patrick.net

I can't help but think that this is an indicator that the Yuan RMB is or will soon be at bubble levels.

The conventional wisdom is that the RMB is undervalued. What if the truth is the opposite?

Once the China housing bubble bursts, and I think it will burst in a most spectacular fashion (barring massive intervention, mind you), it seems likely that RMB will DROP in value, just like USD did when our bubble burst, and perhaps even more permanently so.

I wonder what the motivation of People's Bank of China is with respect to opening branches in the US? They want US citizens to be able to hold deposits in RMB? This will increase demand for USD-->RMB exchange in the short term, and make RMB more expensive. This is the opposite of what is good for China as an exporter, and in fact is what the US/Obama/Congress have been demanding for severals years now.

The mind boggles. somewhat. Not investment advice, buyer beware.

justme says

I wonder what the motivation of Bank of China is?

The bank of china is the government of china. Goals are: Short term, keep congress off their backs. Long term, become the world's reserve currency.

Goal is to diffuse criticism of closed capital markets.

It's a shitty deal. The interest paid is well below their inflation rate. I'll take 1% on my USD thank you very much.

It's still an EXTREMELY closed, controlled economy. Outsiders can't own land, or most stocks or bonds. The only reason China can own so much treasury debt is we let anybody buy it. China does not offer the same openness.

SF ace says

The rate of interest for savings is so paltry vs. inflation and peer that the Chinese have no choice but to chase after stocks and homes. If you can’t gain 30-40% with substantial investment base a year minimum, you are falling behind relative to others.

This is the same as what happened in the US, but amplified by a factor of 3 or 4.

There is no chance this will end well for China.

Anyone here can invest in Chinese yuan right now through two ETFs (exchange traded funds). These are --

CYB = WisdomTree Dreyfus Chinese Yuan
CNY = Market Vectors Chinese Renminbi

These trade just like stocks, although they are structured like a mutual fund, without the associated fees. All you pay is buy and sell commissions to your broker. You can set stop and limit orders on these, too.

You may also walk into most US banks and exchange your US dollars for yuan as long as you have an account there. This will require you to pay a commission/fee to the bank for this service, and you will be limited in the amount you may transfer at any one time. You will need to call your bank for details, and to pre-arrange your order for yuan.

The Renminbi (RMB) (sign: ¥) is the official currency of the People's Republic of China (PRC). Renminbi is legal tender in mainland China, but not in Hong Kong or Macau. It is issued by the People's Bank of China, the monetary authority of the PRC. The primary unit of renminbi is the yuán. One yuan is subdivided into 10 jiǎo, which in turn is subdivided into 10 fēn. Renminbi banknotes are available in denominations from 1 jiao to 100 yuan. Coins are used infrequently compared to banknotes, and have values from 1 fen to 1 yuan.

I trade the ETFs mentioned above in my self-directed Roth IRAs, traditional IRAs, and taxed accounts.

bob2356 says

Long term, become the world’s reserve currency.

Paul Krugman just wrote a blog post about the perceived and supposed but ultimately not-so-real advantages of being a reserve currency.

Among other matters, he points out that there are multiple countries that are able to support a high debt/GDP ratio WITHOUT being the issuer of a generally perceived reserve currency.

He also points out that before the 1990 burst of the Japan bubble, there was widespread discussion that Yen should become the new reserve currency. This did in fact not occur, and this should be food for thought as well.

http://krugman.blogs.nytimes.com/2011/01/17/the-role-of-the-dollar-who-cares/

Another sign that China is going badly:

Forged "commercial paper" (short term commercial loan contracts) in China

http://market-ticker.org/akcs-www?post=177673