Category Archives: Currency

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ChinaLuxCultureBiz is now Jing Daily! Be sure and check us out at our new location.

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Jing Daily compiles the best in Chinese luxury, culture, business, arts, and investment news from around the world

NEW YORK – November 5, 2009 – Jing Daily, the source for the most important and timely news about the business of luxury and culture in China, today announced the launch of its new website (http://www.jingdaily.com). With insight and commentary gathered from the Chinese- and English-language blogosphere and top news sources around the world, Jing Daily offers up-to-date information about crucial developments and current trends in China’s luxury, business, arts, and cultural markets.

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The Yuan’s Growing Global Reach: How Will It Affect The Art World?

Increased Interest In Buying “Portable China” By Domestic Bidders At Auctions Around The World Has Wider Implications

Economist Ha Jiming sees a fully internationalized yuan within the next decade

Economist Ha Jiming sees a fully internationalized yuan within the next decade

Today, a piece on the internationalization of the Chinese yuan by Ha Jiming, the chief economist at China International Capital, China’s largest investment bank, was published on Forbes.com. Ha believes that — within the next decade — the yuan will be a fully internationalized currency, and that the implications for this will be important and far-ranging:

Not long ago, China’s currency, the yuan, wasn’t traded beyond the country’s borders. Yet in the next 10 years, it will become fully internationalized and join the ranks of the world’s main reserve currencies, beside the dollar and the yen.

The global march of the yuan is an extension of China’s success since the launch of its economic reforms 30 years ago. The status of a currency is commensurate with the economic power of a country. The U.S. share of global GDP, for instance, increased from 10% at the turn of the 20th century to 20% after World War I, raising the dollar’s importance; the rise in Japan’s share of global GDP from 7% in 1970 to 16% in 1988 also elevated the yen’s role as a reserve currency.

[T]he internationalization of the yuan will benefit China in general by increasing the appeal of Chinese assets and pool of investment funds. This is similar to what happens when a company’s stock becomes a blue chip. International demand for yen assets increased significantly in the 1980s, as did global demand for U.S. assets at the turn of the century.

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Chinese Auction Buyers Find “Treasures For The Taking”

High Proportion Of New Chinese Collectors Boosting Sales As Economic Mood Remains Relatively Tepid In More Mature Markets

Up for auction in Hong Kong on October 6: Ai Weiwei's “A Gift from Beijing (set of three works)”

Up for auction in Hong Kong on October 6: Ai Weiwei's “A Gift from Beijing (set of three works)”

Next week, Sotheby’s will hold one of the most anticipated auctions of the season, its autumn auction of contemporary Chinese and other Asian art, in Hong Kong. For this closely-watched sale, the location is no coincidence. According to recent stories in the New York Times, Wall Street Journal, Bloomberg, The Economist and dozens of art blogs, mainland Chinese buyers have rapidly become one of the fastest-growing buyer and collector groups in the world. Considering art collection was virtually nonexistent for much of the last 60 years in China (and probably significantly longer than that), many newly wealthy Chinese are taking advantage of the readjustment in prices of pretty much anything up for grabs at auction to bring home everything from Chinese antiquities to contemporary art by living artists.

Whether they are doing this more for personal reasons (decorating their house while holding on to something of great financial value which is expected to grow along with the Chinese yuan) or for patriotic reasons remains to be known. My assumption is that there is a little bit of both involved.

In the run-up to the October 6 auction in Hong Kong, a spate of auctions of Chinese art have taken place over the past few weeks, with Chinese bidders going far beyond the estimates and shocking many observers. The new Chinese collector has, in many ways, signaled his arrival by the manner in which he’s seemed completely impervious to either the global economic slowdown or auction trends, and is quickly building a reputation as willing to spend, brash, motivated and savvy.

