 |
 |
|
Exchange Rates
The PRC has a dual currency system. The value of the local currency
- Renminbi (RMB or Yuan)- is fixed by the People's Bank of China
on the basis of movements in a mixed basket of the currencies of
its major trading partners. The RMB is non-convertible, and its
export is prohibited without official permission. Purchases of imported
goods are permitted only in special stores in exchange for foreign
exchange certificates (FECs).
In theory, FECs are similar in value to the local Renminbi, but
a thriving black market has emerged. Incoming tourists are handed
FECs in exchange for their foreign currency at Chinese banks, and
can illegally convert them into local RMB on a private basis at
a price considerably more than their face value. Devaluation of
the RMB however has eroded the difference in value between it and
the FECs from approximately 2:1 in 1984 to 1.05:1 in 1991.
Since the early 1980s, the RMB has undergone significant devaluation.
In 1981, the exchange rate for the Yuan was 1.705 per $US, whereas
in 1990, the Yuan stood at 4.722 per $US. Graph 7 depicts the fall
of the Yuan compared to other Asian currencies since 1980. In real
terms, the Yuan has lost more than 60% of its value. Consequently,
the PRC's exports have become increasingly attractive in international
markets in comparison to other, more expensive commodities manufactured
by its competitors.
Graph 7
Changes in Real Exchange
Rates for Selected Countries
Note: 1990 calculated from 1989 figures. Sources:
ADB, Asian Development Outlook 1990, Table A26. ADB,
Asian Development Outlook 1991, Table A26.
|
|
|
