Whenever you read about the latest corruption case in China, what immediately springs to mind when you think about how the money was spent? I asked ODB, and here’s what he came up with:
- Buy houses for his mistresses
- Trips to Macau for gambling
- Crazy expensive cars
- Play the stock market, day-trader style
Think of your own list, then read this article from from the Wall Street Journal’s China Realtime Report:
On trial is the head of a finance company who stands accused of bribing bank officials in return for more than 700 million yuan, or more than $100 million, in loans for fake mortgages and small businesses, according to Chinese media reports.
The 30-year-old head of the Beijing Huading Credit Security Company, Hu Yi, allegedly paid officials at the Beijing Rural Commercial Bank to help him apply for loans with fake names and businesses from the end of 2007 to February 2009. A total of 18 people are on trial, eight of them senior bank officials.
The official allegedly used the money to gamble in Macau, invest in mines and buy calligraphy and paintings, most of which turned out to be fake, according to the Legal Mirror. Only half of the total 708 embezzled yuan was recovered, the Chinese reports said.
Bonus points if you guessed that the expensive paintings and cultural artifacts were fake.
Trying being white and walking into a Bank of China on Shanghai’s Nanjing Road or other commercial center. “Hello, money change, 换钱” is a greeting you’ll get. Usually it’s a passive effort by one of the 2 or 3 dudes in black plether jackets congregated near the doorway.
The last few days, though, I’ve noticed them getting aggressive. On February 5th, I was identified by them well before I got to the bank’s door, and one guy walked along with me giving the standard greeting but with much more urgency in his voice. Dismissing him, but before inside the bank, another guy gave me the same pitch, and actually walked one step with me inside the bank. Once safely inside the bank, I looked out and saw yet another guy pacing around like a caged tiger and clutching a huge stack of crisp RMB notes.
Are they trying to dump their RMB? Do they know something? Is RMB depreciation on the way?
After I completed my bank business – which did not involve “changing money” – I stepped outside and asked one of the guys why they were trying so hard to actively change money. Did they expect the RMB to depreciate? The Read the rest of this entry »
McDonald’s price cut for 4 of its set meals made international news last week in the New York Times and elsewhere. Layoffs are underway, and not just in Dongguan and Shenzhen. Intel is closing its Shanghai plant, laying of 2,000 workers.
Less than a year ago, one of the economic concerns to me in Shanghai was rapid appreciation of the RMB and inflation. Now it seems unlikely that the RMB will gain anything – if it doesn’t actually give up some gains its made since 2005 – and deflation may be on its way? The Coffee Bean chain in Shanghai is peddling its mugs with a promotion of getting a free “cuppa” with the purchase, and the bilingual encouragement of “Don’t let the economy get you down! 不要让经济风暴打垮你”, and bars like the Mexican Adobo offering a daily Economic Recession Happy Hour, with beers for 5 yuan and hard liquor for 7.
Actually the opposite of chaos. Peaceful and orderly lines started forming late Monday night at the Bank of China Tower (full of mostly senior citizens by my count) eager to purchase either the Brilliant Jubliation or United Pleasure set. Or perhaps one of each.
Although the HKD20 commemorative bank notes were originally scheduled for release on Wednesday, the bank started early registration on Tuesday for “purchase passes” allowing holders to return on Wednesday (or later) to purchase the notes. There were at least two separate lines at the main branch on Garden Road, one of them (pictured above) extending from the front of the building all the way to Pacific Place several blocks away. I don’t have Park Service-quality crowd estimation skills, but I would guess there were at least a few thousand people in line.
Here’s another photo in the back of the building:
Hong Kong (via the Bank of China HK) announced its own commemorative Olympic currency on Friday. Beginning next Wednesday, branches of the Bank of China in Hong Kong will be selling four million (just over three million available to the public) commemorative Olympic-themed HKD20 bank notes. Later, the notes will be sold at the HK Olympic equestrian venue. As with the mainland bank notes, the Hong Kong notes feature the bird’s nest stadium and the Beijing Olympic logo. The notes will be sold at a significant mark-up, meaning we will never, ever see these in circulation. There are five different packages of single note or sheets available with super impressive sounding names and auspicious price points:
- Radiant Joy (Single HKD Note) at HKD138 per set (that is a nearly seven time mark-up!);
- Triumphant Spirit (4-in-1 Uncut HKD Notes) at HKD338 per set;
- Brilliant Jubilation (35-in-1 Uncut HKD Notes) at HKD1,388 per set;
- Harmonious Union (a package of one HKD Note and one MOP Note) at HKD268 per set; and
- United Pleasure (a package of 4-in-1 Uncut HKD Notes and 4-in-1 Uncut MOP Notes) at HKD868 per set.
