RMB

I would like to share with you an excerpt from http://jpmorgan.com about the currency restrictions of the RMB.

A Restricted Currency

Government regulation is particularly strict regarding foreign currency exchange. For example, the amount of foreign currency that businesses can keep in their onshore accounts in Chinese banks, as well as the currency exchange rate, the interest rate on deposits and the process of remitting and repatriating funds, all are tightly controlled.

Because the Chinese renminbi (RMB) is a restricted currency, U.S. companies want to hold as much of their funds in dollars as possible; but China imposes a cap on the amount of foreign currency that companies can keep.

“Every foreign enterprise that does business in China must have a foreign currency account that’s used for capital injection and receiving foreign currency income. There is a cap on the account imposed by the State Administration of Foreign Exchange,” explains Sue Wong, JPMorgan Chase relationship manager, Multinational Corporations — Greater China.

The cap is based on the amount of business activity the company generates. Until recently, the amount was generally 20%-30% of a company's annual business; but in early August, the Chinese government relaxed the rate to 50%-80%. The government applies different rate tiers to businesses based on size and type of operation.

Depegging Has Significance

Any funds a company keeps onshore above its cap must be converted to RMB at a government-controlled rate. The rate used to be fixed at USD 1.00 = RMB 8.28, but since this past July, the Chinese government has allowed currency trading within a narrow range. On July 21, RMB was appreciated by about 2% to USD 1.00 = RMB 8.11.

“It may not seem like a very big percentage change,” Sun observes. “But it is a significant move, because it reveals more flexibility on the part of the Chinese government and is part of the trend toward more opening up of the currency.

“This has essentially created a future market for RMB,” she adds. “Together with the recent announcement that permits RMB forward and swap trading, this is important for any investors seeking to hedge their currency positions. Further appreciation of RMB is generally expected going forward.”

Fund Repatriation Hurdles

When the time comes to withdraw funds from China and convert them back to U.S. currency, companies should be prepared to wait, because fund repatriation can be a lengthy process. “From the time of the declaration, it may take 12 to 18 months to move the money out,” Wong says.

However, like many regulations in China, these rules are not universal. Depending on the justifications, multinational companies with a longtime presence in China are sometimes able to gain approvals on fund repatriations from local regulators in as little as one month.

Basic Comforts - Living in China

Being raised in a western culture comes with certain biological and cultural expectations. We are all creatures of comfort we love baked foods and comfortable sofas. Many of these types of luxury's are hard to find in the Chinese mainland. However, I find that the Chinese perception or exposure to what we consider creature comforts is the biggest barrier and can only be replicated by a resident director who has lived in Western society for sometime.

I admit that this maybe a biased view. In my experience when it comes to western food comfort and other cultural niceties be prepared to look for your own. Which if it's a short stay then this may not be the most financially practical. The longest I have ever seen someone stay in China is about five years. If you plan on staying this long then make the investment in these creature comforts.

"Choose Yourself" TOP 6

1. Bedding (pillows comforters)
2. Fans/AC and Heaters (you may want extra)
3. Oven (normally not provided)
4. Sofa (normally they would provide a wooden version. Ouch!)
5. High Speed Internet (neccesary for the Western Media)
6. TV Online ( http://www.a2btv.com/ ) Your favorite TV shows!

City Life - Poverty In Asia

In Guangzhou just like in other places in the world there is poverty. I have noticed mainly that most beggars you see have a scam of some kind even the most injured ones. Poor people in China are largely a result of rural-urban migration and limited opportunities for the relatively poor rural population. So, in China it's not a question of poverty because the poor only represent maybe 10% of the population. It's a question of equality.

Poor people in China are mostly badly maimed or injured. Most beggars are running some type of scam because of there inability to enter mainstream Chinese society. Most foreigners feel that the price for goods that they receive are a much higher price then it should be. I think that sometimes this could be a communication error between Chinese shop owners and foreigners. Especially when you consider the price of foreign import goods being almost double. In Guangzhou there is a burgeoning import market that is growing thanks to the drop in the dollar.

Something about the Chinese that everyone should know is they are the nicest people in the world. My advice would be just know the price before you buy.

Love In The PRC

Love happens all over the world and China is no exception. So, on the mainland what are the cost of roses? Well a full bouquet of roses in China is about $240 RMB on valentines day. The U.S. FTD price is about 800 RMB. The Chinese do practice some of the valentines traditions but something that you should know about there culture is that love is a very popular theme all year round in popular culture. In fact as a westerner this is probably the most annoying aspect of there youth culture.

Young men in the PRC tend to be very effeminate. Can love exist between people of different cultures. Absolutely many of my friends do have companions that are cross cultural. However, my advice would be that if you want to have a Chinese mate then make sure you do your research about cultural expectations.

It is the stereo type that foreign men seek young Chinese wives and Chinese women are easily attracted to foreign men. I do not see this as totally accurate so before you seek a Chinese partner understand the social aspects of the culture and language first. My advice to females seeking male Chinese would be to learn the language. My advice to men seeking female Chinese would be to accept there naivety when it comes to productivity and life long goal achievement.

Love can happen but only if you let it!

Happy Valentines

Traders Feel the Love!

Today the house passes the 787 billion dollar recovery plan. Well let’s not pat ourselves on the back just yet. Let me give you an American view from the ground of this economic crisis in China. There is also a stimulus package just recently released 586 billion dollars here on the mainland. Factories that have been closing at a gradual pace will create in the short term more cost for the American consumer.

However, if you are a trader with boots on the ground here in China this means that there are some deals to be made. A little known secret about trade in China is that you maybe able to satisfy your clients or company by traveling to the Canton Fair or trade fairs in Hong Kong. The real golden coin can be found in the fish's mouth in the form of profit margins by purchasing directly from the manufacturing process.

Most people don’t know that the Chinese are the friendliest people on the planet. Westerners who want to trade here have an edge because they are generally perceived to be good for Chinese business!