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June 24, 2010
What Does A Relaxed Yuan Mean For Property In The UK?
Much has been made of the Chinese Rinminbi (yuan) being allowed to float more than usual. The Yuan is pegged to the U.S. Dollar, meaning it is only allowed to fluctuate within a small degree of the Chinese government’s ideal level, about 6.5 to the dollar. The majority of the focus will be spent on how this affects international manufacturing, specifically the trade gap between Chinese and American exports. While this is interesting, and I am personally interested in seeing if this is a sign of China’s further attempt to rival the West’s geo-political dominance, it is also important to question what a stronger Yuan will do to the property market.
Most of the property investment from China to London comes from Hong Kong, which uses its own currency that has not been relaxed along with the Yuan. However, Beijing and Shanghai based companies will have a better position from which to invest and expand outside of Mainland China. At the moment, most investment from the Mainland goes back to China, oftentimes through a shell company created to take advantage of foreign investment benefits. With the Yuan at its highest level against the dollar since Deng’s reforms, many Chinese investors may start looking outside of China to invest. This will definitely happen on a macroeconomic scale, and will possibly include property investment worldwide. Wait to see if Shanghai and Beijing companies start buying property abroad while the Yuan is strong. If so, it may be important to learn Mandarin.