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 38th 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 (8)

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  1. Nemo says:

    Krugman did a pretty good job of explaining the yuan/renminbi thing a couple of weeks ago:

    At least, it was good enough that I now understand it for the first time.

  2. Tamas says:

    Great anecdotes. Always a joy to read your posts.

  3. Sergei says:

    Yuan is the unit of account. In mandarin, you would say the figure, followed by the word “yuan”, to indicate you are talking about money. Renminbi is the name of the currency.

  4. Bob McTeer says:

    Thanks to all three of you.


  5. Sergei says:

    Thought I should elaborate on the difference between Yuan and Renminbi. As previously mentioned, yuan is the unit of account, same as Japanese “Yen”, Korean “Won”, and Mexican “peso”. Renminbi, on the other hand, translates into “People’s money” or “People’s coin”.

  6. Inara says:

    Max,I came across an actrile a few months ago that was quite thought provoking. I don’t have the link but I’ll try to sum it up keep it short.China is a culture that for the most part of 5000 years has always held gold and silver in high esteem. And for the most part have not been part of the fiat money system. And since nobody really knows what China’s gold reserves are they’re not telling -. Why should we assume that they only have 1k-2k tons ??? Long story short the author suggests that they likely have between 20k-23k tons. Yikes !!!Paul

  7. Gedeon says:

    They all feed at the public turogh just like jamie and banksters. I don’t like ANY thieves, public or private! mike millerNormally, I would agree. But the government backed banking cartel is the root of evil while public service unions are a branch.And are you so pure? Have you ever taken a loan from the government backed counterfeiting cartel? Ever bought stock on margin?The whole system is corrupt from top to bottom but it STARTED with the FR bankers.

  8. Adilson says:

    Why don t you get off the poor teachers and pbliuc employees unions.They are every bit as greedy as the bankers, and in the case of the teachers, they can’t teach. In wi they have the worst record in the midwest,and yet they get over one hundred k a year. They all feed at the pbliuc trough just like jamie and banksters. I don’t like ANY thieves, pbliuc or private! Stick to econimics!