40%. One suspects that without exchange control, the Renminbi would have gained a lot more than 20% against the US dollar and the Euro. Exchange controls are slowly being removed by China. We are now able to buy Renminbi and transfer it to mainland China when done for business purposes. However, it is still very diffi cult for individuals to get signifi cant amounts of money out of China and this is unlikely to change any time soon. This is because any change in exchange control rules is a slow process, irrespective of whether it is China or not, and takes place over a signifi cant time period [e.g. 10 years plus]. Also, the Chinese


FX


will be very reluctant to see the “value” of their foreign currency reserves fall dramatically by the Renminbi gaining in value too quickly – all very well to hold all these US dollars, but you don’t want to see your “asset” go down in value. So changes are afoot in China when it comes to exchange control and, as I mentioned, we are now able to buy it here in the UK and transfer it to Chinese businesses, and they are keen to be paid in Renminbi since it reduces their exchange risks and exposure like any normal business. They have for so many years worked on very tight margins and they want to ensure their margins are “safe”, especially as labour costs have begun to rise as the Chinese demand better living conditions. So please get in touch to discuss the Chinese Renminbi, or any other currency, as we are experts in the international property industry and in international transfers including currency exchange.


9.55 9.5


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CHINESE RENMINBI | 65


The world of money | all is not as it seems Daily Exchange Rate GBP/CNY March 2013


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Average Monthly Exchange Rate GBP/CNY


10.4 10.2


The OPP currency reports are prepared by Smart Currency Exchange, independent currency brokers.


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