That last name needs to be reconsidered. I’m just sayin’. And just in case you had any funny ideas about choosing auspicious notes, there will be no selection of serial numbers allowed.
Mul NOTES: Curious what MOP stands for? ODB was. MOP = Macau Pataca, the legal tender of our neighbors in the Macau SAR.
Who doesn’t love the feel of new money? On July 8, exactly one month before the start of the Olympic games, the People’s Bank of China issued 6 million 10 yuan notes. They are 29th Olympiad Commemorative notes (see pictures)
This article says that you can exchange old notes for new ones at any of China’s Big Four banks in Beijing, but that there may be problems doing so in other places. Why? “Because of the earthquake.” My initial scan of the Chinese blogs suggests that there are shortages in availability of these notes and that some cities don’t have any at all. Hoarding could take place. The picture in this story shows people in a long line waiting to exchange bank notes. Heaven help you if you have any real banking to do in China this week.
Of note, this is the only bill in circulation that does not have Mao Zedong’s image on it. From this I predict Mao will be largest fazed out of upcoming Chinese currency (but not eliminated). This is a very logical first step toward achieving that. It will also be interesting to see if a larger denomination Chinese note is brought into circulation. There have been rumors in the past of an RMB 500 note. The current top valued note is only RMB 100 (less than US$15), though personally I like that and don’t hope to see an RMB 500 note any time soon.
10 July - edited 60million to 6 million notes that were printed (600万). nator emailed me to point out that is only one bill per 200 people.
Everyone knows that China has been under pressure for years, led by the US Congress, to allow the value of its currency, the RMB or yuan, to appreciate. But the “weak” RMB that hurts American exporters is not likely to be the main issue of concern to American voters. They’ll be more worried about $4/gallon (or higher!) gasoline. And this (Chinese article) is a big reason why. China has price controls on diesel and other fuels, such that there is now an RMB6000 (US$870) disparity between what a ton of diesel goes for in China and what it goes for abroad. Chinese oil refiners like Sinopec are getting slammed, since their costs are rising but the sale price of fuel is controlled by the Chinese government. The government is responding with measures to import more oil to help ease pressures.
Why does China control prices? Well, it’s obviously a good way to spur growth, and it’s been working as the country has been growing at 10%+ for over a decade. It’s also a way to over pollute the country and congest the roads. And it’s contributing to the skyrocketing oil prices worldwide, since 25% of the world’s population, the Chinese, are paying a lot less for the oil they use than everyone else.
SHTig adds (5/28 6:50pm PRC time): Mul called to ask what this means, and nator commented below also asking for clarity. To answer – yes, China buys oil on world markets at prevailing prices. But then, when that oil is sold domestically it is done so at a price lower than the prevailing world price. The government forces Sinopec and others to sell it on the cheap, and makes up for this by subsidizing Sinopec with the difference. This process allows everyone in China to get oil in all forms for less than the ‘true’ price, which results in more oil being consumed in China than what should be. We expect consumption to be inversely proportional to price – and when prices are kept artificially low, consumption is artificially high. With oil consumption artificially high in China, China demands more oil from the world markets than it should from an economic prospective and this is what adds to the upward pricing pressure on oil.
If your taxi driver had to pay the prevailing market price for gasoline, your taxi flagfall would be higher than RMB 11 (as it is in Shanghai), and you’d pay more per kilometer. The ride might cost you 50% or 100% more, and at the margins, some people would opt to take a bus instead. Multiply this behavior by 1,300,000,000 and remember that China is the world’s workshop, and we’re talking about a lot less oil being used, if only they – the end users – paid the prevailing price. That would reduce global demand and thus the price of oil as well, ceteris paribus.
Wonder if John McCain and Barack Obama will talk about this when asked what they plan to do about $4/gallon gasoline? If Chinese consumers paid the same price for fuel as everyone else, it might serve to put them on the same competitive playing field as other countries, and it might also serve to increase efficiencies within China.