In the past few years, we have experienced an appreciation of the RMB against the US dollar by more than 20% [from
January 1, 2004 - February 20, 2010 Source Xe.comfrom
]. When China announced that it would allow the yuan to float, investors are eager to convert the yuan into dollars as soon as they know that if they hold long enough, they can guarantee the huge benefits of this currency. The rate of appreciation of the renminbi is not as fast as rocket science.
As the United States, the United Kingdom and Europe have forced China to issue pressure on the renminbi, we know that it is only a matter of time before China decides to let the renminbi appreciate against these major currencies. At the time, banks allowed foreigners to easily convert dollars into renminbi, with a maximum annual limit of $50,000. Investors who are advised to invest in currency-denominated funds other than the RMB look at their financial advisors, just as they are crazy, can you blame them?
Anyone who pays in renminbi and invests in a dollar portfolio has to see a 20% gain [4.4% of the year] just for the break-even, because the renminbi has appreciated against the dollar over the four-and-a-half-year period. But by July 2008, the party had ended and the renminbi had not risen from the 6.85 mark since July 2008, causing investors to reconsider their strategy.
Investors now hold enough yuan to wallpaper, and we may want to know why they are converting the yuan into dollars. One way is to simply go to the bank and convert the yuan into dollars. error! For those who don't understand China's very strict monetary policy, as a foreigner, you can only convert the equivalent of up to 50,000 USD into foreign currency, which means that if you hold more than this amount, you May leave China without the hard earned money.
So for investors with a value of only 50,000 yuan, just go to the bank to convert the yuan into dollars? wrong again! This is not easy. The amount of paperwork and time you have to spend on the bank trying to convert the renminbi into dollars will be even more traumatic, and then the money will be left behind. The reason for this is that you can only transfer the tax you have paid, and you will need to show this certificate from your employee payroll or government-issued tax return. Remember how easy it is to exchange foreign currency for RMB?
There is no tax bill and no evidence of income. In fact, Chinese banks don't care where you get money. On the other hand, the conversion of the renminbi into dollars proves to be much more complicated. Providing proof of income is a considerable problem for many foreigners in China because they can only pay a certain amount in RMB, because the rest is paid overseas or in the country as a means of saving taxes. Let us assume that you are paid "$30,000" in China and your "bonus" will be paid to you in your home country.
In the past four years, you can convert $50,000 [annual limit] to RMB, and now there will be 200,000 RMB equivalent. After four years, you now want to convert the full amount back to the US dollar to achieve a 20% return, but only redeem the tax you pay, in your case $30,000. This means that it takes you 6. 6 years to convert the entire amount back to US dollars. Spending 6.6 years to sell investment is not really a wise investment idea.
If you are in a similar situation and you have converted a large amount of dollars into RMB, think twice before converting and make sure you have a clear understanding of what it means to be converted. The reason for these strict guidelines is that the renminbi is still not a currency for public transactions until the Chinese government decides to float the renminbi. They will have to carefully control the amount of foreign exchange traded each year.
Although many experts believe that the renminbi is still undervalued by 25-40%, according to an article by the New York Times on February 5, 2010, we expect that China will not continue to appreciate the renminbi soon [see next paragraph]. After all, during the current global economic downturn, China has done a good job of stabilizing the economy, and they will not take on any unnecessary risks that could jeopardize such risks.
[Beijing - A senior Chinese official said on Thursday [January 31] China Will not succumb to US pressure to revalue its currency President Obama It is said that artificially low levels have made China an unfair advantage in exporting products... from
"from
From the perspective of balance of payments and the supply and demand of the money market, the value of the renminbi is reaching a reasonable and balanced level," Ma said on Thursday. from
- New York Times, February 4, 2010]
There are many companies in Shanghai, China that offer investors advice on how to use China's economic growth without investing in the renminbi. There is a legal way to convert RMB into foreign currency on a monthly basis without the hassle of going through the bank, but this method requires you to fix the RMB bank account on a multi-currency credit card.
Investors who use a multi-currency credit card to fund investments have achieved great success in converting the renminbi into foreign currency. If you do not use the credit card attached to your local bank or RMB account, there is actually no other legal way to convert the foreign currency back to the RMB. It is strongly required that investors always follow the Chinese Banking Guide China's foreign currency when switching.
Even if China allows the yuan to appreciate again against the dollar, investors should be aware that they may only see a 20% increase in the next few years. You need to ask yourself if it is worthwhile to use all the funds in the RMB account for 20% of the unrealized gains? Keep in mind that profits are only realized when you sell them, and if it is difficult to sell at the time of sale, you will have a hard time achieving your profits. It is always safer to invest in currencies or stocks traded on the secondary market and can be liquidated in a matter of minutes. Investing in a market without a secondary market can take weeks, months, or even years to market and realize revenue.
So why do you want to convert foreign currency into RMB? For investors who want to buy real estate or other assets in China, they can only buy in RMB, and in the case of buying a property, the government allows investors to convert the entire amount needed to purchase the property. There are other cases where you can convert more and then allow a $50,000 equivalent, and your local bank will be able to explain the situation accurately.
Orignal From: Convert US dollars into RMB - Things you need to know before converting foreign currencies into RMB
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