Yuan looks to overtake HK dollar

By Zhang Jin and Lillian Liu (China Daily)
Updated: 2007-01-04 09:13

People in this most affluent of Chinese cities may be in for a psychological blow. If economists are to be believed, the Hong Kong dollar is likely to be overtaken by the once humble yuan "within days", bringing to an end more than 15 years of its superior existence.

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But the irony is that an appreciated yuan will do more good than harm to the people of Hong Kong.

Though 100 yuan ($12.5) fetched HK$99.6 at the end of 2006, experts say the order could be reversed in a few weeks. After all, 100 yuan fetched only HK$94 before its latest appreciation in July 2005.

In fact, money exchangers in Hong Kong and neighbouring Shenzhen are already charging retail customers more than one HK dollar for every yuan.

The central government's think-tank, the State Information Centre, sees the yuan appreciating by 3 to 4 percent against the weakening US dollar this year, thanks to the Chinese mainland's booming economy. Some foreign banks have forecast as much as a 10 percent increase.

It is just "a matter of time", says Sun Hung Kai Financial Group's strategist Castor Pang. A more valuable yuan could become a reality this month - one big reason for that being the HK dollar's peg to the greenback.

Generous spenders

The greatest beneficiaries of an appreciated yuan would probably be Hong Kong's retail and tourism sectors. A larger number of mainlanders will head to the city because they can get greater value for the yuan. That means they would spend more, Credit Suisse (Hong Kong) senior economist Tao Dong says.


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