Hi Jay,
If I understand what your saying, then, the speculation in the Yuan is taking place now, as foreign investors invest in enterprises in China. In those cases, are the FDI transactions done in the more easily convertible USD or Yuan?
IF USD-based FDI
I can see how unpegging would increase Yuan demand. Given that Chinese must turn around and purchase imports (materials, services), and that Yuan is less easily convertible, if transaction were in USD I can see how the volume going to Yuan on the depegging might increase demand for Yuan.
If Yuan-based FDI
I can better appreciate your viewpoint that the foundation for Yuan demand has been established and W3C can tip the balance in the freedom of currency movements that depegging would bring.
Taking your viewpoint, then, from a strictly currency speculation basis, if the sogginess of the Yuan will become evident in the weaker post-peg exchange rate, pure Yuan-based currency speculation (as opposed to investments in enterprises, real estate, bonds) would be of less long-term value since the Yuan may be only offered a brief uptick before W3C realizes they must get Yuan out of China. It is more a buy the rumor sell the fact play than I first thought. |