This week, on Economist.com, the Chinese collector’s knack for repatriating Chinese art is examined, with the writer concluding that auctions — as a buyer’s game — are all about who brings the money and who’s willing to spend it. At recent auctions (and, I would have to assume, future auctions) many of these individuals are mainland Chinese:

Anyone who believes the art market has been felled by the financial crisis should have been in New York earlier this month for the seasonal auctions of Chinese bronzes, furniture and ceramics. The salerooms at Sotheby’s and Christie’s were overflowing with bidders, more than three-quarters of them from Hong Kong, mainland China and Taiwan. Extra Mandarin-speakers, all of them fluent and young, had been taken on specially to handle additional telephone bidding from Asia.

The Global Yuan: What It Means For Chinese Assets

China’s Monetary Policies Look To Favor Yuan, Gold At Dollar’s Expense: What Will This Mean For Art Collectors & Investors In “Portable China”?

Art Collectors and other holders of "Portable China" can benefit from the globalization of the yuan if they're in it for the medium- to long term

Art Collectors and other holders of "Portable China" can benefit from the globalization of the yuan if they're in it for the medium- to long term

Today, Business Intelligence looks into China’s monetary policies, and how they are increasingly favoring alternate investment vehicles like gold while putting a dent in the US dollar. For investors looking to diversify their holdings into a number of areas to lower risk and exposure to market fluctuations, what will the simultaneous increase in asset diversification, global economic jitters, the ascendance of China and internationalization of its currency have on those who put their money into Chinese assets? The article does a fairly good job of illustrating the long-term effects these market forces will have on these investors as well as China itself:

In a series of recent policy moves and announcements through official channels, or increasingly through indirect ‘economic ambassador’ addressing conferences or talking to western reporters, China’s intentions and ambitions are becoming clearer.

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Societe Generale China To Offer Yuan-Denominated Retail Services

Societe Generale — with offices in Beijing, Shanghai, Guangzhou, Tianjin And Wuhan — Looks To Expand Private Banking Services In Fast-Growing Market

Societe General is looking to grow its private banking services in China

Societe General is looking to grow its private banking services in China

The Wall Street Journal reports today that Societe Generale (China) Ltd., the locally incorporated unit of Societe Generale SA, has received permission from China’s banking regulator to offer yuan-denominated retail services in the country. This could have major implications on foreign investment in China, as it simultaneously boosts the growing global influence of the Chinese yuan:

Societe Generale (China) will begin to offer these services once its branches receive yuan retail licenses from local bank regulators in Beijing, Shanghai and Guangzhou, Pierre Bonzom, managing director and head of commercial and personal banking for the French bank’s China unit, said in a statement Tuesday.

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New Yuan Bonds To Debut In Hong Kong

Yuan-Backed Sovereign Bonds Seen As Major Step In Building Market For Yuan As A Global Currency

Recent moves show that the internationalization of the yuan is a major priority for the Chinese government

Recent moves show that the internationalization of the yuan is a major priority for the Chinese government

The Shanghai Daily reports today that the Hong Kong SAR government is set to debut a new class of bonds denominated in the Chinese RMB, a move seen as a significant milestone in China’s ambitious plan to make its yuan a more global currency. While articles about the yuan’s potential status as a major currency have multiplied in the last year, particularly following People’s Bank of China director Zhou Xiaochuan’s call earlier this year for the US dollar to be replaced as the world’s de facto reserve currency, less-publicized moves such as China’s currency swap agreements with several countries, and an expansion in the issuance of yuan bonds from commercial banks, have largely flown under the media radar.

With the announcement of these new yuan-denominated bonds, it is clear that China hopes to make Hong Kong even more of an international financial hub. Although the territory has, for decades, been a major financial power in the region, with its more relaxed political and financial system, Hong Kong looks to be one of the most accessible areas for China to experiment with some of its more long-term financial projects. With the strong linkage between Hong Kong and Shanghai — sometimes playfully referred to as “Shangkong” — if this program is successful it may mean more fluid and regular investment in yuan bonds by foreign investors as well as a simultaneous boost to the yuan’s reputation abroad.

