Dollar-Yuan Diplomacy: My 15 Seconds

I attended a conference in Beijing in 2003 sponsored by the Chinese government. While in China, I also met with several Chinese officials, including the new Premier, Wen Jiabao, officials of the central bank, and the agency in charge of maintaining the exchange rate of the Yuan, or Renminbi.

In several television interviews I was asked about the dollar/yuan peg and whether it was appropriate. I tiptoed through the tulips on the delicate aspects of that question, focusing instead on the basic dilemma.

The dilemma was that China was pegging its currency to the dollar, which was sinking. While a depreciating dollar might help offset economic weakness in the United States, the sinking yuan tied to it certainly seemed inappropriate for the booming Chinese economy.

Diplomacy became trickier when I was leaving the exchange pegging agency and was asked to sign their guest book. The book was huge and they opened up an entire blank page for me. About all I was sure of was that a large handwriting font was called for. I have (or had) a photograph of that scene that I’ve looked for unsuccessfully for months. It shows exactly what I wrote. The best I can remember, it was something like this:

Congratulations to the Chinese people for

the rapid growth of their economy. May the

Yuan and the Dollar remain strong together.

Now that I’ve guessed at it, I’ll probably find the picture tomorrow.

A highlight of that visit was the audience some of us had with the Premier in the Great Hall of the People. He went around the circle and asked some of us for any advice we had to give him. A distinguished scholar sitting next to me, a Harvard professor I believe, shared his concern about so many single male Chinese coming off the farm into the cities to work without the stability offered by family. He urged the Premier to allow wives to come too, lest the husbands succumb to the temptations of the city.

I was called on next. My contribution was that I thought the professor had been watching too many episodes of “Sex in the City.”

On that visit, I reached the conclusion all over again that we don’t want a land war with China. While I was walking up a long stretch of the Great Wall, what seemed like millions of Chinese soldiers in ill-fitting green uniforms were walking down. I felt like a salmon swimming upstream. The soldiers were apparently on holiday. While they did not look menacing, they did look infinite in their numbers. They just kept coming and coming. I thought of what it must have been like during the Korean War when the Chinese poured across the 38^th parallel.

On a lighter note, there were two mysteries I never was able to solve during that trip. One was, when do you use Yuan and when do you use Renminbi for the Chinese currency. I had it explained to me several times, but the explanations were all different. I never got it.

The other, greater, mystery was this: Why did they change the name of the city from Peking to Beijing but didn’t change the Peking duck to Beijing duck?

Either way, they are highly overrated.

Comments

[Mark Anthony:]

Interesting story.

Regarding your question of Renminbi versus Yuan. I can help you. Renminbi is the name of the currency. It means "people's currency". It is equivalent to our Federal Reserve Note. But the name of Renminbi is referenced much more often than we refer the name FRN.

Yuan is the unit of the currency. So Yuan is equivalent to Dollar. The meaning of Yuan is "round", silver round. Actually the usage of Yuan as refering to the unit of money is a pretty recent thing in Chinese history, much more recent than the name Dollar.

Yuan and Dollar actually has the same origin. They both refer to the silver rounds of the same size and composition circulating as currency then. The silver dollar was strictly defined as 371.25 grains of pure silver, or 416 grains of standard silver (1485 parts of fine silver with 179 parts alloy), or about 24.057 grams of pure silver.

In China, the silver Yuan was defined as precisely 7 maces and 2 candereens of standard silver. That's the same quantity as the American silver dollar. So yes, at certain times in history, one dollar and one yuan was once precisely equal in valuation.

Nov 05 04:39 AM

[Formyx:]

>I reached the conclusion all over again that we don’t want a land war with China.

You speak like someone whose ambient environment is populated with people contemplating this as an option.

What a nightmarish scenario.

Nov 05 08:55 AM

[huangthomas:]

Japanese adopt Chinese ideograph (characters) in their language, called "kanji". The same character is pronounced differently in their respective language. In Chinese, "jing" is reserved for the capital of the nation. Beijing means "northern capital". Since it is not capital of Japan, it is referred to as Peking by Japanese. In Japanese, the same character (kanji) is reserved for capital of Japan and pronounced "kyo". Japanese capital Tokyo means "eastern capital". Confused? Never mind, just enjoy your Peking duck. By the way, the best place to have Peking duck is in Taipei, followed by Hong Kong.

Nov 05 10:40 AM

[mna:]

I've got many colleagues in finance in Asia, and they explain it like this. Yuan is a catch-all term that means the Chinese currency, as well as a unit for all currencies in general. It can be used formally or informally, although the informal usage is more common. In general you use "Yuan" when the context of the conversation already established which currency it is you're talking about. It's kinda like the word "dollar". We normally mean the US dollar when we say dollar, even though it can mean the Australian dollar or the Canadian dollar.

Reminbi refers unambiguously to the Chinese currency. It's generally used in more formal contexts. Its use is more like the term "US Dollar". You generally don't refer to the term "US Dollar" over and over again in conversation. Generally you use it once to establish which currency it is you're talking about, then use "Dollar" for the rest of the conversation because it's shorter. Same type of usage for the Reminbi and Yuan.

Incidentally, the Chinese Yuan, Japanese Yen, and Korean Won are all the same word (circle, or round). That's why they sound alike.

Nov 05 04:44 PM