The renminbi has steadily appreciated and, while analysts urge investors to be cautious, it is undervalued and there may soon be a one-off revaluation
Buying yuan may not be the investment that first springs to mind. Yet, since its peg of 8.28 to the US dollar was lifted on July 22, 2005, the yuan has slowly and steadily appreciated.
By August11 this year, the yuan had strengthened to 6.86 to the US dollar - a gain of 20.7per cent. Even with withdrawals capped at 20,000 yuan a day and bank deposit rates for the yuan around 0.57 to 0.7per cent, money is still pouring in. In February 2004, when banks in Hong Kong were first permitted to offer yuan deposits to retail customers, the Hong Kong Monetary Authority listed deposits of 895 million yuan. By early June this year, that figure had reached 77.64 billion yuan.
From May last year to this year, yuan deposits nearly tripled, increasing from 27.156 billion to 77.675 billion. It's probably no coincidence that the yuan also appreciated at its fastest rate during that period, from 7.69 to the US dollar in May last year to 6.99 this May.
But the pace of deposits began slowing in June, in tandem with the slower pace of the yuan's appreciation. No one has data on who is investing in yuan, but it's believed that a wide cross-section of people - from housewives to professionals - are hoping to profit from the renminbi.
What lies ahead for the yuan? The consensus is that it is headed for a period of uncertainty. For the next year, most see the yuan levelling off at about 6.6 to 6.7 to the US dollar.