As the Shanghai Daily article explains, the Chinese Ministry of Finance will offer $878 million (6 billion yuan) worth of the bonds to retail and institutional investors beginning on September 28:

Peng Wensheng, head of China research at Barclays Capital, said that while the amount is not large, it is a significant development in the internationalization of the yuan and for the development of the Hong Kong bond market.

“The issue broke new ground in an effort to promote the domestic currency as an international currency,” Peng said yesterday.

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Bilateral Trade In Chinese RMB Coming To Hong Kong

China And Hong Kong Get Ready To Begin Bilateral Trade Scheme, Announced Last December. What Will It Mean For Holders Of Portable Chinese Assets Like Art?

HONGKONG

The internationalization of the RMB could be a huge plus for holders of portable Chinese assets in coming years. Photo © Reuters

The internationalization of the Chinese yuan has hit a major milestone, as China’s Central Bank Governor Zhou Xiaochuan, and Joseph Yam, chief executive of the Hong Kong Monetary Authority, today signed a memorandum in Hong Kong to set off bilateral trade that can be settled in Chinese yuan rather than Hong Kong or U.S. dollars. The move, which follows similar “currency swap” agreements signed by China and Argentina, Malaysia, and South Korea in recent months, illustrates the urgency with which China’s Central Bank is looking to globalize China’s currency. While none of this is really “new” to China-watchers, the importance of this story — and the story of China’s rapidly-internationalizing currency — is in what it means for investors who have “bought into” China. While it won’t mean much for holders of Chinese real estate or stocks, the real story here is in portable goods, an area which we have covered in detail several times before. With the globalization of the RMB comes a revaluation of portable goods (which can be carried across borders and converted into alternate currencies).

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DeBeers Wooing Safe-Haven Investors – FT

Stock Fluctuations Lead Investors To Continue Searching For Diversity: Gold, Diamonds, Art, And Wine

Diamond and gold producers and contemporary art and wine auction houses are increasingly targeting Chinese investors and sovereign wealth funds

Diamond and gold producers and contemporary art and wine auction houses are increasingly targeting Chinese investors and sovereign wealth funds

Today’s Financial Times has a feature on investors who are turning to traditional hedges against stock market turbulence, and the way major diamond producers like DeBeers are ratcheting up their marketing and outreach efforts to get these people’s attention. Although diamonds fell mainly out of favor in recent years in many developed countries due to their sometimes controversial nature, diamond consortia have seen their fortunes turn around rapidly as they increased their foothold in emerging markets like Russia and China.

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The Rising RMB And You: What Does It Mean For Art Collectors?

As China’s Currency Becomes Increasingly Global, Will Collectors Of Chinese Art Benefit?

As the RMB appreciates and becomes more convertible, Chinese assets like art look to be a smart hedge. Painting: Chinese contemporary artist Qi Zhilong's "A Chinese Girl In Male Military Uniform No. 2" (2006)

As the RMB appreciates and becomes more convertible, investing in Chinese assets like art looks like an even better option. Painting: Chinese contemporary artist Qi Zhilong's "A Chinese Girl In Male Military Uniform No. 2" (2006)

In recent months, a number of high-profile Chinese and world economists have increased their calls for the creation of a truly “global currency,” which would diminish the US dollar’s role as the de facto international currency sooner rather than later. Although this concept is still far off, as these economists concede, definitely within the next 10-20 years the dollar’s primacy will be challenged, if not completely nonexistent.

Although this is not some kind of dollar apocalypse, but rather a readjustment of the global economy based more on a realistic global picture. In the post-Cold War, post-BRIC-growth world, we are seeing the world economy pluralize rapidly. So a global currency will require an accurate portrayal of this multipolarity — thus, it is unlikely that the next global currency will be “from” one country. Rather, it is likely to be a multi-currency basket, or “supracurrency” — as the governor of the People’s Bank of China, Zhou Xiaochuan, himself called for in March.

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